I read that a bank can write off capital off its balance sheet and show profit in its income statement. This pertains to the current subprime crisis. How is this done?
Can you explain this in depth?
I don’t understand the relationship between the balance sheet and the income statement in a case like this
Can you explain this in depth?
what is the relationship between the balance sheet and the income statement in a case like this
If the amount of the write-off is less than the total income for the quarter it is certainly possible.
If the bank writes off income or declares a loss on capital, they can deduct it from thier taxes while they sell the debt to a collection agency for a small amount of their loss. That way they do not have to pay taxes on profits totaling the amount lossed. Therefore, they still have a positive income at the end of their fiscal year.