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Henry Waxman’s War On Accounting

Via Megan McArdle:
Accounting basics: when a company experiences what accountants call “a material adverse impact” on its expected future earnings, and those changes affect an item that is already on the balance sheet, the company is required to record the negative impact–”to take the charge against earnings”–as soon as it knows that the change is reasonably likely to occur. This makes good accounting sense. The asset on the balance sheet is now less valuable, so you should record a charge. Otherwise, you’d be misleading investors. The Democrats, however, seem to believe that Generally Accepted Accounting Principals are some sort of conspiracy against Obamacare, and all that is good and right in America.

Up next, insurers will be called and asked why they are raising rates now that they are forced to cover everyone. - Greg Pollowitz


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