Contemporary issues in accounting and finance Case Study

Contemporary issues in accounting and finance - Case Study Example In brief, economists (Norton & Porter, pp. 56-63, 2009) have blamed organizations for considering short-term profits of the company to pay huge rewards and compensation to CEOs and directors that is a significant form of excessive amount of risk-taking by the organizations, causing long-term financial issues. Despite of different claims and blames, analysis of the studies (Saudagaran, pp. 21-25, 2009) has indicated that everything goes down to one end that is accounting and its principles. A huge number of studies (Sorkin, 2008) have indicated that there has been deficiency of ethical and professional accountants in the profession that were involved in manipulating accounting rules and metrics on short-term basis that resulted in a financial issue for the organizations, as well as the banki... Economists believe that this specific rule inclined accountants to exaggerate the financial matters in front of the national banks that contributed adversely in the promotion of economic recession. In addition, a number of experts (Manning & Nothwehr, pp. 1, 2008) from the banking sector consider the rule as a very dangerous principle that resulted in the representation of losses of billions of dollars, whereas, the organizations never lost it. In an article of the New York Times, author wrote, "FAS 157 represents the so-called fair value rule put into effect by the Federal Accounting Standards Board, the bookkeeping rule makers. It requires that certain assets held by financial companies, including tricky investments linked to mortgages and other kinds of debt, be marked to market. In other words, you have to value the assets at the price you could get for them if you sold them right now on the open market" (Sorkin, 2008). Besides FAS 157, a few experts have indicated similar objective of mark-to-market rule, FAS 115 that regulates the organizations to perform the following tasks. Although it is a good principle, but it allows companies to manipulate things in a tricky manner, and this possibility of manipulation indicates the intensifying capability of this accounting principle to encourage frauds and subsequently, recessionary period around the world. Experts (Sorkin, 2008) have indicated that big names like CitiGroup, Lehman Brothers, etc used this accounting principle to show their exposure at fifty percent, whereas, it was only near to fifteen percent. In this regard, besides unethical practices involving personal