Financial Accounting Standards Research Initiative

I couldn’t resist. The title comes from the first line of today’s David Brook’s column in the New York Times. Read more > >

I was busy trying to update my class for the fall here. It seems discontinued operations turn a turn backwards, is that right? Anybody else following this one? Last year, they were trying to make the “thing” (to get technical) that qualifies for discontinued operations treatment be larger than in the past [...] Read more > >

A recent Accountingweb article talks about how accounting treatment can affect stock prices in a big way. Recently Apple overtook Microsoft as having the largest market cap for a technology company. According to the article, some of this may be due to accounting treatment: Supplementary notes to Apple’s results and filings with the Securities and [...] Read more > >

**See bottom of post for a June 25 update.** After suffering through a 5-hour delay in Newark on Friday, it appears that I was not the only one about to be subjected to delay. Many of you have probably been wondering how the FASB and IASB were going to accomplish the monumental task of finishing all of [...] Read more > >

Reactions to the recent Accounting Standards Update on financial instruments are rolling in.  Start with this one from Bloomberg/Businessweek: Banks including Bank of America Corp., based in Charlotte, North Carolina, and San Francisco-based Wells Fargo & Co. already report the fair value of their loans in the footnotes of their quarterly reports to regulators. Bank of America’s [...] Read more > >

The FASB has just issued a long-awaited, and much-debated, Exposure Draft of a Proposed Accounting Standards Update (ASU) that would dramatically change the accounting for financial instruments. As noted in a press release (full text available here): Among other changes, the proposed ASU would seek to bring more transparency into financial statements by incorporating both amortized cost [...] Read more > >

You probably noticed we haven’t had a round table for a little while. We will continue with this hiatus for at least a few more weeks, as I am traveling throughout much of June, and Jeffrey is making the transition back from Norwalk to civilian life. We’ll start up later in the summer, and plan [...] Read more > >

Certain transactions are inherently difficult to account for. Investments in illiquid financial instruments may be impossible to value without heavy reliance on unverifiable assumptions from management. Transactions that include explicit or implicit rights of return must be recorded as sales or as a bundle of options, neither of which is quite accurate. [...] Read more > >

In case you haven’t already seen it elsewhere, the FASB website and Bob Herz’s testimony last Friday before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises both contain Bob Herz’s earlier (April 19) letter to Congressman Barney Frank that discusses accounting standards and the Lehman Bankruptcy report.  Not surprisingly, I found it [...] Read more > >

I was talking about a recent regulatory failure with my wife last night (yes, we talk about such things), and we agreed that the truth would surely come out eventually, as uncertainties resolved. That led me to utter the pithy remark “Time is the best auditor.” My wife asked “who said that,” and I realized [...] Read more > >

Like many of you, I was in a state of despair due to the lack of a Round Table this week. As a way of coping, I went back and watched this archived Round Table video on revenue recognition research! Click here to see the original post. Read more > >

IN THE MONEY: FASB Readies Proposal On Fair Value For Loans By Michael Rapoport A DOW JONES NEWSWIRES COLUMN 996 words 17 May 2010 15:27 Dow Jones News Service DJ English (c) 2010 Dow Jones & Company, Inc. NEW YORK (Dow Jones)–The battle over whether to expand the use of controversial “fair-value” accounting is about to heat up. Rulemakers at the Financial Accounting Standards Board are [...] Read more > >

Signed up to attend the FASB/IASB update on Sunday at the AAA in San Francisco. For the last many years, probably 10, i have attended and it’s a HUGE benefit to me in my teaching and research. I get up to speed in a very efficient way, and i hear it straight from those [...] Read more > >

I was reading a report that said that certain bank’s tangible book values are supported by large deferred tax assets. It went on to say that banks avoided DTA writedowns at 2009 year-end based on incorporating several years of future profitability in their assessment. First question: how can this be the case [...] Read more > >

During the FASRI Roundtable this week, Tom Selling sparked a discussion about the extent to which accounting standards are unnecessarily complex.  In response I posed the question whether it was possible to have simple accounting standards for underlying transactions that are complex.  As I continue to think about it, I think that this is a [...] Read more > >

