DTAs

Presently, banks can count DTAs within their reported tier-one capital.

KPMG Sees Possible Bank Writedowns 2010

Also holding large amounts of DTAs are Sony , with a balance of $6.9 billion, and NEC , with $3.2 billion.

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However, according to KPMG, if the projections of future profitability upon which they were calculated turn out to have been too optimistic there is a risk that banks will have to write down a chunk of the value of these DTAs.

KPMG Sees Possible Bank Writedowns 2010

A bigger concern is that DTAs may no longer be recognized for capital purposes under the forthcoming Basel III requirements.

KPMG Sees Possible Bank Writedowns 2010

As well as hitting income, writing down the value of DTAs would also have implications for regulatory capital requirements.

KPMG Sees Possible Bank Writedowns 2010

Deferred tax assets, or DTAs, arise when a company reports a loss but cannot record the loss for tax purposes until the future.

KPMG Sees Possible Bank Writedowns 2010

In Mayo's view, Citigroup needs to take an immediate loss of some $10 billion on its DTAs, something that would place the marginally profitable bank, back in the red.

Charles Gasparino: Citigroup Goes After Mike Mayo Over Accounting Accusations 2010

In Mayo's view, Citigroup needs to take an immediate loss of some $10 billion on its DTAs, something that would place the marginally profitable bank, back in the red.

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Mr. Martin said: "If profit forecasts are cut, then DTAs are no longer justifiable and banks will need to take writedowns which will affect the reported bottom line and hit regulatory capital."

KPMG Sees Possible Bank Writedowns 2010

PLC based their DTAs on a five to eight year time-frame.

KPMG Sees Possible Bank Writedowns 2010