Publicly-traded companies have obligations as regards accurate accounting of their balance sheets, so how do they determine the value of novel types of securities which are often too complex to analyze accurately?
For example, say it's the '80s and someone wants to structure a CDO for the first time. We all know from the financial crisis that nobody really understood how much these things were actually worth. So what legal basis under corporate accounting rules do these companies have to put such a thing on their balance sheets? Are you just allowed to put anything liquid on your balance sheet, with the current market value? If so, what happens with initial offerings of securities when there's no indication yet whether they'll be liquid?
Basically, I'm looking at some of these really complex structured products and wondering what's actually preventing someone from crafting the ultimate impossible-to-analyze twenty-thousand-page instrument and using it to hide their toxic assets.