Accounting & Financial Analysis News by GLG Council Members

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Internal Audit - The Changing Face and Stimulus

May 15, 2009

Analysis of:Internal Auditors: Mission Unaccomplished? | www.cfo.com

The face and scope of internal audit is changing. With time processes have always taken precedence over actual verification - except when a major fraud was discovered. The referred article speaks of the change now that the newness of Sarbannes Oxley is over and business is back to normal - atleast in terms of reduced major frauds. The article is however misleading because it relies to an excessive extent on statistics presented in a verbose form (which misleads) as compared to a tabular format (which is easier to read). In my analysis below I look at how and why internal audit is becoming increasingly relevant and all aspects are equally important.

China Replaces US as Brazil's Top Trading Partner: Bad News for Some Global Logistics Players

May 14, 2009

Analysis by: GLG Expert Contributor

Analysis of:Could Latin America Recover Sooner than Advanced Economies | www.vimay-group.com

Latest data from Brazil's development, industry and trade ministry (MDIC) confirm that China has replaced the US as Brazil's top export destination.  Will this latest international trade trend help or hurt the global logistics market? 

Keep Your Eyes and Ears Open

May 13, 2009

Analysis by: GLG Expert Contributor

Analysis of:In House Fraud Cases Surge | www.ft.com

Excellent article! The article is important as it correctly identified what most astute companies already know. Employee theft is on the rise as the economy takes a drip for the worst. As wallets tighten and income shrink employees will find creative ways to steal and or look for opportunities to save money. Many times employees rationalize and will justify taking office supplies or company product home as a barter exchange for services or due to the employee having taken a reduction in pay or accepted reduced hours.

slowing acceptance of IFRS by USA

May 13, 2009

Analysis by: GLG Expert Contributor

Analysis of:CFO's on IFRS: Forget About It | www.cfo.com

Accounting standards are meant to be followed and reviewed.  It looks like adequate review of US GAAP did not take place in the last 20 years.  In the meanwhile, the IASB was very active on this front and used the feedback from industry to revise the standards.  And this process is still going on!  No wonder, then that IFRS has been termed as a moving target.  And this is the genesis - the FASB was concentrating on framing new standards; the IASB was concentrating on reframing previous standards to give more scope for flexibility and transparency in accounts.

Latin America with good forecasts of the International Monetary Fund

May 8, 2009

Analysis by: GLG Expert Contributor

Analysis of:Could Latin America Recover Sooner than Advanced Economies | www.vimay-group.com

It seems after the international financial crisis the IMF has changed its vision for some Latin American countries.

Treasurers at the Helm - From Backroom to the Boardroom

May 7, 2009

Analysis by: GLG Expert Contributor

Analysis of:Crisis multiplies strains on company treasurers | www.ft.com

Treasurers used to rely on the accounting and finance department  to provide the numbers to forecast cashflow requirements and generally accept these as given to determine their cashflow forecasts, liquidity requirements and risk.  Today's Treasurer needs to be a Corporate Finance expert to ensure the figures provided are in fact reasonable and to ensure cashflow forecasts are accurate and complete.  In fact, as the crisis bites deeper, they also need to assist their senior management team in identifying near-liquid assets that may be converted, as well as support the organization in identifying out of the box opportunities to tap into further lines of credit, and present the company to creditors and would be creditors in a professional and successful manner. Finally, as financial markets continue their roller coaster ride, and even respectable financial institutions are at risk of default, existing financial risk management responsibilities have become essential to corporate survival.

Is Liquidity Accounting the Future?

May 5, 2009

Analysis by: GLG Expert Contributor

Analysis of:CFO's on IFRS: Forget About It | www.cfo.com

Current accounting standards are confusing and hard to understand by the average reader of financial statements.  They don't present a picture of liquidity or an analysis of of cash needs and uses.  Good businesses fail principally because they run out of cash, yet the traditional statement of cash flow doesn't accurately or clearly describe sources of cash and where it went.  Nor does it indicate projected cash requirements and whether the company will be able to meet its cash needs. There must be a linkage between realistic sales and earnings forecasts and the bottom line result.  Two analyses, therefore, are vital for an understanding of where a company is heading and whether it is reasonable to assume that it will get there.  The first is cash basis forecasting, and the second is liquidity analysis.  A monthly cash flow analysis for 12 months out is critical to determine the adequacy of internally generated cash flow versus the need to draw-down on existing debt availability.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Price of Financial Innovation - Pitfalls in the Road

April 30, 2009

Analysis of:Fed Chief Warns Against Stifling New Ideas | www.ft.com

The price of financial innovation can be like the ends of a pendulum. I would compare it to say research in medicine - except that there are no clinical trials for financial products. Just as thalidomide created major deaths/deformaties  relating to the birth of children in the 1960's so CDO's without adequate testing have created mayhem in the first years of this century. I draw the parallel between thalidomide and CDO's because in both cases there was said to be great innovation without adequate backup research and testing. Bernanke in the referred article speaks of the good of financial innovation. I agree - but then clinical and proper testing of financial products is equally necessary for financial products. This is the emphasis of my analysis below.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting - The Congruence - The Stumbles - A Look At Accounting Standards Development

April 23, 2009

Analysis of:CFO's on IFRS: Forget About It | www.cfo.com

The present economic downturn has now got pundits and others saying that Accounting Standards are going to stumble - their will be no congruence on convergence of accounting standards. I would compare the present debate to that which took place when efforts were being made to salvage the gold standard in the first half of the last century. Then the intent was to keep the gold standard intact - it failed. The effort today is to keep national accounting standards in compartments - deny the concept of fair value - and  generally keep accounting so complex that it is as difficult to understand as all the languages of the world - spoken simultaneously. In this analysis I look at why the development of accounting standards is going to continue and not going to be effected by the unnecessary arguments being floated in this context.

MSR risk in Stress test should be minimal

April 14, 2009

Analysis by: GLG Expert Contributor

Analysis of:TheStreet.com | www.thestreet.com

Most large banks hedge their MSR positions creating an offset that would show up in scenario analysis, although Government intervention is hard to measure.  The Natural Hedge needs to be considered.

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