According to IAS 39, a credit balance in the income statement or a surplus of liabilities over assets in the balance sheet only had to be recognized when the loss actually occurred, i.e., when it materialized. The event triggering the loss (trigger event) could be waited for. In the course of the financial crisis that followed the subprime crisis, it became apparent that this approach led to avalanche-like rounds of write-downs and significantly exacerbated the crisis. – See presentation, credible, fair value, imparity principle, net asset value, insolvency cases, combination effect, mark-to-model approach, market value, procyclicality, loss, expected, loss case.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/