GLG News by Accounting, Finance, and Tax Professors (US)

Robert KempProfessorUniversity of Virginia - CC

Pensions - Management is responding to economic realities

September 4, 2007

Analysis of:Rank to consider sale of its pension scheme | news.yahoo.com

The key implications of Rank Group's actions are threefold. First, it is harder for companies to borrow from employees with off balance sheet pension schemes.  Disclosure requirements have increased (i.e., FASB). Second, pensions have always been a too-often neglected risk dimension in corporate valuation.  With more disclosure, this risk dimension is being recognized, appreciated, and used in pricing value. Last, the reasons for a company to retain influence over its pension fund are diminishing.  Regulation (e.g., Pension Protection Act) is requiring more discipline in the assumptions used to evaluate pension obligations and the funding of pension obligations.

Robert KempProfessorUniversity of Virginia - CC

The Need to Balance Return and Risk: Wake Up Call for Pension Funds

August 31, 2007

Analysis of:Pension Fund Managers Rethink Their Love of Hedge Funds | online.wsj.com

Too often the managers of pension funds use an objective of maximizing return.  However in doing so, they neglect risk.  In the volatile markets of today, the focus on returns, while neglecting risk, is causing problems.  It's time to stake a step back and rethink the management of pension funds. 

Robert KempProfessorUniversity of Virginia - CC

Pensions, Risk, and Reality

August 22, 2007

Analysis of:Insurers Brace for Policy Fight | online.wsj.com

The process of managing pension plans (defined benefit plans) is too often simplified and neglected due to its long-term nature.  Like Dr. Mangiero, I also agree that the degree of sophistication needs to be raised.  However to do so, all risks within the process must be recognized and managed in an integrated framework. 

Robert KempProfessorUniversity of Virginia - CC

Global Convergence of Accounting Standards: A Reality Check for Financial Analysts and All Involved

June 21, 2007

Analysis of:Foreign Affair: Is End Near For "U.S. Only" Accounting? | online.wsj.com

1.    Convergence of U.S. and international accounting standards is coming. 2.    The pace for this evolution is quickening. 3.    This convergence is troublesome, not because of its goals, but because of the expectations of financial statement users. 4.    Users of financial statements must be educated to the differences in accounting standards, and the implications that different approaches yield.  These implications also include legal issues/recourse.

Robert KempProfessorUniversity of Virginia - CC

The Fair Value Challenge: The Real Challenge for the PCAOB, Auditors, and Financial Analysts

June 20, 2007

Analysis of:PCAOB ponders how to audit fair value | www.cfo.com

The real challenge for the PCAOB, auditors, and financial analysts is not the lack of expertise.  The real challenge is twofold: 1.    The user of financial statements must be educated and revise their expectations. 2.    The US legal system must adapt.

Robert KempProfessorUniversity of Virginia - CC

Fair Value Accounting - A Reality Check For US Auditors and Financial Analysts

June 19, 2007

Analysis of:PCAOB:Can auditors handle fair value | www.cfo.com

The US accounting profession has long dealt with fair value.  However how US accountants deal wit fair value is first a function of the US legal system.  Until the US legal system changes, the US accounting profession will always have challenges.  Thus the US accounting profession will cling to historical cost methodology.

Robert KempProfessorUniversity of Virginia - CC

Pensions and Risk Management - An Underlying Cause of Neglect

May 9, 2007

Analysis of:Risk Management for Pensions, Endowments and Foundations | www.amazon.com

As the author notes, pension managers often neglect risk management.  The question is, "Why?"  To understand the answer one must look for incentives to manage pension risk.  One must focus on the accounting for pensions.

Robert KempProfessorUniversity of Virginia - CC

Financial/Risk Analysis of Lenders - The Cure May Be As Troublesome As The Problem

April 18, 2007

Analysis of:Subprime solution: Swap ARM's for fixed-rates | money.cnn.com

The problems of subprime lending are hot topics.  Lack of underwriting standards and poor pricing are the primary concern.

However lenders need to understand the cure or reaction to such concerns can cause even more harm.  Financial analysts need to understand how their clientele (e.g., banks) are coping with the challenges.  Financial analysts must consider the proposed solutions.  The solutions may cause as many, if not more, problems.  The issue is value at risk.

Robert KempProfessorUniversity of Virginia - CC

Analyzing the business of banking - new trens and old issues

April 13, 2007

Analysis of: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.

Robert KempProfessorUniversity of Virginia - CC

The Force Behind Bank Mergers: Don't Forget Basel II

March 21, 2007

Analysis of: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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