We provide evidence that managers use the discretion afforded by fair-value accounting rules to manage the size of reported securitization gains. We show that the ambiguity allowed in discount rate choice is one way that managers can influence these gains. We investigate whether CEO compensation...

Relative to recording securitizations as collateralized borrowings, the quot;gain on salequot; treatment allowable under SFAS 125/140 has several accounting benefits such as reducing leverage, increasing profits, and improving efficiency ratios. We argue that to maximize these accounting...

Accounting rules for valuing retained interest from securitizations require management to make assumptions concerning discount rates, default rates, and prepayment rates. These assumptions provide management with discretion to determine the “gain on sale” of the receivables. We investigate...