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Lease Accounting Changes Should Benefit All.

July 21, 2006

Analysis of:FACTBOX-Retailers seen taking biggest hit from lease accounting | today.reuters.com

·Newspapers sell because they sensationalize headlines. Despite the headlines of the attached article the adoption of new lease accounting rules should not (as explained below) impact the share price nor the borrowing costs for retailers.

·These contemplated accounting change are long overdue, we can only hope that when issued it will make the rules easier to follow and will simplify rather than complicate the reading and comparability of financial statements.

·The FASB in its official news release on this topic stated The decision to add a leasing project, which will be conducted jointly with the International Accounting Standards Board (IASB), reflects the Boards concern that the current accounting in this area does not clearly portray the resources and obligations arising from lease transactions.  While this is true I hope that we are not headed down a path of fair valuing leases as that can lead to abusive accounting practices

Guilty until Proven Innocent?

April 11, 2006

Analysis of:Zale: SEC Launches Probe Into Accounting | biz.yahoo.com

Just the announcement of an SEC investigation was enough to cause Zale's stock to drop 9.5% in one day.
The Company said it believes its accounting "complied with generally accepted accounting principles"
While we will not know for a while whether or not Zale did anything wrong investors are not waiting to find out. How can companies protect themselves from wild stock swings, and how can investors avoid getting hurt, when the SEC can make similar announcements about any listed company?

An easy to understand presentation of Internal Control over Financial Reporting

April 9, 2006

Analysis of:PCAOB's Gillan on "A Layperson's Guide to Internal Control over Financial Reporting" | www.pcaobus.org

With all of the noise over SARBOX, internal controls, CEO / CFO and Auditors certifications, etc. many laymen have become confused over what it all really means. One of the PCAOB Board members, Kayla Gillan presented "A Layperson's Guide to Internal Control over Financial Reporting" at the Council of Institutional Investors (CII) Annual Spring Meeting on March 31. It has been posted to the PCAOB's website and it is easy reading. Use the above link to get to this presentation.

Corporate Companies would benefit from their executives focusing on real issues rather than managing

April 9, 2006

Analysis of:Why Earnings Guidance Can Be Bad For Corporate Health | www.cfo.com

Companies would be better off if their Executives focused on real business issues rather than worrying about The Street and their stock price.

A McKinsey study covering 4,000 companies over a 10 year period showed that providing earnings guidance had no impact on the price of companies stock.

Rather than providing guidance company executives should provide insight to investors about how they react in their business and help investors understand the logic behind their decision making processes.

A tremendous amount of time is wasted in preparing for guidance meetings, issuing guidance, explaining variances from guidance and answering investor inquiries. Tremendous pressure is created when one knows that the guidance provided will not be achieved.

Investors would be better served if this time were spent in identifying opportunities or real problems and then maximizing results based on what is learnt.

Results are what drive stock prices not words.

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