All GLG News Analyses Filed Under: Accounting Regulatory Bodies

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting Disclosures - FASB Moves - My Comments

July 29, 2009

Analysis of:FASB Initiates "Disclosure Framework" Project Aimed at More Useful, Organized and Consitent Disclosures | www.fasb.org

 The referred FASB news release speaks of a new FASB project to simplify accounting disclosures and make them more meaningful. In this analysis I look at the relevance of such a major project in the realm of accounting and how this could make financial statements more meaningful.

MTM- Does Not Represent True & Fair Value

June 19, 2009

Analysis by: GLG Expert Contributor

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

Mark To Market(MTM) basis for valuation of INVESTMENTS made by BANKS shall distort Balance Sheets and published accounts of the Banks, and may Strangulate Economic Growth, particularly in periods when GOWTH is needed. Financial Institutions\Investment Banks\Pension Funds and BANKS make longterm investments in shares/stocks/govt. securities for long term growth benefits. Requiring them by law to value these investments at MTM principles regularly at weekly/ monthly/quarterly/yearly intervals is just like calling upon their managements to become market participants like speculators/hedge funds/derivative operators or BROKERS in CDS. BANKS are trustees of PUBLIC DEPOSITS. This is  the perception of the PUBLIC .  Unfortunately some banks mixed up the domain of their operations because of poor regulation or deliberate oversight by the REGULATOS.The need of the hour is Strict Surveillance, not making rules that kill the GOOSE that laid the GOLDEN EGGS that is-BANKS, Institutions of Growth

MTM- May Strangulate World Economic Growth

March 23, 2009

Analysis by: GLG Expert Contributor

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

Mark To Market(MTM) basis for valuation of INVESTMENTS made by BANKS shall distort  published accounts of the Banks, may Strangulate World Economic Growth particularly in periods when GROWTH is needed. Financial Institutions\Investment Banks\Pension Funds and BANKS make longterm investments in shares/stocks/govt. securities for long term growth benefits. Requiring them by law to value these investments at MTM principles regularly at weekly\ monthly\quarterly\yearly intervals is just like calling upon their managements to become market participants like speculators\hedge funds\derivative operators or BROKERS in CDS. BANKS are trustees of PUBLIC DEPOSITS. This is  the perception of the PUBLIC .  Unfortunately some banks mixed up the domain of their operations because of poor regulation or deliberate oversight by the REGULATORS.The need of the hour is Strict Surveillance, not making rules that kill the GOOSE that laid the GOLDEN EGGS that is-BANKS, Institutions of Growth

MtM accounting provides one side results

March 20, 2009

Analysis by: GLG Expert Contributor

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

Mark-to-market (MtM) accounting while useful information for investors as a reference to future valuation and expected streams of cash flows, creates financial reports that are expected to provide in today's dollars all of the future value of the firms net worth.  Given the numerous variables, including what discount rate to use in present valuation along with market price forecasts that exceed the tenor of liquid commodity futures, allows for mismanagement of the firms books.  Its readily apparent that MtM has allowed many folks to be rewarded today for the all of the future cash profits, regardless of the time period.  What is not considered in MtM is the present value of all the risk that the firm has undertaken.  Stress testing scenarios that provide a 20% or more probability of occurrence should be used to net against the firms MtM valuation.  To report the one side of the risk to return ration as an asset and basis of bonus is bad financial management.

Analysts and Investors Can Ignore WF Chief's Call to Stress Cash Flow Over Value

March 16, 2009

Analysis by: GLG Expert Contributor

Analysis of:FASB Moves Toward Giving Banks More Flexibility on Fair Value by Ian Katz, Bloomberg | www.bloomberg.com

FASB responded ASAP to the demand by the House Financial Services Committee last Thrusday for immediate action to provide bankers relief from Mark to Market accounting. FASB has proposed guidance to allow banks to separate Credit risk from Liquidity risk in order to attenuate writedowns they might otherwise have to take on hard-to-value financial assets. An avowed purpose of the proposal is to close some of the gap between industry capital as stated by the regulators, which investors do not trust, and Tangible Net Equity, which banks contend entails an excessively severe markdown of assets banks claim they can hold to maturity. However, banks may not have sufficient capital, unless it is supplied by the government, to continue to hold these assets.

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.

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.

The Start of a new Polemic

May 27, 2008

Analysis by: GLG Expert Contributor

Analysis of:The Beginning of the End of GAAP | www.cfo.com

1) IFRS will help to see all Financial Statements homologating criteria which contributes to improve investment activity around the world. 2) Even mentioned IFRS must be reviewed in some aspects also, because some issues do not reflect a the real business activity.  

Less Costly GAAP for Globally Accepted Accounting Principals ?

May 16, 2008

Analysis by: GLG Expert Contributor

Analysis of:The Beginning of the End of GAAP | www.cfo.com

As long as the F.A.S.B.'s blueprint could "identify the least disruptive, and least costly approach" to move U.S. public companies to IFRS, and this blueprint is generally accepted in the U.S. as accounting principals, the U.S. GAAP is applied. However, applying these standards by other countries and nations already requiring international accounting standards IAS would be a problem.

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