The Accounting Review Vol. 29 No. 1 1954
BUILDING RESERVES BY OVER-VALUATION OF ASSETS.
Abstract
In recent months certain savings and loan associations, with a view of increasing their reserves, have been buying Valuation of Assets and other mortgage loans at big discounts, booking them not at cost but at par, and crediting the discount straightway to earnings, from which, at the end of the fiscal period, it is transferred to reserves. Since these associations are strictly cooperatives, they have no capital stock of the kind corporations do. The commercial banks and trust companies are incorporated and are owned by stockholders; the capital stock is evidenced by shares which entitle the stockholders to their proportionate part of the corporation's current net earnings, and of the net worth in case of liquidation. Except in a few states, the state-chartered savings and loan associations are not allowed to accept deposits; the savings and loan associations having federal charters are similarly inhibited. In short, the associations have no debts of consequence, except perhaps their borrowings from commercial banks or the Federal Home Loan Banks; and so almost all of their assets are owned in equity.
- DOI
- 10.2308/tar-7129405
- Volume
- 29
- Issue
- 1
- Pages
- 45-51
- Language
- en
- Sources
- openalex crossref