No, I believe assets are stated at cost until there is a gain or loss that is realized. Depreciation is only used for assets with a “useful life”. Please correct me if I am wrong. I went to B-school 8 years ago, but accounting was not my concentration. I merely skated through the classes and haven’t used much of it since.
Oh, in general you are right, and that is how most businesses are run.
But not the banks of today. This issue was very hot in 2008. The FSAB, I am not sure of that acronym, it is a ruling board that decides the rules that banks can run under. It is THEY who decided that what I wrote is OK. And I think it applies ONLY to the mortgage backed securities.
It was a pretty big deal at the time, specially when those MBS were selling pennies on the dollar. It allows banks to look well funded, when they are not.
It is frankly, criminal. Enron accounting is now allowed for the banks, essentially.