Mr. Nitish Grover FCA, AICPA Intl Associate

GLG News by Mr. Nitish Grover FCA, AICPA Intl Associate, Principal, Owner

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The Fed, The Economy, Accounting and Regulation - Changing Landscape for a New Century

June 24, 2009

Analysis of:US Groups Face Regulatory Revamp | www.ft.com

Banks, Insurance companies, Investment bankers, Hedge funds - they are all up against the wall facing new regulatory pressures. The Alan Greenspan era is over. Alan Greenspan was supposed to have a magic wand with which nothing went wrong. Its like Napoleon asking for a few lucky generals - Greenspan was one such in the financial world of today. Bernanke obviously is not. In this analysis I look at some of the aspects of the changing regulatory landscape.

Accounting and Financial Risk in the Background of Declining Credit Availabilty

June 16, 2009

Analysis of:Liquidity, Crime Woes Shake Up Chief Risk Officers | www.cfo.com

The current situation of non availability of credit is leading to a position where Chief Risk Officers and CFO's will have a difficult time in funds management, meeting profitability targets and running a business. Funds constraints  will make it difficult to extend credit to customers when financial institutions and creditors are making credit vanish. Such a situation may also lead to conditions where accounts may be stage managed simply to keep creditors at bay. In this analysis I look at the peculiar conditions which I expect to come to play in the coming years and suggest that better control systems need to be in place not just in organizations but also in the wide spread global capital village.

Cost of Capital - The Formula Which No Longer Makes Sense In A Changing World

May 27, 2009

Analysis of:A Losing Formula | www.cfo.com

The financial world is changing and undergoing metamorphosis. Companies like GM and Chrysler are insolvent. Stock indices gyrate for no reason. Financial giants regularly go bust these days - so it seems. In this scenario what we have is a situation where the basic formulae for computing the cost of capital and such basics as beta and delta are becoming misleading. It is just not possible to calculate the systematic risk attached to a market or the unsystematic risk of a security. In this analysis I look at where this confusion is heading and how we may soon see a sea change in the way in which financial costs based on accounting statements are calculated.

The Economy and Credit Cards - Games Banks Play

May 19, 2009

Analysis of:Credit Card Industry Aims to Profit From Sterling Payers | www.nytimes.com

The referred article speaks of the banks - with their backs against the wall - thinking of evolving new rules for the good customers. The concept seems to be to create new rules so that bank earnings increase at the cost of the customer. To my mind this will only make the sterling customer disappear. Also from an accounting point of view it will create unnecessary complications. In this analysis I look at these two aspects.

Forensic Accounting - Fraud - A Perspective

May 18, 2009

Analysis of:In House Fraud Cases Surge | www.ft.com

The referred article speaks of the increased levels of fraud by insiders in organizations across countries - especially those that are hit by recession. In this analysis I take a look at how this will impact forensic accounting and indepth audits. The role of the accountant and auditor will gain emphasis and management will have to take increased care to safeguard assets - the stewardship function.

Internal Audit - The Changing Face and Stimulus

May 15, 2009

Analysis of:Internal Auditors: Mission Unaccomplished? | www.cfo.com

The face and scope of internal audit is changing. With time processes have always taken precedence over actual verification - except when a major fraud was discovered. The referred article speaks of the change now that the newness of Sarbannes Oxley is over and business is back to normal - atleast in terms of reduced major frauds. The article is however misleading because it relies to an excessive extent on statistics presented in a verbose form (which misleads) as compared to a tabular format (which is easier to read). In my analysis below I look at how and why internal audit is becoming increasingly relevant and all aspects are equally important.

The Price of Financial Innovation - Pitfalls in the Road

April 30, 2009

Analysis of:Fed Chief Warns Against Stifling New Ideas | www.ft.com

The price of financial innovation can be like the ends of a pendulum. I would compare it to say research in medicine - except that there are no clinical trials for financial products. Just as thalidomide created major deaths/deformaties  relating to the birth of children in the 1960's so CDO's without adequate testing have created mayhem in the first years of this century. I draw the parallel between thalidomide and CDO's because in both cases there was said to be great innovation without adequate backup research and testing. Bernanke in the referred article speaks of the good of financial innovation. I agree - but then clinical and proper testing of financial products is equally necessary for financial products. This is the emphasis of my analysis below.

Accounting - The Congruence - The Stumbles - A Look At Accounting Standards Development

April 23, 2009

Analysis of:CFO's on IFRS: Forget About It | www.cfo.com

The present economic downturn has now got pundits and others saying that Accounting Standards are going to stumble - their will be no congruence on convergence of accounting standards. I would compare the present debate to that which took place when efforts were being made to salvage the gold standard in the first half of the last century. Then the intent was to keep the gold standard intact - it failed. The effort today is to keep national accounting standards in compartments - deny the concept of fair value - and  generally keep accounting so complex that it is as difficult to understand as all the languages of the world - spoken simultaneously. In this analysis I look at why the development of accounting standards is going to continue and not going to be effected by the unnecessary arguments being floated in this context.

The Hedge Fund Conundrum - Gold - Risk vs. Safety and Return

March 19, 2009

Analysis of:Hedge Funds Turn To Gold | www.ft.com

Hedge funds are in a quandary. Their sine qua non for existence is the noticeably high returns that are expected to consistently deliver compared to the rest of the market. This obviously means that their investments have a higher beta compared to the market. These same funds are now trying to shift to bullion where gold is considered a safe investment. The problem here is however that anything that is safe will obviously give stable but not extraordinary returns. We can therefore expect a dichotomy in the aims of hedge funds which will reflect on their performance. These are the aspects I attempt to analyze below.

