Accounting & Financial Analysis News by GLG Council Members

Derivative Market Risk - Bad But Not End Of World Scenario

October 23, 2008

Analysis by: GLG Expert Contributor

Analysis of:The $1,300 Trillion Derivative Market | maxkapital.blogspot.com

This post looks at the size of the derivative market and seeks to understand the economic exposure to the financial system from risks embedded in this market.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

When The Sky Falls - How Accounting Analysis Can Help Correct The Financial Imbalance

October 14, 2008

Analysis of:A Power That May Not Stay So Super | www.nytimes.com

Over the last few weeks the sky has fallen and the latest cover of the Economist has the heading "Saving the system - The Panic, The Rescues and a Special Report on the World Economy".  Different newspapers are covered with details of virtual nationalizations, lost bank confidence and the list goes on. In this analysis I look at how accounting analysis can actually help correct financial imbalances when the sky has literally caved in or fallen.

Paul MillerProfessorREGENTS OF THE UNIVERSITY OF COLORADO

Exacerbation or exposé?

October 13, 2008

Analysis of:Alls Fair: The Crisis and Fair-Value Accounting | www.cfo.com

undefined undefined Listen to the message and don’t shoot the messenger if you think it’s bad news. And don’t endorse public policies based on deceptive reporting. undefined undefined

Method of Valuation of Assets - How useful in preventing the turmoil.

October 10, 2008

Analysis by: GLG Expert Contributor

Analysis of:Alls Fair: The Crisis and Fair-Value Accounting | www.cfo.com

In the present context, Mr. John McCain rightly says that "Fair value rules may be exacerbating the credit crunch", since the market reacts and stabilizes on sentiments. While strictly applying the valuation rule of mark to market accounting, the assets held by the investment companies will be vaued at current market rates which has already fallen considerably.  For those assets, which are valued at mark-to-model accounting would still find a dilemma in its valuation, and if the assets are valued at distress sale price, it would take several companies towards failure, as the investors will line-up for the redemption of their investment at throw-away prices, which will automatically reduce the possibility of survival of several investment banks.   Those "sound" assets that had suffered undue valuation may be allowed to be suspended, so that there is always a possibility of better recoveries, but liquidity is the factor to be considered in such a situation. 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Credit and Banking Meltdown - The Disruptive Effect of Politics on Financial Statement Presentation - The Nemesis of Finance

October 7, 2008

Analysis of:Politicians rail against fair value accounting | www.ft.com

As I  write this article the Senate has passed the $700bn bailout package. There is also general  unanimity to increase the limit upto which bank deposits are insured upto $250000. Yet all this only reflects the effect of  politics on the economy. There is also pressure to allow banks to measure financial assets by suspending the use of fair value and the SEC has indeed recently issued guidance in this regard. All this will not restore the credit markets and in this analysis I argue why in my opinion the present situation is just a beginning and a lot more needs to be done to restore confidence in credit and financial markets - most of  this needs to be done by the market participants themselves. 

Fair Value Accounting Is Not a Political Issue.

October 3, 2008

Analysis by: GLG Expert Contributor

Analysis of:Politicians rail against fair value accounting | www.ft.com

Lawmakers are suggesting that providing the financial industry relief from Fair Value accounting can be part of the "Cure" for the troubled industry, and should be considered in the proposed bailout legislation.  Political lobbying and a misunderstanding of accounting principles should never  be the basis for weaker standards. Congress needs to let the accounting profession deal with accounting principles.

Value Accounting - a must in the current economic scenario.

October 3, 2008

Analysis by: GLG Expert Contributor

Analysis of:Politicians rail against fair value accounting | www.ft.com

Failure of several investment banks together with some insurance companies clearly indicate that the investment banking system need to be modified so that the short-comings and irregularities are capped at the beginning itself, and should not be allowed to grow to such a proposition that it becomes impossible for the institutions to come out of such financial crisis. The fair value accounting stipulates the valuation of the holdings of the companies at current market price, however it should also be kept in mind that while making such valuation, the uncovered/un-hedged position of contracts which may bring losses in the event of adverse market movements to be strictly taken care of.  Further, the persons who are in charge of the operations should be asked to provide answers/ testimony to understand and report the financial issues and implications of the investments.  An in-depth analysis will help uncover the trends and the steps need to be taken. 

Robert McCabePartnerMcCabe & Associates, PhDs

More Attacks on Fair Value

October 3, 2008

Analysis of:Alls Fair: The Crisis and Fair-Value Accounting | www.cfo.com

Why does the SEC not enforce the rule against "naked short selling?"

The Return of the Monkeys Uncle

October 3, 2008

Analysis by: GLG Expert Contributor

Analysis of:ABA Levels New Blast at Fair Value | www.cfo.com

Mark to market rules make no sense when the market values are established within a market in dis order.

The Monkeys Uncle

October 3, 2008

Analysis by: GLG Expert Contributor

Analysis of:Politicians rail against fair value accounting | www.ft.com

What is wrong with the mark to market rule?

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