Yesterday the information circulated about a € 14 billion loss incurred by a major bank in 2013.
Isn’t it a good reason to raise the question of the accountability of the accounts?
At first glance such figure may well jeopardize the usual understanding of economical realities
But once converted into multiples of the annual yearly minimum wage ( € 17,160 in France) it equates 810,000 units of annual “SMIC”.
It could be viewed as an invitation made to the newsmakers who are attacking the French SMIC as the culprit for the lack of competitiveness in this country to challenge their logic and use this quite simple calculation.
The result should help them realize that the way is still quite long before they find the right answer!
But let us go back to our bank.
According to its official statement, such losses are the consequence of amortization of goodwill as well as of reserve against risk with the need to entry these figures in the books before end of 2013 as a condition to ensure the success of a new strategic plan .
The question is why one should wait until 2013 before “offloading” these losses if a big chunk of them is more than one year old.
The accounting principles allow spreading expenses over time but in so doing, they may open the road for some sensitive information to be delayed in the very defiance of the transparency criteria.
Time and again the right posture remains giving full priority to an extensive homework on the technicalities of the underlying transactions and to a thorough understanding of the economical drivers of a bank and of its cash flows.
Beware of the accounts…
Marx would concur …
… Adam Smith himself would concur
Dominique Pasquier F.
.