Investments, Hedge Funds and the Future Outlook

March 16, 2009

Analysis of:Hedge Funds to Cut 20,000 Jobs in 2009 | economictimes.indiatimes.com

The hedge fund outlook is changing fast and the glory of the past is giving way to the gloom of the present. In an era of disappearing jobs and declining economies the money available for hedge investments is on a downswing. In this emerging situation I look at where this new trend may lead to.

Accounting Jugglery With Foreign Exchange Losses and Hedges

March 10, 2009

Analysis of:Cos Grapple With Forward Contract Losses | epaper.timesofindia.com

Foreign exchange accounting and accounting for hedges have always been major problem areas. These also give immense scope for manipulation of corporate results. The spot vs. forward contract vs. hedge accounting syndrome are complex and can give rise to misleading and inaccurate results if not properly applied. In this analysis I take a look at IAS 39, Indian AS 30 and SFAS 133 as amended and how these are impacting corporate results in the present scenario.

Gold Hedging - Derivatives Valuation - The Coming Problem Areas

March 9, 2009

Analysis of:Gold Rises Ahead of Vital US Employment Data | www.ft.com

The referred article draws attention to the expected increase in the price of commodities like gold which act as a safe haven in troubled times. In this analysis I look at the effects this perceived demand and the price spiral will have on the valuation of derivatives based on these commodities and some of the problems which can be expected in the realm of valuation of derivatives including embedded derivatives and other aspects of the equation.

The Second Great Depression - Accounting - Finance - Economics - A Personal View

March 9, 2009

Analysis of:Blue Chip Stocks, Economic Metrics Headed for Ground Zero | economictimes.indiatimes.com

The second great depression is on. It is effecting accounting, finance, economics and the way of life in every way possible. The paper investments are losing favor and commodities - especially gold and silver - are in favor. In this analysis I look at where accounting may head and the sea change we can expect in the way Institutions of economics - especially those involved with the distribution of wealth and the growth of economies are administered and viewed.

The Upcoming Changes in Bank Ownership and Possible Effects on Accounting Statements

February 27, 2009

Analysis of:Government Offers Details of Bank Stress Test | www.nytimes.com

The Obama administration is proposing major changes in the manner in which banks are financed. The proposals would probably end up with the Government getting a major controlling interest in several financial institutions. Add to that the fact that several banks are declaring losses and you could expect major changes in the way in which the banks present financial information. In this analysis I look at some of these effects.

The Changing Nature of Tax Havens and The Flow of International Capital

February 27, 2009

Analysis of:Tax havens under pressure | www.economist.com

Tax havens are becoming less secretive. The UBS deal, the Lichenstein deal and other changes in OECD and American rules are all having their effects. The Stanford scandal will invariably have its effect on Antigua and other island havens. All this will have its effect on the international flow of capital and tax policy at a global level. These are the aspects I look at in this analysis.

Banking Regulations, Mortgages, Recession and Accounting Imbroglios

February 20, 2009

Analysis of:Bank Stress Test May Expand Regulators Role | www.nytimes.com

Banking regulations are in for a change and so are the manner in which mortgages are financed. The recession is also going to effect the manner in which accounting and financial controls are related. Also the latest Stanford scam is going to have its effect on the deployment of bank funds.

The Bailout Scenario, Executive Pay and Declining Productivity

February 6, 2009

Analysis of:US Plans to Curb Executive Pay for Bailout Recipients | www.nytimes.com

We are today in a situation where socialist practices are making their way into capitalist economies. The restriction on executive pay is only one such instance. The players in the market themselves are to blame for this situation which is not very healthy for capital development and economic growth. All this is coming in the context of the TARP and TARP2 (yet to be finalized) programmes. In this analysis I take a look at how this will impact productivity and have adverse effects on financial management and the growth of capital markets and growth.

The Banking Sector and The Reform of Markets - An Accountant's View

January 29, 2009

Analysis of:Banks boosted as Geithner talks of a clean-up | www.ft.com

Ever since the meltdown in derivatives started effecting the banking sector and clogged house prices, mortgages and credit in the US, British and other global markets the authorities in most major markets have been trying their best to get the system on track. The referred article speaks of certain possible positions being considered by the Obama administration. In this analysis I speak of why the options being considered do not make sense to my mind.

The Madoff Scandal - The Unravelling Threads - JP Morgan - The Possible Effects

January 29, 2009

Analysis of:JP Morgan Exited Madoff Linked Funds Last Fall | www.nytimes.com

I have always maintained that you have to pull a single thread to tear a cloth or unravel a fraud. This has now started happening in the Madoff case. The timing of certain transactions of JP Morgan appears to be the thread and in my opinion will have far reaching effects. JP Morgan is a name with a chequered history and has always (to my knowledge) acted in the best interests of investors as well  as the capital markets. A century back it effectively played the role of the Fed in the crisis of  1907-8. In this analysis I look at how times have changed and where the thread is indicating it may lead in the Madoff fraud.

Corporate Governance and Audit in the Context of the Satyam Fraud

January 22, 2009

Analysis of:Proforma Distractions at Satyam | www.cfo.com

The referred article highlights the weaknesses in corporate governance and audit practices in the case of Satyam as well as in emerging markets like India. The fact that there was a failure on both counts in the Satyam case is to my mind established. The fact that the company's Chairman has publicly made such a statement and the auditors have gone on record to state that their audit should not be relied upon is sufficient to draw the right conclusions. Yet to generalize as the referred article does on Indian audit practices is to my mind not correct. In this analysis I look at why Indian audit practices are as good as any other while at the same time not being infallible.

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