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Originally posted by Wayne at Pelican Parts
Read the article from Seeking Alpha - it explains why booking non-cash earnings is far different than regular earnings.
-Wayne
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I did read it and I'm quite familiar with non-cash earnings (am a CPA by profession) - my points stand. There's nothing wrong with the accounting here - what is highly subjective and risky is management's judgment on the collectibility of the mortgages. The issue in the accounting profession for the last several years has been making financial statements (or really, the rule & guidance underlying them) more transparent to the reader. This is undermined by companies engaging in more and more complex transactions - it gets nearly impossible for the average (not professional) investor to make sense out of a set of statements.
I see the reference to Enron later in the thread. That was a huge wake up call. Their statements should have had a red, bold disclaimer all over them - "Hey Joe Investor - pay attention - if the following reasonably possible circumstances occur, a *****load of off-balance-sheet debt will be called and company will instantly go bankrupt. Buy this stock at your own risk". Again, I'm not in banking but I've been pretty edgy the last few years watching some of the products the banks have been offering. Definitely risky.