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Nama Accounting Methods

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I wish to draw attention to Nama's accounting policies which have attracted little comment but have huge significance for taxpayers as the cost of the banking bale-out rises.

Specifically, Nama has decided to use a methodology which allows it to immediately write off about €40 billion of the €81 billion of loans being purchased from the banks and to ignore related interest, amounting to about €10 billion. This means that, with a stroke of the pen, Nama is forgiving about €50 billion of developer debts and, of course, making it much easier to report an illusionary "profit" when wound up.

Where is the "moral hazard" and justice in this when, based on Nama's creative accounting, every billion euro of discount on the loans being acquired is effectively a billion less to be paid by developers but a billion more to be pumped into the banks (mainly by taxpayers)? Suggestions by Nama that it will pursue debts to the "greatest possible extent" should be taken with a pinch of salt. As they don't even appear in Nama's balance sheet, where is the pressure to collect them?

Nama should be obliged to show the original value of the loans being acquired in its balance sheet and to properly account to taxpayers for bale outs and write offs when all methods of recovery have been exhausted.

Letter published in the Sunday Business Post on 22nd August 2010. For more on this topic, see this Open Letter to Nama's Board and the related blog entry.

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This page contains a single entry by Brian published on August 23, 2010 2:28 PM.

National Pension Reserve Fund and Sale of State Assets was the previous entry in this blog.

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