TOPIC 2B SUMMARY OF PAPERS.docx - TOPIC 2B SUMMARIES OF PAPERS Paper 1 for Topic 2B How Lehman Brothers Used Repo 105 to Manipulate Their Financial

TOPIC 2B SUMMARY OF PAPERS.docx - TOPIC 2B SUMMARIES OF...

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TOPIC 2B SUMMARIES OF PAPERSPaper 1 for Topic 2B – “How Lehman Brothers Used Repo 105 to Manipulate Their Financial Statements” (by Jeffers, 2011): // Lehman Bros abbreviated as LB Based on the questionable accounting technique of Repo 105Repo 105 was used to disguise debt and an unhealthy financial position and instead presented a temporary healthy appearance to readers of the financial statementsThe findings conclude that the executives of Lehman Brothers were unethicalStock price plummeted by 93% by 2008 prior to its collapseLB was the largest victim of the sub-prime mortgage debacleThe use of Repo 105 resulted in a falsely inflated market position of the bank To remain financially afloat through the use of Repo 105, cash was received in exchange for their assetsLB then repurchased the assets at 105 percent of the cash amount receivedFormer CEO of LB was Richard S Fuld was questioned as to whether he helped LB mask billions of $$$ of troubled assets and liabilities on the books?The use of Repo 105 made the financial statements appear better than what they actually wereLB used the Repo 105 technique just prior to the production of the quarterly reportsSupposed sales should have been recorded as loans, but they were notThe financial statements therefore mislead the investorsThe purpose of the paper is also for us to further question the repeated use of these aggressive accounting tacticsLB was around for 158 years and was a successful bankThe crisis began to exacerbate when in 2007, homeowners were unable to pay their mortgages and this was when LB began to adopt more questionable practices
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