Regions Financial, Can You Come with Me, Please? We Need to Discuss this Accounting
Listen, I know it's not glamorous and might be the most misunderstood but essential profession since prostitution - but accountants are, of course, far more crucial to the overall economy than, say, broke German hookers. That being said, anyone else get the feeling like we get shunned in much the same manner? When was the last time you hugged an accountant? Can you get on that, please? We don't bite. Erm, most of us, at least.
Hey, so let's talk about some exciting bank accounting, shall we? It makes my head hurt and I'm immune to the stuff at this point. That right there should tell you something is terribly awry with this entire mess. The unwashed masses may not get that the accountants are on there on the frontlines trying to make sense of this unadulterated ridiculousness but Bloomberg's Jonathan Weil does:
Check out the footnotes to Regions Financial Corp.’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.While Weil has a point, let's keep in mind that footnotes aren't really meant as a reflection of the overall health of the financial statements, oftentimes they are merely fluff for the financial jerk off. Remember back in the good ole days of up-up-up when all that mattered were fat dividends? Yeah, well, those days are gone but some habits die hard. No longer do we necessarily care about educating the investor, it's about duct-taping this thing together long enough to figure out a plan.
So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well-capitalized.”
While disclosures of this sort aren’t new, their frequency is. This summer’s round of interim financial reports marked the first time US companies had to publish the fair-market values of all their financial instruments on a quarterly basis. Before, such disclosures had been required only annually under the Financial Accounting Standards Board’s (FASB) rules.
The timing of the revelations is uncanny. Last month, in a move that has the banking lobby fuming, the FASB said it would proceed with a plan to expand the use of fair-value accounting for financial instruments. In short, all financial assets and most financial liabilities would have to be recorded at market values on the balance sheet each quarter, although not all fluctuations in their values would count in net income. A formal proposal could be released by year’s end.
I don't know about any of you but this is not the profession that I believe in. And if these asshats don't stop bending over my precious accounting (ha!), I'm going to be forced to take names for when the indictments start barrelling down the pipe. Footnotes my ass, this is fraud.
So where is the SEC? The PCAOB? Who signed off on these audits and allowed this (Uncle Ernie audits Regions, FYI)? Well FASB, of course! (at the behest of the federal government and Lord knows who else slithering around behind the scenes that has absolutely no real-world accounting experience but knows enough to make assets > liabilities no matter how badly it rots the fundamentals in the process)
IMHO, we've burned through the accounting magic. And what remains on these disasters called financial statements isn't going to be pretty to slog through.
I'll be in the bunker curled up into the fetal position with my 10 Key clutched to my chest if anyone needs me...