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

Robert KempProfessorUniversity of Virginia - CC

The Reality of Accounting Standards - Political and Economic Challenges

November 28, 2006

Analysis of: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. 

Robert KempProfessorUniversity of Virginia - CC

Without Relief, The Accounting Profession Will find It Hard To Embrace Standard Harmonization

November 28, 2006

Analysis of: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.

Robert KempProfessorUniversity of Virginia - CC

Health Care Accounting - Financial analysis issues

November 27, 2006

Analysis of: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.

Thomas KleinManaging MemberKleinCPA PLLC

Adverse Tax Consequences of Option Backdating Becoming More Evident

November 9, 2006

Analysis of:UnitedHealth expects bigger charges due to options | www.bizjournals.com

Restatement charges for option backdating were initially perceived to be a largely noncash adjustment to earnings.  However, it is becoming apparent that the backdating may result in very significant tax liabilities, with a material impact on a company's cash flows.

Robert KempProfessorUniversity of Virginia - CC

Watch out for Lucent - Be sure you understand how Lucent reports earnings

October 24, 2006

Analysis of: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.

Robert KempProfessorUniversity of Virginia - CC

Understanding Risk in Pension Plan Investing

October 18, 2006

Analysis of: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.

Robert KempProfessorUniversity of Virginia - CC

Financial Analysis: Understanding the impact of new pension disclosures

October 18, 2006

Analysis of: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.

Gil ManzonAssociate ProfessorTRUSTEES OF BOSTON COLLEGE

If you make me account for it I won’t do it: Consideration of the change in pension accounting

October 16, 2006

Analysis of:FASB Statement 158 | www.fasb.org

What to be ready for given that publicly traded firms will have to adjust their balance sheets for underfunded / overfunded pension plans ending for years after 12/15/06?  Look into the footnotes of the 05 financial statements.  For some companies, the adjustment will be big and net equity on the balance sheet will be reduced commensurately (that said, the markets doing well will likely mitigate negative adjustments that would have been much larger in recent years). Also, look for companies to begin discussing changes in existing pension plans (just as they did with other post retirement benefits in the early 90s when the accounting for these liabilities was changed along similar lines to those for pensions).

Gil ManzonAssociate ProfessorTRUSTEES OF BOSTON COLLEGE

What are you doing with my money?

October 16, 2006

Analysis of:Stock Buybacks at 'Unprecedented Level' | www.cfo.com

One of the critical issues you need to be clear on with stock buybacks is why is it happening.  The article suggests an attempt to increase EPS.  Maybe.  My first question would be what alternative uses for my money (shareholder talking) do you have? If you're not making me money near term, give me my money back (repurchase shares).

Anthony CatanachDirectorDI2 Associates, LLC

Classifying Investment Cash Flows: Much To Do About Nothing

September 22, 2006

Analysis of:Where Accounting Meets Language | online.wsj.com

How should returns from investments be reported in a statement of cash flows? Does it really matter if dividends are reported as investing activities rather than operating activities? This commentary provides investment analysts with insights on how investment returns should be viewed when evaluating cash flows.

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