Balance Sheet and Total Capital Ratio Essay

Words: 995
Pages: 4

1、(1) What are the primary line items within Citigroup’s balance sheet and income statement?
Balance Sheet
Cash and due from banks
Deposits with banks
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Total loans, net
Total deposits
Short-term borrowings
Long-term debt
Common stock
Additional paid-in capital
Retained earnings
Income Statement
Total revenue
Total provisions
Total operating expenses
Net income These are primary line items because of they are either great in amount or great in significance (Referred to as key performance indicators).

1、(2) Using the balance sheet as a reference, what happens during
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4、(1)Assume Citigroup experiences countinuing losses in its trading account in 1Q 2008, requiring a fair value decrease of $50 billion (net of tax).
Dr. Net income 50b Cr. Trading account assets 50b
Dr. Retained earnings 50b Cr.Net income 50b
4、(2) How would this be recognized in the financial statements? Tier 1 Ratio=Tier 1 capital/risk-weighted asset

4、(3) How would this affect the Tier 1 capital ratio?
The loss will make the risk-weighted asset lower, so the Tier 1 Ratio will be higher.

5、(1) Do you think fair value accounting helped or hurt the US banking industry over the time of the case? The fair value accounting hurt the US banking industry over the time of the case. Normally, since the fair value is able to reflect the gain and loss resulting from the market risk as well as the effect coming from the change of credit quality, the fair value accounting is considered to be better for reporting the financial standing and results of operation. The previous mixed measurement model may enlarge the fluctuation of the revenue and assets that will make investors call for the higher risk premium and lead to higher capital costs. But when there is the run on the bank, the use of fair value accounting results in violating common