FAS 157 wreaks havoc with bank earnings

While the general take is that three of the four top investment banks 3Q results were great, there is a lot of uncertainty still. A lot of it has to do with Financial Accounting Standard 157. Financial Week offers a pretty good explanation of the issues. The rule issued last year by the FASB describes methods to value assets and liabilities at fair or market values. Banks can also choose to "fair-value certain financial assets or liabilities they formerly didn't-their own debt, for example." The results are hard-to-compare numbers about how the rule affected each company. Morgan Stanley recognized a gain of nearly $290 million by marking down its own debt. The other firms were mum. More information should be forthcoming in 10-Ks.  

For more:
- here's the Financial Week article

Related articles:
- Earnings bomb from Morgan Stanley
- Release: Lehman Brothers reports third quarter results
- Goldman spared large expected earnings reduction

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