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Strategies & Market Trends : The coming US dollar crisis
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To: Real Man who wrote (11854)9/26/2008 2:37:41 PM
From: benwood  Read Replies (1) of 71454
 
Why do they write off what they don't collect? Their balance sheet hasn't changed at all, has it, except the cost of the contract. Is that what you mean?

Seems like you have them making a write off for something they thought they'd have, contracted to have, and then didn't get, like if they were trying to take over a bank, and then the deal went south.

e.g. say they have assets of $100, and they buy a contract for a dollar which entitles them to collect $101 from the counter party at maturity.

If paid:
assets are $200 (net gain of $100)
If the counterparty goes bust and does not pay them,
assets are $99 (net loss of $1)

You seem to be suggesting that they'd report a loss of $101 and that their assets are $-2 when in fact they still have assets of $99.

?? (yes, I *may* be a real idiot).

edit: perhaps they'd report a gain of $100 (gain from contract) and a loss of $101 (counterparty failure)??
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