Title: The reverse side effects of mark to market accounting: Exista and the saga of leveraged paper profits

Authors: Már Wolfgang Mixa; Murray Bryant; Throstur Olaf Sigurjonsson

Addresses: School of Business, Reykjavik University, Menntavegur 1 – 101 Reykjavík, Iceland ' Ivey, The University of Western Ontario, Canada ' School of Business, Reykjavik University, Iceland; INT, Copenhagen Business School, Denmark

Abstract: We describe holding companies and their main roles. We follow up by describing the spectacular development of the investment company, Exista. We then discuss how the difference in fair value methods and equity methods may provide a false picture of the state of companies. This applies especially to different types of holding companies. Our paper shows an example of one that people generally perceived as being a financial company when in reality was more like an investment company, in this case a highly risky and leveraged one.

Keywords: investment firms; holding companies; fair value accounting; mark to market accounting; Iceland; equity methods; Exista; leveraged paper profits; risk.

DOI: 10.1504/IJCA.2016.10002498

International Journal of Critical Accounting, 2016 Vol.8 No.5/6, pp.463 - 477

Received: 22 Jun 2016
Accepted: 22 Jun 2016

Published online: 18 Jan 2017 *

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