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Mark To Make Believe Accounting

Daily Brief

by Liz Gunnison, Jeffrey Cane, Mark Stein, Laura Rich and Megan Barnett
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Aug 23 2007 12:00am EDT

Mark to Make Believe Accounting

Thanks to the Financial Standards Accounting Board, public companies have several ways they can value their own assets when reporting earnings. "Level 1" is your basic mark-to-market value based on price quotes in public markets. "Level 2" lets companies use "observable inputs" to value assets when market prices aren't available.

And "Level 3"? Use your own judgment!

Wells Fargo used Level 3, and it turns out that using your own subjective asset valuation methods can be quite lucrative.

Read Yves Smith's full Market Movers blog post on this subject here.

Laura Rich is a co-founder of Recessionwire, which provides news, advice, perspective and humor about the recession and the recovery.

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