Accounting & Financial Analysis News by GLG Council Members

Accounting of bailout money is allowing for executive bonuses to be paid.

March 16, 2009

Analysis by: GLG Expert Contributor

Analysis of:AIG Executives receive bonus | www.cnn.com

There is a problem.  It is the accounting of bailout money on the balance sheet.  Most contracts are performance based and a contract does not guarantee a bonus to its employees.  Unless the bailout money is accounted as an offset on the balance sheet allowing the company to show a profit. 

SEC may finally get something right.

March 13, 2009

Analysis by: GLG Expert Contributor

Analysis of:SEC won't suspend mark to market - source | money.cnn.com

- Mark to market is necessary for risk management - Even do disruptive markets may distort prices, there is a price for everything. - Even though the price of an asset may not be equivalent to the value of the asset, the market price should be used to gauge risk and position level. - When times were good and prices of assets significantly exceed the value, companies were not complaining about why they had to "write-up" their assets.  They took advantage of that scenario and benefited from it.  Now when the table have turned, they are crying foul.  They should not be allowed to have it both ways. - FAS157 is not perfect, but it is the best thing we have to provide a transparent picture to the investing public.  If management has something to explain, that is what disclosures are for.

What impact would this have on the world economy if the principles where integrated into all business models?

March 13, 2009

Analysis by: GLG Expert Contributor

Analysis of:A need to reconnect | www.ft.com

The question should be part of the evaluation process for any business seeking funding for their current operation, acquisition, expansion or IPO.

Banking Industry Jawbones for MTM Change

March 11, 2009

Analysis by: GLG Expert Contributor

Analysis of:SEC won't suspend mark to market - source | money.cnn.com

Because the financial crisis is the most controversial issue now and likely to remain so indefinitely, the question of how assets are valued on the books of large financial institutions is of great importance.  Hundreds of billions of dollars has alread been spent on a number of programs designed to aid troubled banks by injecting funds into them, and the authorities have vowed to implement the original purpose of the rescue program, which is to buy troubled assets.  For many years, the banking industry has insisted on wide latitude in the valuation of securities and other assets that have declined in value during the crisis.  As values have declined, the demands for relief from Mark to Market rules have become more shrill.  Lately bankers have proposed that Congress empower the Federal Reserve to change the accounting rules, on the ground that the other agencies with jurisdiction have refusted to provide relief.  Chairman Bernanke's words did not totally dispel this notion.

market value will become VALUE IN THE AIR

March 11, 2009

Analysis by: GLG Expert Contributor

Analysis of:SEC won't suspend mark to market - source | money.cnn.com

Book value is foundation of market value. If you separate them, market value will become VALUE IN THE AIR.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting Jugglery With Foreign Exchange Losses and Hedges

March 10, 2009

Analysis of:Cos Grapple With Forward Contract Losses | epaper.timesofindia.com

Foreign exchange accounting and accounting for hedges have always been major problem areas. These also give immense scope for manipulation of corporate results. The spot vs. forward contract vs. hedge accounting syndrome are complex and can give rise to misleading and inaccurate results if not properly applied. In this analysis I take a look at IAS 39, Indian AS 30 and SFAS 133 as amended and how these are impacting corporate results in the present scenario.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Gold Hedging - Derivatives Valuation - The Coming Problem Areas

March 9, 2009

Analysis of:Gold Rises Ahead of Vital US Employment Data | www.ft.com

The referred article draws attention to the expected increase in the price of commodities like gold which act as a safe haven in troubled times. In this analysis I look at the effects this perceived demand and the price spiral will have on the valuation of derivatives based on these commodities and some of the problems which can be expected in the realm of valuation of derivatives including embedded derivatives and other aspects of the equation.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Second Great Depression - Accounting - Finance - Economics - A Personal View

March 9, 2009

Analysis of:Blue Chip Stocks, Economic Metrics Headed for Ground Zero | economictimes.indiatimes.com

The second great depression is on. It is effecting accounting, finance, economics and the way of life in every way possible. The paper investments are losing favor and commodities - especially gold and silver - are in favor. In this analysis I look at where accounting may head and the sea change we can expect in the way Institutions of economics - especially those involved with the distribution of wealth and the growth of economies are administered and viewed.

Auditing Limitation As To Madoff Type Matters

March 5, 2009

Analysis by: GLG Expert Contributor

Analysis of:Government Offers Details of Bank Stress Test | www.nytimes.com

1. Development of new or altered rights and opportunities for fraud victims. 2. Availability of larger potential asset fund for use by trustee/receiver.

The Italian "anti-crisis" package and the impairment test - ADZ Morison

March 2, 2009

Analysis by: GLG Expert Contributor

Analysis of:Government launches anti-crisis measures | www.eurofound.europa.eu

The impact of the crisis on the financial statements of Italian listed companies will also be considerable for the impairment test which is required by the national setter OIC and the regulatory bodies. The "anti-crisis" package includes a moratorium on assessment for Italian companies which are non listed providing some relief to their financial statements for the years 2008 and probably 2009.

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