GLG News by Bank Financial Statement Analysts

Anthony CatanachDirectorDI2 Associates, LLC

More Under Armour Red Flags...

November 20, 2009

Analysis of:Stock Jocks Punish Under Armour's Mathletes | www.cnbc.com

Under Armour's most recent 10K contains a number of financial reporting "red flags" that reflect a cavalier attitude toward financial reporting transparency.

Anthony CatanachDirectorDI2 Associates, LLC

What the Former SEC Chairmen Missed...

November 19, 2009

Analysis of:Don't Let Banks Hide Bad Assets | online.wsj.com

Conceptually, the arguments favoring fair value accounting are sound and quite appealing. Unquestionably, financial statement users will benefit from data about how a company’s assets and liabilities change in value during a reporting period. However, there are two major issues associated with fair value reporting that accountants, investors, legislators, and regulators need to address in the wake of our most recent financial crisis.

Anthony CatanachDirectorDI2 Associates, LLC

What Have the Accountants Done For Us Lately?

November 19, 2009

Analysis of:Systemic risk legislation threatens FASB’s independence | www.accountingweb.com

Debates about the causes of the recent financial crisis have yet to focus on the inability of financial institution independent auditors to provide adequate oversight over management’s valuations of financial instruments.

Robert KempProfessorUniversity of Virginia - CC

Reality Impact - Grasping the Cost of Not Acting to Restore Trust in Capital Markets

September 19, 2008

Analysis of:Fed Tentatively Agrees to Provide $85bn to AIG | www.washingtonpost.com

There are significant arguments today on what should or should not be done to address the current capital market crisis.  In reality, market economies first and foremost rely on trust.  When trust is lacking, the ramifications are significant and far reaching.  The mistrust of one sector multiples into problems throughout other sectors.  A good example is the impact of capital markets on nonfinancial services businesses.  This point is easily seen in the cost of credit, or the lack of credit.  However the impact is much greater than mere credit.  An example is unfudned pension and other post retirement benefit plans (OPEB). The cost of not restoring trust in the capital markets needs to be understood, in all aspects.  The price is high (e.g., government spending and assuming risk) on both sides of the argument.  However all costs, on both sides, must be understood and measured before judgements are made.

Robert KempProfessorUniversity of Virginia - CC

Fair Value Accounting - The Good And Bad Of It In The Real World

September 15, 2008

Analysis of:Fair-Value Revolution: Historical cost accounting is fading as Corporate America marches into a new era. | www.cfo.com

Fair value accounting, or mark-to-market accounting, is not new.  The debate of how to account for value has been around for decades.  However the implications of fair value accounting, versus historical accounting, are far reaching and often not grasped.  A society needs to be careful in setting accounting standards that may or may not reflect its cultural values.

Robert KempProfessorUniversity of Virginia - CC

Valuation - The Trick Is In The Fundamentals

August 25, 2008

Analysis of:Kazakh rival lifts ENRC stake to block bid | www.ft.com

To accept or reject an offer to sell all or part of a company is a challenge.  There are two issues.  First is the maximization of shareholder value.  The second is understanding the basis of conflicting valuations. 

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Continued Housing Difficulties

May 14, 2008

Analysis of:The Housing Crisis is Over | online.wsj.com

The housing bust is not over and trends continue to be negative.  The only positive activity is that homebuilding stocks have gone up, without a good reason.  We still have a ways to go to work through all this.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Direct Expensing of Interest by Homebuilders

May 6, 2008

Analysis of:Hidden Mortgage Risks Abound in U.S. Home Market | www.bloomberg.com

Not capitalizing interest in inventory causes acceleration of losses and deterioration of book value.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

ARE HOMEBUILDING STOCK PRICE INCREASES PREMATURE?

April 24, 2008

Analysis of:Construction Companies Are Clamoring for Managers | online.wsj.com

Recently, stock prices of most public homebuilders have increased 20-30 percent.  This despite no visible signs of improvement in the overall housing industry.  It seems early in the cycle for these stock price upward movements, as it appears the housing market has not yet found bottom.  Equity buyers at the present stock prices must be patient and have a mid- to long-term perspective on their investments. There may be several reasons for the recent price appreciation including: 1. Short sellers covering positions as hedge funds encounter increasing risks in other parts of their portfolios or simply decide to concentrate their efforts in another sector. 2. A perception the government enacted or proposed initiatives will cause significant improvement in homebuilding activities, including sales and financing of homes. 3. A belief the housing downturn is at or nearing bottom and this is the appropriate time to purchase homebuilder stocks.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

IMPAIRMENT REVERSALS – IMPACT ON COST OF GOODS SOLD

April 24, 2008

Analysis of:New-Homes Supply Builds; Durable Goods Orders Slide | online.wsj.com

Homebuilders have recorded large inventory impairments over the last couple of years.  Most of these impairments have been for land and lots.  As these previously impaired lots are built on and a completed home is delivered, the land component as a percentage of Cost of Goods Sold may decline significantly.

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