GLG News by Dr. Robert Kemp CPA, Professor
GLG News is now G+ Insights
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Analyzing the business of banking - new trens and old issues
April 13, 2007
From cheque book to checking pulses | www.economist.com
The attached article highlights the fact that banks are tailoring more products to an aging population. Good businesses and industries evolve to meet the changing needs of the market place. However new products also pose risks. Financial analysts need to focus on the risk, as well as the returns, such banks embrace.
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The Force Behind Bank Mergers: Don't Forget Basel II
March 21, 2007
More bank buyouts ahead | money.cnn.com
The consolidation of the banking industry has been, and will continue to be a continuous process. The reason is economics. However this process should intensify during the next several years because of regulation, specifically the Basel II accord.
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GM, Pension Funds, and Risk Management
March 15, 2007
GM to shift 20% of pension from stock to bonds | money.cnn.com
Pension fund management has historically focused on maximizing return. However today, risk management is taking center stage. General Motor's announcement focuses on this point.
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Pension funds, property derivatives, and risk
March 15, 2007
Property derivatives poised for US launch | www.ft.com
Pension funds are embracing a new opportunity in property derivatives.
First, managers of pension funds must be careful to understand the derivative, its underlying asset, and the impact on the return/risk of the pension fund's portfolio.
Second, managers of pension funds can not focus on enhancing returns through speculation. They must use such instruments to manage risk (hedge).
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A Closer Look At Convergence of Accounting Standards: The Reality of Our World
March 8, 2007
Found in Translation: A guide to using foreign financial statements | www.aicpa.org
1. The need for convergence of accounting standards is real.
2. The ability to converge accounting standards is challenging due to cultural and legal issues.
3. Although convergence will ultimately occur, it will occur with a broad based framework that may be adjusted by countries. The adjustment will be a function of cultural and legal issues. -
China's Pension Challenge: A Sleeping Dragon
March 2, 2007
Heavenly Mandate: Winning a piece of China's pensions market | customers.reuters.com
China's pension issues are real.
The question is, "How will China's government address the pension issues?"
Watch out. Changes must be forthcoming. -
Pension Funds - No Place for Excessive Risks
March 2, 2007
Fewer Second Chances For Failed Fundies | www.dailyii.com
The reality of pension fund management is simple: fund managers have a fiduciary responsibility. What that means is risk management is at the heart of managing pension funds. Today, more than ever, risk management must go beyond the quest for higher returns.
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Understanding the Risk in Pensions - Financial Analysis
December 13, 2006
Pension demand leads to long bond stripping | today.reuters.com
1. The market is grasping a fundamental risk in defined benefit plans. That risk is in matching the duration of the pension fund's assets and liabilities (i.e., immunizing the pension fund).
2. Accountants need to recognize this asset-liability risk and disclose it. -
The Reality of Accounting Standards - Political and Economic Challenges
November 28, 2006
Investors Warn Over Convergence | www.ft.com
Converging to one set of global accounting standards is ideal. However political and economic factors will intervene. Accounting standards reflect value systems. Culture must be appreciated.
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Without Relief, The Accounting Profession Will find It Hard To Embrace Standard Harmonization
November 28, 2006
Booming Audit Firms Seek Shield From Suits | online.wsj.com
1. The US accounting profession is attempting to harmonize US GAAP with IFRS.
2. The US accounting profession finds it hard to embrace some harmonization principles because of the US legal environment. -
Health Care Accounting - Financial analysis issues
November 27, 2006
Yes, Red Wine Holds Answer. Check Dosage. | www.nytimes.com
1. Susan Mangiero is correct in highlighting the impact of increasing health care costs.
2. Financial analysts need to be concerned about the impact of retiree health care costs on earnings and the balance sheet.
3. FASB 158 changes the accounting for retiree health care costs. -
Watch out for Lucent - Be sure you understand how Lucent reports earnings
October 24, 2006
Lucent's earning hold steady | money.cnn.com
The derivation of Lucent's earnings must be understood. In the past couple of years, the majority of Lucent's earning are derived from the way it accounts for pensions.
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Understanding Risk in Pension Plan Investing
October 18, 2006
U.S. Senator Alarmed at Hedge Fund Risk in Pensions | money.cnn.com
Financial analysts should always worry about the investments that pension funds make. The above referenced article about hedge fund exposure is a good example. However risk analysis of pension funds is too often limited to asset quality. This is a big mistake. In analyzing pension funds, the source and use of funds must be appreciated.
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Financial Analysis: Understanding the impact of new pension disclosures
October 18, 2006
FASB Statement 158 | www.fasb.org
The new pension accounting standard has many implications. Although not perfect, it is a move in the right direction. The disclosures are intended to help financial analysts better understand what the firm is doing.
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The Reality of Accounting versus Economics - Pensions
July 12, 2006
Business Objects to FASB's Plan for Measuring Future Pension Costs | www.accountingweb.com
1. Paul Miller is correct when he highlights the political nature of accounting standards.
2. The bottom line is simple. The issue is what do financial analysts want reported? The issue is not what financial statement preparers want to report.
3. If a firm is a going concern, the PBO is the correct measure of the future economic obligation of the firm. -
Lucent - Watch Out for Lucent's Pensions
July 12, 2006
Lucent slides on profit outlook | money.cnn.com
1. The drop in Lucent's profit is worse than reported. Lucent's profit is being driven primarily by it's pension accounting. Lucent pension accounting, in compliance with current US generally accepted accounting principles, is not a cost. It is a negative cost, or a profit enhancing activity.
2. Financial analysts should look at Lucent's operating cash flow, not Lucent's accrual net income. -
Pension Accounting: The simple need to disclose reality
June 29, 2006
FASB, Employers Class on Pension Metric | www.cfo.com
FASB is currently revising its pension standards. The debate is furious but mystifying.
What is needed is full disclosure of all aspects of a company's pension program. -
Pensions - The need for US GAAP to equal economic reality
June 15, 2006
Execs letters Rip FASB Pension Draft | www.cfo.com
1. I agree with Nitish Grover and most observers that current US GAAP does not reflect economic reality regarding pensions.
2. I believe the proposed revisions to US GAAP are an improvement, particularly regarding the balance sheet.
3. I do not believe the proposed revisions to US GAAP go far enough regarding the income statement.
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