Posted on 02/06/2008 9:39:54 PM PST by TigerLikesRooster
Credit woes to spread, says PwC chief
By Francesco Guerrera in New York and Jennifer Hughes in London
Published: February 6 2008 22:01 | Last updated: February 7 2008 00:06
The global credit crisis is set to spread beyond the financial industry as companies in other sectors are forced to write down the value of their investments, according to the head of the largest global audit firm.
Samuel DiPiazza, chief executive of PwC, said several US companies had invested in the asset-backed and mortgage-backed securities that caused billions of dollars in losses at Wall Street banks.
“It’s not just in banks,” he said. “We are going to find some problems at non-financial institutions.”
Only last week, Bristol Myers Squibb, the US pharmaceutical group, revealed a $275m charge to write down illiquid securities with exposure to subprime mortgages, and there are fears of similar admissions to come elsewhere as the annual report season looms.
The warning by the head of one the Big Four accounting firms is likely to heighten investors’ fears that troubles in the financial and property sector are rapidly spreading to the rest of corporate America.
Auditors have warned that they and their clients face enormous challenges in valuing the complex derivatives littering balance sheets.
Mr DiPiazza said that marking assets at “fair value” – the value they would fetch on the market – is particularly difficult because of volatility and lack of liquidity in a number of securities.
“Now that the markets are moving rapidly, the trading in the securities is thin and the collateral . . . is fragile, that makes for a tough audit,” he said.
However, he defended “fair value” accounting – blamed by some experts for exaggerating the size of the recent writedowns – and said that auditors were equipped to deal with the current problems.
Mr DiPiazza also said he thought large US companies could move from domestic accounting rules (US Gaap) to international financial reporting standards (IFRS) within five years – a faster timetable than that indicated by US regulators.
“The Europeans did it in five years. I would find it difficult to think that the Europeans are that much more capable than the Americans,” he said. “It is certainly possible for all large-cap companies to be in IFRS by 2015.”
Christopher Cox, chairman of the US Securities and Exchange Commission, has said the SEC will draw up plans this year for how to manage the move.
Companies with international operations are generally keen to switch, but smaller groups are more concerned about the costs it will bring.
Ping!
Credit contagion.
Ripple effects...
(Surprising nobody except the ‘professionals’...)
” It is just that we are not buying their act anymore.:-) “
If by “we”, you mean thee ‘n me (and distressingly few others), then, yep....
Unfortunately, my observation is that the vast majority of the sheeple - including many FReeper participants in these threads - are lined up, holding out their Kool-Aid cups, and saying, “Please, sir - may I have some more?”
critic of financial market = anti-business = anti-free market = doomsayer = Dems = enemy of GOP.
Can we get the government in on this too? Wouldn't it be nice if they had to follow the same accounting rules the rest of us follow?
pretty hilarious, the mighty pharmaceuticals and other jokers where depending on McD’s employees to make their mortgage payments, to meet the mighty QTR’ly profits
Common Sense = Good Business Practices = Profits = Survivability in a down market = Friend of the American Citizen = Conservative
Even the big boys were caught up in the equity scam.
Boy, you got that right.
The Bullish news just keeps coming. I need to go in debt up to my eyeballs so I can invest during what I’m sure we will all look back upon and call “the best time to buy, ever!”
Interesting stuff. Not knowing any better, I wil inquire.
Is this IFRS why my British Gas (BG Group PLC Spon ADR was BRG on the NYSE) became BRGYY on the NQB/OTC Pink Sheets? Also Metso Corp Spons ADR went to the same exchange as MXCYY.
The exchange touts simplified listing requirements for international companies with legitimate accounting procedures.
Does IFRS hide accounting problems that Sarbox would expose?
FT had an article about European banks going to the ECB secretly for liquidity.
Considering the dots that have been connected on this forum in the past year +, it appears the Europeans are in a bind that will not be as transparent as the U.S. is becoming.
yitbos
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