Summary
The current recession is part of a business cycle. The reasons for the recession are several but then a trough after a long period of prosperity is to be expected. President Obama puts the blame on investment bankers and executives. There is also talk of legislation to limit further repeats. I wonder how this will impact accounting and in turn the figures on which financial decisions are made. In this analysis i present some of my thoughts on the subject..
Analysis
1. Business cycles have always been a part of the economic landscape. Failures of businesses and stock bubbles have generally lead to a overhaul of economic, tax and accounting regulation.
2. These events normally also lead to a lot of public condemnation of business and ways to streamline the same.
3. The present plethora of cataclysmic events are leading to continuing business failures.
4. There is talk of the worst being over amid continuing job losses.
5. In the midst of all this we have proposed legislation and evolving new corporate governance and accounting standards.
6. The present situation is going to evolve into new and more stringent norms for revenue and liability recognition and disclosure.
7. The accounting standards will have to be in confirmity with the newly evolving financial instruments.
8. Instruments and Institutions like hedge funds and CDO's are all passe. The new legislation will control and regulate these instruments which are now part of economic history.
9.Therefore, what is relevant is a continuing set of accounting principles which are in tandem with economic events as they happen.
Nitish Grover consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
