CBA Tanks On Accounting Changes

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            [1] => ((WBC))
            [2] => ((NAB))
            [3] => ((ANZ))
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            [0] => CBA
            [1] => WBC
            [2] => NAB
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This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies.
For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Shares in Commonwealth Bank ((CBA)) slid 4% to the close today on the announcement the bank was changing its accounting practices. This move provided part of the impetus for the market to erase its earlier gains.

CBA has decided to no longer include unrealised gains and losses on “derivatives used for hedging purposes” in its profit and loss statement.

While no doubt a valid argument could be put forward for such a decision, its timing is somewhat spurious to say the least. It is hard to believe CBA would choose now to decide some extraordinary unrealised gains should not be considered part of its reported cash profit. The opposite is more likely true and, if not, certainly enough to spark speculation.

Unrealistic valuations of derivative positions is one reason US banks, and other global counterparts, are in the mess they’re currently in. US accounting authorities have already moved to increase disclosure rules. Yet CBA has chosen to go the other way at the height of banking sector uncertainty.

Just how much has it lost? is the obvious question that is going around the traps on Monday afternoon. The quick reversal in CBA’s share price direction in the late afternoon did also leave a mark on the rest of the sector with peers such as Westpac ((WBC)), National ((NAB)) and ANZ Bank ((ANZ)) all ending the day in the red.

The announcement follows enquiries by FNArena subscribers last week about rumours that one of the Australian banks was some kind in trouble. We had no idea where these rumours came from, or whom they were targeting. We might have an idea now.

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