Week 1 - government sponsored enterprises going against...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Consider the global financial crisis of 2007–2009 and the Generally Accepted Accounting Principles. Do you feel that any of these principles were ignored by large banks? What were one or two principles that were ignored to a particularly disastrous effect? With the global financial crisis that took place between 2007 and 2009, there were plenty of companies that chose to ignore the GAAP or Generally Accepted Accounting Principles. The biggest and most important problem of this time was the huge number of sub-prime mortgages that were being lended to high risk consumers. This lending clearly showed the large banks and
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: government sponsored enterprises going against GAAP, in particular the principle of prudence. This principle in general states that the company should show the reality of the situation as opposed to giving the probability of what might happen. By offering adjustable rate mortgages to high risk consumers they lead them on to believe that the low rates of the time would stay low which is obviously what didn’t happen, especially when the housing bubble burst. Many of the companies that chose to go against these principles are now no longer operating and have gone belly up in the long run....
View Full Document

This note was uploaded on 11/08/2010 for the course EDMG 12344 taught by Professor Jenkins during the Spring '10 term at American Public University.

Ask a homework question - tutors are online