All GLG News Analyses Filed Under: Accounting Issues

Analyzing Receivables for Warning Signals and Red Flags

October 3, 2007

Analysis by: GLG Expert Contributor

Analysis of:12/31/06 10-K for Sypris Solutions (SYPR) | sec.gov

This post specifically discusses some key potential risks with receivables on the balance sheet that are common across a broad base of companies.  The "Analysis" section below gives several recommended tips and techniques for investors on how to analyze receivables for these specific risks.

Liquidity Crunch, Bonds and Pension Plans

September 25, 2007

Analysis by: GLG Expert Contributor

Analysis of:Liquidity Crunch: How Long Will it Last | www.cfo.com

1. Defined benefit plan sponsors could be seriously impacted by the sub-prime crisis, possibly triggering a funding status violation. 2. For those companies directly involved in poor credit risk assessment, defined contribution plan fiduciaries are assessing whether company stock in the 401(k) plan makes sense. 3. Sub-prime litigation that involves institutional investors is rising.

Popular “Cash-Settled” Convertibles to Become Extinct?

September 24, 2007

Analysis by: GLG Expert Contributor

Analysis of:A Splitting Headache? | www.cfo.com

The FASB recently issued a proposed accounting standard covering “cash-settled” convertible debt instruments – which have become popular in recent years. The standard, if finalized, could materially increase the amount of interest expense recorded on the P&L for applicable companies. The rule is targeted to become effective for fiscal years beginning after December 15, 2007 – so investors would begin to see the broad-base impact of this proposed standard in conjunction with earnings reports in Q1 2008. The standard would have the obvious impact of reducing net income and EPS for applicable companies. Importantly, the impact to EPS could be significant for certain companies with material levels of cash-settled convertibles. It appears this proposed standard would largely eliminate the attractive “loopholes” that currently exist in the accounting for cash-settled convertibles – leading to the logical conclusion that these instruments will likely become extinct.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Revised IAS 1 - Where are Accounting Standards Heading - Is there a confusion?

September 24, 2007

Analysis of:IASB issues revised standard on the presentation of financial statements | www.iasplus.com

The  FASB-IASB  convergence project  appears  to  be  in  confusion. The  revised IAS 1  effects  28  international accounting  standards (IAS and IFRS)  and  by  simply  changing  the  nomenclature  of  a  few  standards. While  the  requirement  to  present  owner  changes  in  equity  and  other  non-equity  owner  changes  separately is  beneficial  yet  the  overall  impact  of  the  new  standard appears  to  be  much  below  expectations.

Raj MehraPresident & FounderChelsea Advisory Services

Low Loan Loss Reserves at Banks Could Cause Problems Ahead

September 20, 2007

Analysis of:E*Trade Hit By Mortgage Turmoil | online.wsj.com

Loan loss reserves at banks are at historic lows. At the same time, the credit cycle has turned viciously negative, particularly for mortgages. Banking regulators are likely to ratchet the pressure up on banks to raise their loss reserves. The most vulnerable are banks with outsized exposure to the mortgage lending business

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting Development and the Effect of Ayn Rand

September 17, 2007

Analysis of:Ayn Rand's Literature of Capitalism | www.nytimes.com

As  i  read  the  analysis  by  Dr  Mangiero  and  her  views  of  whether  we  in  the  world  of  finance can learn  anything from the  writings  of  Ayn  Rand  the  thought  that came  to  my  mind  was  'Ayn  Rand  has  actually  contributed  immensely  to  the  world  of  finance'. In  this  analysis  I  look  at  how  in my  perspective  she  has  guided  the  development  of  the  world  of  accounting  and  finance  without  of  course  going  into concepts  like  IRR, DCF  etc.

Salaries and Bonuses for Investment Risk Professionals

September 17, 2007

Analysis by: GLG Expert Contributor

Analysis of:Bigger bonuses approved for Texas Retirement System investment staff | www.statesman.com

1. The need for talented pension risk managers is growing. 2. Demand is starting to quickly outweigh supply and driving up wages as a result. 3. Pension investment returns and related strategy must consider the cost of attracting and retaining talented risk managers.

Can the Pension World Learn Something from Ayn Rand?

September 17, 2007

Analysis by: GLG Expert Contributor

Analysis of:Ayn Rand's Literature of Capitalism | www.nytimes.com

1. How can plan sponsors embrace best practices if proper economic incentives are not in place? 2. What are the ills of excessive regulation with respect to commercial risk-taking? 3. Is there a role for bold leadership on the part of plan sponsors?

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Balance Sheet - The Age Old Conundrum

September 11, 2007

Analysis of:When Balance Sheets Collide with the new economy | www.nytimes.com

The  referred  article  refers  to  the  age  old  conundrums  of  accounting - replacement  cost  vs.  historical  cost. Also  the valuation  of  intangibles. It  was  only  a  few  years  back  that  software companies said  that  they needed  higher valuations  and  accounting rules  were  outdated. Now  we  have  the  subprime  crises  and  the  CDO  valuation  conundrum. This  analysis  argues  that  current  accounting  rules   are sufficient  for  all  such  problems  and  it  is  a  fallacy  to suggest  that  accounting  rules  need  to  be  amended. What is  probably  needed  is  proper  education  for  the  accountants  and  auditors.

Raj MehraPresident & FounderChelsea Advisory Services

Countrywide Spells Out Its Strategy to Manage Credit Market Crisis

September 10, 2007

Analysis of:Countrywide Communicates Staff Reductions to Employees | online.wsj.com

Countywide's announcement late last Friday and Angelo Mozilo's letter to employees provide a unique window into CFC's strategy for addressing the impact of the credit crisis on its business. The letter provides details on the steps that CFC is taking to shelter itself from the fallout. Unfortunately, the strategy, while undoubtedly aggressive, may not be enough.

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