In general, the characteristic of certain economic variables – not to follow the business cycle in the same direction (in a broader sense; such as certain consumer goods, especially basic foodstuffs) or – even to run counter to it (in a narrower sense; such as exports; because companies demonstrably put more effort into sales abroad when domestic sales are sluggish). – In particular, the requirement that accounting by itself, according to its internal logic, must at least not be cycle-reinforcing. This refers in particular to the fact that, due to the fair value valuation prescribed by IFRS, banks are forced to report their securities, which have now risen sharply in price, at market value in the event of a bull market on the stock exchange. However, if prices collapse sharply due to special circumstances on the financial market such as the subprime crisis (or, more generally, during the downturn phase of the economic cycle), then corresponding losses have to be reported. These loss reports move many market participants to sell their securities (as they believe: in time). Such panic selling (also referred to as shock waves) reinforces the bear market on the financial market and can easily spill over into the real economy. – Allowing institutions to use the mark-to-model approach to value securities that have slipped in price in such exceptional circumstances raises many questions. In the wake of the subprime crisis, for example, certain securitized securities became completely worthless for good and had to be classified as nonvaleurs. It would be contrary to a credible account if banks carried these securities on their balance sheets at any value greater than zero. – See Absence capitalism, contagion effects, audit, valuability, valuation, origination rate, representation, credible, deficit spending, insolvency cases,
Inventory value, combination effect, air securities, mark-to-model approach, market value, massive sales, procyclicality, risk perception, asset, incorporated, time value,
Cyclic.

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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/

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