All GLG News Analyses Filed Under: Accounting Issues

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Increasing Relevance of Going Concern in the Declining Economy - Implications for Analysts

November 10, 2008

Analysis of:SFAS Exposure Draft On Going Concern | www.fasb.org

Going concern has since as far as I can remember been a fundamental accounting assumption and has been codified in general technical literature, International Standards, FASB standards, Indian standards and generally been accepted globally. The exact methodology to arrive at a conclusion of going concern has however hardly ever been codified.  The FASB exposure draft on the subject does path breaking work in this area. In this analysis I look at the concept of going concern and its relevance in the present global financial economic environment.

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.

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. 

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?

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.

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.

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. 

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