3. How the text is organised

What do these words refer to in the article?

1 their (line 58) 4 they (line 62)

2 they (line 60) 5 their (line 63)

3 they (line 61) 6 its (line 82)

Vocabulary

1. Definition

Match these accounting terms (1-2) with their meanings (a-b).

Then match them with the correct chart (i-ii).

1 fair·value asset valuation

2 amortised cost asset valuation

a) An asset’s market value at any specific point in time is not taken into account.

It is assumed to increase steadily over the asset's lifetime.

b) An asset’s valuation at any specific point in time is based on the amount of money that could be obtained if the asset were sold at that time.

2. Synonyms

Find words or phrases in the article which mean the same as these words and phrases.

1 a change (paragraph C) a..... ...

2 to change (paragraph D) to).........

3 judgements (paragraph F) a........

4 regulators (paragraph H) w..... .. ..

5 cash and easily liquidated assets that a bank must hold to satisfy stock-exchange regulations (paragraph H) c .. ...... I).

3. Opposites

Find words or phrases in the article which have the opposite meaning to these words.

1 improved (paragraph A) 5 to keep secret (paragraph E)

d. .... ... to d.......

2 healthy (paragraph B) 6 to mark up (paragraph E)

t.... ... . to w ........ d. ..... ..

3 market stability (paragraph C) 7 rose sharply (paragraph E)

m .... ... . v...... . p. .......

4 increased market value (paragraph C) 8 an upturn (paragraph G)

r ...... .. m ...... .. y........ a d. ...... .

4. Sentence completion

Use words and phrases from Exercises A-C in the correct form to complete these sentences.

1 The banks prefer the ................ method to the fair-value method of accounting for certain assets.

2........ monitor the banks to make sure that they have enough capital to lend money to customers.

3 The banks’ problems emerged as international stock markets started to........ in 2008.

4 The amortised cost accounting system is considered to be particularly useful during a period of.................

5 The specific amount of capital a bank must hold in order to lend a specific amount to customers is known as it’s.................

6 Under the old system of accounting, banks were forced to ................ their assets by very large amounts if asset prices fell.

5. Understanding expressions

Choose the best explanation for each phrase from the article.

1 •... relaxing of fair-value accounting' (article title)

a) making stricter b) making easier

2 •... over the lifetime of the financial instrument.' (lines 25-26)

a) an investment such as a bond or share b) an order to buy shares

3 •... a move that would effectively "cement" the use....' (lines 36-37)

a) stick b) formalise

4 ' ... in order to create a level playing field for the international banking sector ....' (lines 40-41)

a) a situation where the conditions are equal for everyone

b) a reduction in the volatility of the market

5 ' ... forced regulators and executives to face the problems head on ....' (lines 52-54)

a) ignore the problems b) deal with the problems openly

6 ' ... that fair-value accounting was pro-cyclical ....' (lines 65-66)

a) followed the economic cycle b) moved in the opposite direction to the economic cycle

7 ' ... by giving in to political pressure ....' (lines 85-86)

a) doing something due to political pressure b) putting political pressure on someone

8 ' ... the IASB had permanently damaged its credibility.' (lines 88-89)

a) the extent to which someone can be believed or trusted

b) the amount of credit someone is allowed to have