GLG News by Mr. Nitish Grover FCA, AICPA Intl Associate, Principal, Owner
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April 2, 2008
Wall Street Shows Optimism That Crisis is Fading | www.nytimes.com
The sub-prime crisis is to an extent a creation of Accountants and Auditors. Had the accounting/auditing profession properly presented the value of derivative instruments held by banks, hedge funds and other investment institutions then risks would have been properly evaluated without the present balloon effect. The balloon keeps swelling and no one including the Fed knows how to remove the gas without bringing down the US and global financial and economic systems. In this analysis I look at why the optimism being shown is only a mirage and what needs to be done.
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The Changing Face of Banking Regulation - Change Personified - The Direction
April 1, 2008
Paulson Faces Tough Fight Over Reforms | www.ft.com
The banking system is in a systemic crisis. The US government and Federal Reserve are now trying to set the system right. The present efforts are in my opinion bound to fail because they are flawed at the core. In this analysis I take a look at the nature of proposals and what needs to done to set the financial system on track.
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March 24, 2008
Statement of Financial Accounting Standards 161 | www.fasb.org
The FASB has proposed major changes to SFAS 133 which deals with accounting for derivatives. The changes relate to disclosures in terms of qualitative aspects, better reporting formats and risk disclosures of derivative instruments. In this analysis I look at the major pathbreaking changes being brought about by SFAS 161. In the context of the existing crisis effecting the financial markets these changes are really pathbreaking.
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March 18, 2008
Dow Slides on Fed Move and Bear Deal | www.nytimes.com
The decision of the Fed to dramatically reduce interest rates, guarantee the assets of Bear Stearns and help JP Morgan in the takeover of Bear are all indicative of the fact that the malaise striking the US banking system and global securities markets are severe. In this analysis I look at the possible effects of the actions of the Fed and why in my opinion these actions are not the correct response to the present crisis. I also present my views on what should be the possible corrective course of action.
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Subprime Insurance - Credit Default Swaps - The Whirlpool
March 3, 2008
Arcane Market is Next to Face Big Credit Test | www.nytimes.com
This analysis is being written in response to a comment by a reader to my previous analysis on the same subject. Today we have a problem where the subprime situation is getting worse. It is also becoming a matter of concern for the contenders to the White House. The Federal Reserve is every few weeks reducing its lending/discount rates. At the epicenter lies the worth of the basic housing mortgage in a market where incomes and jobs are steadily declining. In this analysis I take a look at some of the problems in this sector and related issues.
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The Indian Budget - Some Implications for Non Indian Investors
March 3, 2008
Its Payback Time as Market Caps Market Speculation | economictimes.indiatimes.com
The Indian budget has a number of far reaching changes in the tax code. One of these deals with taxation of short term capital gains. This is bound to effect the returns which all investors including foreign investors derive from the Indian markets. In these days of global financial instability this is a major factor to be considered in the quantitative models and implicit risk perceptions as well as returns which investors may enjoy. In this analysis I take a look at the effect of the 50% increase in the rate of the short term capital gains tax.
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Derivatives Accounting and their effect on Accounting and Capital Markets
February 28, 2008
Can't Anyone Here Deal with Derivatives? | www.cfo.com
The referred item speaks of a major deficiency in the accounts of Merrill Lynch which effects its cash flow statements but not its income statement or its balance sheet. What this probably means is that the effects of the deficiency in the cash flow statement have neutralized each other over time. In this analysis I look at why derivatives accounting is such an important area and why finance managers as well as auditors need to pay more attention in order to strengthen capital markets.
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Fed Monetary Policy - Stagflation - Effects on Accounting and Financial Reporting
February 21, 2008
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.
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February 20, 2008
Brown Defends Northern Rocks Nationalisation | www.ft.com
The announcement by Gordon Brown and Alistair Darling that the British Government is temporarily nationalizing the mortgage lender Northern Rock stinks of socialism. It also points to difficult times ahead for the banking and securities industry. In this analysis I examine the implications of this move for banks and securities institutions at a global level as also from the accounting and financial markets viewpoint.
