Allow me to translate the bolded part of the news release I just posted. Because UBS' debt is trading at a discount in the market, UBS could theoretically retire its debt for less than book value. That highly improbable theoretical scenario allows them to book a gain. This is an unintended (and absurd) consequence of FAS 157 and mark to market accounting. Taken to an extreme a company on the verge of bankruptcy could book gains on the declining value of its bonds up until the moment it declared bankruptcy.
If Greece was allowed to record GDP the way UBS records earnings, there wouldn't be a European debt crisis.
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