Accounting Woes Grow From Derivatives
The real estate sector has experienced a great deal of accounting problems recently. Last week Countrywide Financial fessed up to a derivative problem, and left investors with this ominous note; "..the Company concluded that its interim unaudited financial statements for the periods ended March 31, 2004, June 30, 2004 and September 30, 2004 should no longer be relied upon."
This is becoming a trend as this note from the Fannie Mae website reminds us. "On December 22, 2004 Fannie Mae announced that its previously issued financial statements should not be relied upon in light of the SEC's determination that the financial statements were prepared applying accounting practices that did not comply with generally accepted accounting principles." Derivatives were largely the cause of this mess as well.
How did we get in a situation where some of the biggest corporations in the world are no longer providing an accounting of their operations?