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Subprime Insurance - Credit Default Swaps - The Unknown Paradigm
February 19, 2008
Arcane Market is Next to Face Big Credit Test | www.nytimes.com
There is a new paradigm on the horizon to further trouble the subprime CDO market. As the CDO market unravels we find wheels within wheels coming off. Where this will end is anybody's guess. In this analysis I take a look at the new skyline of Credit Default Risk Insurance and how this is going to trouble the players in the financial and securities markets.
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Financial System - Failures - Brickbats - Present and Forthcoming Problems
February 11, 2008
Financial Engine Failure | www.cfo.com
The referred article compares the simultaneous failure of the twin engines of the BA flight from China to Heathrow to the failure of the banking and financial markets in the US. In this analysis I argue that should the present situation continue we may have failures in other areas - especially accounting and auditing.
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Indian Economic Environment - The Changing Markets - Budget Expectations - Volatile Expectations
February 11, 2008
Emaar IPO also falls victim to market | www.businessstandard.com
The gyrations in world securities markets have been effecting all major trading centers. What makes these special in the case of India however is that the month of February is when a number of major economic changes are announced. In this analysis I take a look at the possible effect of the failure of major securities offerings on how the budget will evolve and possible changes in tax and regulatory changes.
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Credit Crunch - Banking - Accounting Implications - Opportunities
February 5, 2008
Accounting Consequences of the Credit Crunch | ifrs.pwc.com
The credit crunch is effecting banking institutions, hedge funds and ordinary people in several ways - mostly adverse. Such effects are impacting profitability and also creating opportunities. In this analysis I look more at the profitability impact in the context of IFRS - IAS 39 as well as under SFAS 157 and 159. I also look at some of the opportunities being created by the credit crunch and how in these opportunities lies the silver lining for the American and global economies.
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SocGen - The Fraud - Subprime - Controls - Effect on Banking and Controls and the Coming Recession
February 4, 2008
Further Revelation's dent SocGen's Reputation | www.ft.com
The Societe Generale Fraud and its relationship to a single trader brings into focus the effect of internal controls and management processes. There are reports that the genesis of the fraud were laid way back in 2005 when the options imbroglio had not yet started unraveling. What the Soc Gen fraud brings to my mind is that more than any audit, internal controls and management philosophy are more important. The effect on financial markets will be to raise fears of similar emerging situations in other financial institutions and of further recessionary effects.
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Carbon Trading - Growing Acceptability - Hedging - Financial and Accounting Implications
January 22, 2008
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.
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January 16, 2008
US SEC deepens ties with India's SEBI | economictimes.indiatimes.com
The growing importance of the Indian bourses in the emerging markets and the manner in which capital is getting attracted to India from the United States and also the amount of M&A activity taking place between the companies in the two countries is giving rise to increased cooperation in the sphere of market and economic regulatory oversight. Accounting standards, auditing procedures and money laundering are major areas of concern for both the SEC and SEBI. In this analysis I look at where this increased cooperation is heading.
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Options Volatility - Indices, Accounting Conundrums and Effects on Markets
January 14, 2008
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.
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Tata Motors - Nano - Indian and International Auto Market - Cost Paramenters and Emission changes
January 14, 2008
The New Model - T | www.ft.com
The debut of the Nano from the Tata Motors stable has deep ramifications for the auto industry in all spheres. It will impact carbon emissions, carbon trading, cost of automobiles, the manner in which automobile costing is calculated and also impact the bottomline of automobile companies worldwide. In this analysis I take a look at some of the possible effects that the Nano will have on auto industry costing, design,pricing and other ancillary matters.
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FIN 48 - Will a delay give relief ?
January 8, 2008
FASB proposes delay of FIN 48 for non public enterprises | www.fasb.org
FIN 48 has caused enough problems ever since it was issued some time back. The requirement to disclose the more likely than not evaluation of tax liabilities in the context of SFAS 109 caused major problems for companies. Last year the FASB refused to extend the applicable date in the case of those companies which have listed securities. The FASB is now proposing to defer the effective date for non-public entities. In this analysis I look at the possible ramifications of the same.
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The Importance of Zero Base Budgeting for Corporate Performance , Appraisal and Outsourcing
January 2, 2008
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.
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