After a series of missteps and failures by several specialty finance companies that depended on asset-backed securitization as their primary funding source and "gain-on-sale" accounting, the equity markets have become wary of the quality of earnings reported by these companies.

Some analysts have gone so far as to suggest that forcing all finance companies to account for profit on a "flow" or "portfolio" basis (and perhaps even stop funding their business via securitization) is the only way to accurately represent earnings and restore investor confidence. Clearly there have been problems (in some cases, perhaps even abuses) of gain-on-sale accounting. However, when properly applied it can provide a level of transparency and an emphasis on creating value that traditional flow accounting does not.

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