All GLG News Analyses Filed Under: Accounting Issues

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Fed Monetary Policy - Stagflation - Effects on Accounting and Financial Reporting

February 21, 2008

Analysis of:The 70's Look: Stagflation | www.nytimes.com

Doubts are now being raised in different circles of a  possible period of  stagflation  being  induced  as  a  result  of  Federal Reserve monetary policy. While I do  not  think  the  present conditions point  towards stagflation  and  we  are  presently  a  long way  from reaching any such point, yet in the  present  context I think  it  would be advisable to look  at  the  effects  on  accounting and  financial reporting of  any such  economic situation  for  a  sustained period of  time.

Robert McCabePartnerMcCabe & Associates, PhDs

Is Accounting Regulation Being Dismantled?

February 8, 2008

Analysis of:Donaldson Slams "Pendulum Pushers" | www.cfo.com

Can the SEC protect investors without regulation? 

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Carbon Trading - Growing Acceptability - Hedging - Financial and Accounting Implications

January 22, 2008

Analysis of:Global Carbon Trade Rose 80% Last Year | economictimes.indiatimes.com

Carbon emissions  and  eco friendliness  are  creating  awareness, opportunities  and  costs for  companies.  The  referred  article  says  that  the  value  of  carbon  credits  traded  in  2007  at  US$ 60 bn  was  nearly  double  the  US $ 33 bn  traded  in  2006. As  more  states  in  the  US  evolve  carbon  control  measures, Australia adopts  the  Kyoto  protocol, the  EU  system  of  carbon  trading  strengthens  and  India  becomes more involved  with  the  GHG  control  movement  we  have  new  financial  instruments  and  measures  in  control. In  this  analysis  I  look  at  the  kind  of  threats  and  opportunities  that  carbon  credits  are  creating  for  corporate  profitability.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Options Volatility - Indices, Accounting Conundrums and Effects on Markets

January 14, 2008

Analysis of:Riding the Cycle | www.economist.com

The subprime crisis has  given rise to accounting conundrums in the light of  valuation of subprime assets. The relevance of delta, delta hedging and gamma  are  all  under question especially in relation to the manner in which the value of various financial instruments have been calculated. In this analysis I look at  the relevance of  the  Volatility index (Vix) in relation to  the  delta and gamma factors as  also  the  effects that this is having on the accounting valuation of  CDO instruments and  the possible effects on securities markets  and  presentation of  financial statements.

ZBB or Fuzzy Budgeting

January 4, 2008

Analysis by: GLG Expert Contributor

Analysis of:Duncan Williamson : Zero Base Budgeting | www.duncanwil.co.uk

This problem seems to be an old one as the world. Should we rely on historical data or are we enough accurate and able to predict the future based on current assumptions? ZBB is relying on the second approach. Especially in case when the resource consumption is not repeatable from period to period e.g. new projects. Anyway an incremental budgeting should be crashed with ZBB. Cost pools can be tailored even to a single head (or FTE); single and named responsibility for a budget and at the same time reconciled with a global cost value or profit center, Next, it has to be as the top-down budgeting, iteratively reconciled. some depts may have an incremental budgeting every year, the other ones only ZBB for the sake of large resource value involved. In this case if we consider an accurate cost mgmt, the question is solutable using Time-Driven ABC methodology.  The resource efficiency as well the whole organization agility is translated into customer satisfaction.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Importance of Zero Base Budgeting for Corporate Performance , Appraisal and Outsourcing

January 2, 2008

Analysis of:Duncan Williamson : Zero Base Budgeting | www.duncanwil.co.uk

Budgeting is  an  area  which  has  not  attracted sufficient interest from analysts  and  others involved with the financial analysis of  financial  statements. At  the  same  time  zero base budgeting  attracts  even less  interest even  from corporate managements. Over the  last  few  years however I  have  found  that  company managements  are  resorting more  to  zero base  budgeting without actually  using  the  technical  term. In this  analysis I  take  a  look  at  the  relevance  of  zero based budgeting  for  corporate  evaluation as  also outsourcing activities.

Ronald KiimaPresident Kiima Incorporated

2007 Accounting Error of the Year: Depreciation and Amortization

January 2, 2008

Analysis of:Securities Suits Spike in 2007 | www.cfo.com

The subject article provides some interesting insights into the upward reversal in the number of securities class-action lawsuits filed during 2007.  Given such, I thought it might be fitting to offer my personal insights into what I continue to believe is the most common, yet rarely noticed, accounting error. As in prior years, inappropriate depreciation and amortization methodologies once again gets my nomination for Accounting Error of the Year.  Unfortunately, absent some unforeseeable improvement in oversight by corporate auditors and the SEC, I suspect that I will again be making the same nomination this time next year.      

Lease Accounting-- Basic Concepts

December 26, 2007

Analysis by: GLG Expert Contributor

Analysis of:Report : Lease Financing on the Rise | www.cfo.com

Lease accounting can be understood in relatively simple terms, and can be very beneficial to both preparers and users of financial statements.  In the case of utilities, recording the leased asset as a component of rate base would allow them the opportunity to earn a return on this asset.

David YoungProfessorFONDATION INSEAD

Coming to terms with fair value accounting

December 26, 2007

Analysis of:The Finer Points of Fair Value | www.aicpa.org

This article is the best summary to date of the FASB's new standard on fair value accounting.  FAS 157 is an important standard.  First, it allows (but doesn't require) companies to abandon historical cost for a broad range of financial assets and liabilities.   It also reflects a change in the FASB's philosophical approach towards a more balance-sheet oriented approach to standards setting, in contrast to the earnings measurement approach that used to dominate.  Also of interest is the principles-based nature of the standards.  In both of these ways, FAS 157 is close to what one might expect from the IFRS.  This standard is just one more step on the road to GAAP-IFRS congruence.  The article is also useful in pointing out the key issues that analysts need to understand to avoid being blindsided by reporting entities.

David YoungProfessorFONDATION INSEAD

The sub-prime meltdown has far reaching accounting effects

December 26, 2007

Analysis of:Accounting consequences of the credit crunch | ifrs.pwc.com

The article shows why the recent problems in global credit markets can have accounting effects that go far beyond the banks and other players directly touched by the crisis.  It also highlights the areas that financial statement readers should be wary of when accessing the possible effects of the crisis on companies of interest.  For example, recent market turmoil could lead to significant asset impairment charges, even for companies with no direct involvement in subprime loans.

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