Accounting & Financial Analysis News by GLG Council Members

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Fair Value - The Bankers Blame It for Their Woes - The Familiar Blame Game

September 29, 2008

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

When the going gets tough deflect the blame. That's an age old tactic. The banks and the global financial system are in a mess. The mess has been created by "easy credit" and  now the bankers want to blame accounting rules and the concept of  fair value. This is like going back a 100 years in accounting. It is the  stratagem used by defenceless managements when their bluff has been called and exposed. In this analysis I examine why fair value should be used for measuring the value of assets especially in the case of financial instruments. I also  argue that it is not right for the banks to ask the regulators to tell them how to arrive at fair value. This is their job. Simply because their access to capital and their profitability is affected is no reason for using intrinsic value which is easy to manoeuvre.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting and Fair Value Considerations - Monetary Policy - Market Corrections - Financial Statements

September 22, 2008

Analysis of:Punctured Bubblenomics- Understanding the Shrinking Economy | www.nytimes.com

As I  look at the troubles facing the financial world and global economy as a bystander and a involved person (as  a  finance professional) I actually see  a  certain amount of  humor in the entire situation. Monetary policy during  the  last  few  years did not follow the basics which I learnt at college, accounting got embroiled in politics. The number of  esoteric instruments being invented were just too many. In several cases these instruments were designed to get around rules which would have brought out their fair value. Those who blame fair value should instead blame the managements of institutions which were always trying to outmaneuver the market instead of improving productivity and generating real wealth. In this analysis I look at these various conundrums from an accounting and earnings perspective.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Finance Manager - What Happens When the Going Gets Tough - Changing and Emerging Role

September 18, 2008

Analysis of:New AIG Chief Liddy has Finance in His Blood | www.cfo.com

The present banking crisis is once again bringing out the importance which prudent financial management plays in wealth creation and maintenance. Till  now it was profits, sales targets and gross billing which  was important. The growth and continuing existence of the organization was taken as given. This was both at the macro and micro level. A finance manager who urged caution or an auditor who had reservations on a financial statement was considered to be a unnecessary stumbling block. Now that honored names on the corporate scoreboard are collapsing the existence of  organizations is becoming more important. Concepts like internal controls, proper valuation of assets/liabilities and returns on investment are more important. In this analysis I take a look at this new emerging trend where finance is gaining importance in a tough environment.

Robert KempProfessorUniversity of Virginia - CC

Fair Value Accounting - The Good And Bad Of It In The Real World

September 15, 2008

Analysis of:Fair-Value Revolution: Historical cost accounting is fading as Corporate America marches into a new era. | www.cfo.com

Fair value accounting, or mark-to-market accounting, is not new.  The debate of how to account for value has been around for decades.  However the implications of fair value accounting, versus historical accounting, are far reaching and often not grasped.  A society needs to be careful in setting accounting standards that may or may not reflect its cultural values.

Fosters Advance Ruling - India

September 12, 2008

Analysis by: GLG Expert Contributor

Analysis of:Fosters & the Authority for Advance Rulings in India | www.maxkapital.com

The importance of a coherent international tax framework is important.

Robert McCabePartnerMcCabe & Associates, PhDs

Is “Fair-Value” Really that Dangerous?

September 10, 2008

Analysis of:Fair-Value Revolution: Historical cost accounting is fading as Corporate America marches into a new era. | www.cfo.com

The article makes several claims that need a response.  First, it declares the principal question that accounting tries to answer is “What is a company really worth?”  Second, it states that fair value played a role in the recent “economic meltdown,” because the fair value rules forced “banks to sell their securities in plummeting markets.” Third, it states that historical cost reporting “enabled companies to work their way out of trouble,” by waiting until the market turned around.  Fourth, the case is made for fair value measures being unreliable.  Finally, it’s noted that International Financial Reporting Standards (IFRS) favor greater use of fair value. 

Robert KempProfessorUniversity of Virginia - CC

Valuation - The Trick Is In The Fundamentals

August 25, 2008

Analysis of:Kazakh rival lifts ENRC stake to block bid | www.ft.com

To accept or reject an offer to sell all or part of a company is a challenge.  There are two issues.  First is the maximization of shareholder value.  The second is understanding the basis of conflicting valuations. 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Risk Modeling and Financial Returns

August 22, 2008

Analysis of:Risk Models | www.glgroup.com

The measurement  of  value  at  risk  in  financial modeling  is  a  generic concept  and has  existed  since time  immemorial - even  before  the  current  sophistication  set  into financial  decision making  starting around  50  years  back. In  this  analysis  I  take  a  look  at  the  various  inputs   which  go into the  construction  of  a  valuation  model for financial  instruments.

Financial Fraud in the Small Corporate Community

August 18, 2008

Analysis by: GLG Expert Contributor

Analysis of:Small Businesses Suffer From Company Fraud | voices.washingtonpost.com

Financial Fraud in the small business community has increased to epidemic proportions.  As the economy tightens there will be a statistical rise in fraud perpetrated against business owners by employees and/or contractors.  What can the business owner do to minimize the potential of theft via financial fraud?

A Vodfone Tax Case Loss in India Will Open Significant Uncertainties

August 18, 2008

Analysis by: GLG Expert Contributor

Analysis of:Vodafone India Tax: What it Might Mean | www.maxkapital.com

If lost, the Vodafone India tax case will cause considerable uncertainties for the investor community.  This article highlights some questions which might arise if the Vodafone case is lost.

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