All GLG News Analyses Filed Under: Accounting Issues

Nitish GroverPrincipal, OwnerNitish Grover and Associates

High Oil Prices - Earnings Quality - Hyperinflationary Situations

May 27, 2008

Analysis of:Economic Toll Mounts From High Oil Prices | www.nytimes.com

The mortgage crisis, the hyperinflationary oil prices and gyrations in securities markets apart from the  errors by  rating institutions point to  a  coming metamorphosis in  the  presentation of  accounting statements. Accounting literature gives little guidance on how  to  present financial statements in accordance with inflation. The only little bit of  guidance that exists to my knowledge is SFAS 89 and IAS 29. In this analysis  I  look  at  some of  the  challenges facing the accounting profession in this  confusing time of  economic upheaval, confused monetary policy and  rising prices.

Fair Value Accounting/Mark-to-Market Strengthen the System

May 19, 2008

Analysis by: GLG Expert Contributor

Analysis of:Some facts about fair value | www.fasb.org

Without the fair value accounting and mark-to-market concepts, the modern investment banking and asset management industry could not function. We live in a real time world and the above concepts reflect this fact. The real danger to the system is too much leverage, lax risk management and a missing, common regulatory framework for the securities industries, which covers banks, insurers, pension funds, hedge funds and private equity players.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Fair Value Issues

May 19, 2008

Analysis of:Some facts about fair value | www.fasb.org

This  analysis  takes  a  look  at  the  issues  involving  fair  value. While  fair  value  is  becoming  increasingly  relevant  yet  it  raises  several  problems  and  complicated  issues. The FASB  and  IASB  alongwith  all  major  accounting  bodies  are  aggressively  promoting   the  concept  of  fair  value. In  this  analysis  I  take  a  look  at  some  of  the  issues  involved.

Fair Value of Financial Instruments are Embedded in their Prices.

April 24, 2008

Analysis by: GLG Expert Contributor

Analysis of:Bankers: Fair Value Is Like Throwing Gasoline on a Fire | www.cfo.com

Short term Financial Instrument ( For trading purposes ) are bought in the Financial secondary market to be traded within a short term period normally less than one year, and could carry a maturity period of more than one year. The purchase (or Sale) of such an instrument in the secondary market is normally for liquidity purposes, and the proceeds are posted directly to the income statement. Medium or long term Instruments ( Held till Maturity), are bought or sold in the Primary or Secondary markets at premium or discount rates reflecting the fair value in the market on date of purchase or sale. the Historical cost is reflected in the books just like acquiring a non-financial Fixed Asset. The revaluation of the H.T.M. Security yearly by comparing yields and currency values to newly issued instruments  is the most appropriate  method for  revaluation wherever regulators allow it ( Code Regulated Countries), or International Accounting Standards are applied.

Robert McCabePartnerMcCabe & Associates, PhDs

Why do bankers oppose the use of fair value?

April 23, 2008

Analysis of:Bankers: Fair Value Is Like Throwing Gasoline on a Fire | www.cfo.com

Claiming a "mixed attribute" accounting model provides a better picture of a company's business and earnings engine, bank trade groups blast full fair value. The bank trade groups argue that periodic updating to fair value would lessen the predictive value of future cash flows.  They also argue that “a mixed measurement model is essential for the faithful representation of an entity’s business model and how it generates earnings.”   

Thomas KleinManaging MemberKleinCPA PLLC

Security Writedowns Today May Lead to Massive P&L Charges Later for C, MER and Others

April 21, 2008

Analysis of:A Way Charges Stay Off Bottom Line | online.wsj.com

Depending upon management's classification of a security (i.e., either "trading" or "available for sale"), a charge may or may not appear on the income statement in the same period as the write-down on the balance sheet. If the security is classified as a trading security, the charge on the income statement will occur in the same period as the write-down. However, if the security is classified as available for sale, the charge bypasses the income statement and is taken directly to stockholders equity. If the value of the security does not recover prior to its liquidation, the charge typically is taken in the year of liquidation. The potential charge for write-downs related to available for sale securities can be quantified by looking at the statement of stockholders equity, particularly other comprehensive income.

What's mission for Controller Education = Real Time experience (internship) while still in school.

April 17, 2008

Analysis by: GLG Expert Contributor

Analysis of:What's Missing in Controller Education | www.cfo.com

Have a daughter who is a retired school teacher. She was required to perform in life's real world as a student teacher for a period of roughly six months prior to her graduation. Points of requirement:  1.  Opportunity to observe the teacher who was her mentor and evaluator. 2.  Opportunity to relate to the students on a one on one basis.          2.a Learned how to talk to and assist the students          2.b Confident when talking with the students because she always had the primary teacher in the room with her for consultation.          2.c The students seemed to be very eager to permit her to help them 3.  Opportunity to examine and study the pros and cons of being a teacher.         3.a This was very meaning-ful as she was aware of the evaluation   coming at the end of the semester. All of her observations had to be documented for her final review.          3.b As a professional, her conduct was reported to school the board by her mentor.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting Education - Repeated Financial Crisis - A Personal View on What Ails Accounting Education

April 15, 2008

Analysis of:What's Missing in Controller Education | www.cfo.com

As the  rate of  growth of  economies  the  world over grows so does the frequency  of  failures and shortcomings in global  and  national  financial markets. In this analysis I take a look  at  the  role which  the  nature of financial training and education plays in these  repeated unhealthy  financial cycles.

The Move Away from US GAAP Will Adversely Impact Consistency and Comparability Amongst Companies

April 14, 2008

Analysis by: GLG Expert Contributor

Analysis of:Goodbye GAAP | cfo.com

This article discusses the move for Companies to report revenues using IFRS rather than US GAAP.  The move to IFRS is troublesome for several reasons: 1. US GAAP provides specifics and guidance for a multitude of revenue transactions and industries, many of which will be scrapped; 2. In contrast, Global Standards have many variants diminishing consistency and comparability between companies;  and  3. The lack of consistency and comparability will expose company management to unnecessary litigation.  

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Convergence of Accounting Standards - Not as Simple as it Appears - Many Milestones to Go

April 7, 2008

Analysis of:Goodbye GAAP | cfo.com

The Convergence  bandwagon  marches  on. Just  as  we  today have  metric  standards  in  the  area  of  physics  so  accounting  standards  will  converge  -  but  not  fully. The  point  here  is  that  accounting  is  evolving  at  a  fast  pace. As  economies  change  new methods  of  accounting  evolve. Inventory  accounting  has  evolved  over  the  years. Accounting  for  fixed  assets, construction contracts, specialized industries  like  oil  and  gas  and  film  production  are  all  subject  to  different  rules  in  different  areas  of  the  globe. So  in  that  sense  US GAAP  will  not  disappear.

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