Change in accounting rules

My dad recently pointed our something to me. Apparently, accounting rules have been changed.

Companies can now report equities that they are holding at cost price rather than 'mark-to-market' prices. What this means is that companies badly hit by the market downturn can hide losses they have taken in their portfolio. Which is fucked up. Assets on the balance sheet will be overstated.

There's a whole host of implications. In one example: Equities are supposed to be 'near cash' assets, used to ability to meet short term liabilities. But if the equities a company is holding is at a rubbish price or not even trading at all, it may not be able to meet its short term liabilities in real life though its books say it can.

The bottomline as far as I'm concerned is that traders and investors will over value a company that uses the new accounting rules.

Sidenote: I typed this entry on my new phone! (Though I still used my computer to upload it.)