Tuesday, July 23, 2002

MOTO [Slate] Mark Lewis makes the stunningly obvious point that the crash is everyone's fault. I say, let's get the Dow back down to 2000! [GAAP=generally accepted accounting procedures, i.e., regular lies; pro forma=fantasy numbers.]
The GAAP numbers also were included in the press releases, although usually they were less prominently displayed. So why did everybody focus on the pro forma earnings? Because we wanted to. It was a mass delusion in which everybody willingly participated. That's why this issue is getting relatively little attention these days, despite all the focus on reform. With pro forma, there is no convenient villain to blame. The pro forma phenomenon is simply embarrassing for all concerned -- which is just about everybody. (Federal Reserve Chairman Alan Greenspan made the point Tuesday during his testimony before a Senate panel, when he was asked about the recent accounting scandals. "Remember, it's not as though everybody should be shocked by this," he said. "I mean, we had these pro forma statements for months and quarters back when the market was roaring away, and it was the most imaginative accounting I have ever seen.... Everybody knew that was going on.")
Update 7/24: Business 2.0 had a timely article explaining how this works back in February... 2002. Thanks for the tip. How can they still be in business?

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