The April 21, 2008, issue of the Wall Street Journal Online included an article by David Reilly entitled “A Way Charges Stay off Bottom Line.”
Instructions Read the article and answer the following questions.
(a) According to the article, how do companies avoid reporting losses on certain types of investment securities in net income?
(b) At what point would these losses be reported in net income?
(c) At the time of the article, what was the total estimated amount of unrealized losses that companies in the Standard and Poor’s 500 Stock Index were reporting in equity?
(d) Does the article suggest that these companies are violating accounting standards?
(e) What are the implications of this accounting practice for investors?