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If you're old enough, you may remember seeing pictures of how the Kremlin doctored Russia history to keep up with the latest power struggles within the Politburo. Some comrade who could be seen storming the Winter Palace one year was magically photo-shopped out the next.

Well, now Société Générale is keeping that practice alive in the 21st century. The company had its huge loss this year, but the firm is magically transferring it to 2007.

It is not often that a major international bank admits it is violating well-established accounting rules, but that is what Société Générale has done in accounting for the fraud that caused the bank to lose 6.4 billion euros — now worth about $9.7 billion — in January.

In its financial statements for 2007, the French bank takes the loss in that year, offsetting it against 1.5 billion euros in profit that it says was earned by a trader, Jérôme Kerviel, who concealed from management the fact he was making huge bets in financial futures markets.

In moving the loss from 2008 — when it actually occurred — to 2007, Société Générale has created a furor in accounting circles and raised questions about whether international accounting standards can be consistently applied in the many countries around the world that are converting to the standards.

Posted by edelfenbein at March 7, 2008 11:37 AM