Estimating subprime write-downs and the ‘cookie jar’ accounting problem

December 11th, 2007 | Category: Mortgages, Mortgage News, Stocks

Another write-down related to subprime loans is coming from UBS AG (NYSE: UBS), that day to the tune of $10 billion. Combined with write-downs in the third quarter, the company will have a total of $12.6 billion in write-downs related to subprime issues that year.

Those write-offs will likely put UBS in the red for the entire year. The company has two investors ponying up nearly $12 billion to help fill the gap. One is the Government of Singapore Investment Corp and the other is an undisclosed investor from the Middle East.

Management says that the new

write-downs are in line with the current mortgage markets. Finance experts aren’t so certain. It’s widely known that the creation of reserves and the booking of write-offs involves a great deal of judgment on the part of management.

Third-party users of the financial statements are relying upon accurate and conservative estimates regarding risks and the markets, in combination with good judgment applied by management.

Continue reading Estimating subprime write-downs and the ‘cookie jar’ accounting problem

Original post by Tracy Coenen

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.