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financial reporting - Case Study Example

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Undergraduate
Case Study
Geography
Pages 6 (1506 words)

Summary

Name Professor Course Date Financial Reporting Case study: Summary The collapse of Lehman Brothers Holdings, Inc. (Lehman) unmasked the presence of problematic loopholes in the accounting treatment for repos. Although Lehman filed for debtor-in-possession reorganisation (Chapter 11) in the United States of America, yet its financial shockwaves severely hit the global economy, prompting the International Accounting Standards Board (IASB) to reconsider its accounting framework towards the International Financial Reporting Standard (IFRS) 7: Financial Instrument…

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financial reporting

Lehman’s bankruptcy was considered as the largest one in the financial history of America. In 1850, Lehman took start as a modest retailer of textiles and clothing in Alabama; soon, it became a leading global financial services giant, investing mostly in investment banks, investment management and brokerage securities. However, the year of 2008 recorded the financial history with Lehman filing bankruptcy in September due to its exposure of the risks associated with the residential-mortgage loans; at the same time, Lehman owed $613 billion to its creditors. Lehman perpetrated its deception by using 102% in Statement of Financial Accounting Standards (SFAS) No. 140 (Pounder, 2011) in repos. A repo is associated with a transfer of financial assets when the borrower-transferor- wants to hold its ownership of the assets in the long term, but requires fulfilling the short term cash needs. Initially, the transferor commits that he would repurchase the financial assets in a given period of time after receiving a sum of cash- mostly smaller than the original value of the asset- for the financial assets. ...
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