The Challenges the Changing Landscape of Banking Poses for Accounting and Financial Reporting

34 Pages Posted: 7 Feb 2013

See all articles by Wayne R. Landsman

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Ken V. Peasnell

Lancaster University - Department of Accounting and Finance

Date Written: November 30, 2012

Abstract

This paper summarizes changes that have taken place in banking, the attendant financial innovations, and the challenges these innovations pose for accounting standard setters and regulators. We focus on asset securitizations and the difficulties in accounting for such transactions, in particular their option-like features, and discuss how such option-like features appear in many financial contracts. We discuss ways that such difficulties can be addressed and conclude that a purely measurement approach is likely to be problematic. This suggests that the FASB’s approach of requiring an increasing amount of supplementary disclosure relating to the risks faced by banks may be the best solution.

Keywords: securitizations, options, credit-linked notes, financial institutions, accounting disclosures

JEL Classification: M41, G21

Suggested Citation

Landsman, Wayne R. and Peasnell, Kenneth V., The Challenges the Changing Landscape of Banking Poses for Accounting and Financial Reporting (November 30, 2012). UNC Kenan-Flagler Research Paper No. 2013-18, Available at SSRN: https://ssrn.com/abstract=2212148 or http://dx.doi.org/10.2139/ssrn.2212148

Wayne R. Landsman (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Kenneth V. Peasnell

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+44 1524 593631 (Phone)
+44 1524 847321 (Fax)

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