On Tuesday, May 4th, 4 pm ET, we will be joined by Tom Selling of The Accounting Onion. Tom will be discussing his opinions of standard setting in general, including fundamental questions regarding recognition, measurement and disclosure. In the process, he will also be providing his thoughts on selected portions of the current FASB/IASB [...] Read more > >

A recent Journal of Accountancy article states that the SEC Chief Accountant Jim Kroeker would support the FASB’s cutting the number of convergence projects due for completion in 2011. Here’s one excerpt from that article: “June 30, 2011, is an arbitrary deadline and it’s not one that’s been put in place by the SEC or by [...] Read more > >

John Cacioppo is one of my favorite authors. He’s here today at the U of Texas, speaking to the business school. I was reading some of his stuff and ran across this and found it to be quite insightful. Although he’s a psychologist, his thoughts speak to any discipline. I guess i [...] Read more > >

   Most bloggers are familiar with lots of examples of accruals management research.  We are also seeing studies on other sorts of financial reporting manipulations, including real earnings management or classification shifting.    The NY Times had an article which discusses the credit rating agencies and their role in the recent financial crisis.  In a move [...] Read more > >

Last week, FASB Chairman Robert Herz submitted a letter to Congressman Barney Frank, Chairman of the House Financial Services Committee, and Congressman Spencer Bachus, Ranking Minority Member, regarding accounting rules that were being used (or misused) by Lehman Brothers prior to its bankruptcy in 2008. The letter, which explains the relevant accounting guidance, was [...] Read more > >

According to the Financial Times, the most recent Senate financial regulation bill will require banks to spin off their derivatives operations because “The financial instruments are too inherently risky to be traded by companies benefiting from government guarantees.” Am I missing something? I thought the general bank strategy was to attempt to balance derivative holdings [...] Read more > >

A policy proposal floating around these days is to require banks to issue contingent convertible debt: MY [Mankiw's] favorite proposal is to require banks, and perhaps a broad class of financial institutions, to sell contingent debt that can be converted to equity when a regulator deems that these institutions have insufficient capital. This debt would be [...] Read more > >

The other day, a PhD student here at Texas asked me for an advanced accounting book that had deferred tax coverage in it. She’s a tax person and was wanting to re-fuel her knowledge of this area before she started her summer paper. I laughed and said good luck on that one! [...] Read more > >

It sure seems hard to account for revenue, leasing, derivative…you name it.  Well, let’s add insurance loss ratios to the list.  The only difference is that this is a Congressional matter, not (just?) financial reporting:  take a look here. Read more > >

The US Commodities Furtures Trading Commission has approved an interesting exchange: CHICAGO (April 16, 2010) –– Media Derivatives (“MDEX”) is pleased to announce that it has received approval from the U.S. Commodity Futures Trading Commission (“CFTC”) as a designated contract market. Media Derivatives will operate under the name The Trend Exchange® (“TrendEx”). TrendEx is the first [...] Read more > >

Over the course of the past few months, I’ve reviewed a number of books and papers that were nominated for the 2010 AAA Wildman Medal Award, which seeks to recognize papers that use rigorous research methods to deal with current issues in accounting practice. One of the nominated papers was entitled, “Consequences of GAAP disclosure [...] Read more > >

The Financial Accounting Standards Board (FASB) is pleased to announce that Phil Shane, Professor of Accounting at the University of Colorado at Boulder and the University of Auckland, has accepted the FASB 2010-2011 Research Fellowship, which will begin in August. Phil will be replacing Jeffrey Hales, who will complete his term and return to his [...] Read more > >

Over the course of the past few months, I’ve reviewed a number of books and papers that were nominated for the 2010 AAA Wildman Medal Award, which seeks to recognize papers that use rigorous research methods to deal with current issues in accounting practice. One of the nominated papers was entitled, “Consequences of GAAP disclosure [...] Read more > >

Blue Ribbon Panel to Weigh Launching Standard Setter for U.S. Private Companies NEW YORK—Members of a blue ribbon panel formed to address private company financial reporting in the Unites States said April 12 the group would decide whether to set up a new and separate standard-setting body that would address and write accounting standards for the private [...] Read more > >

I just got my Credit Suisse report entitled OFF AGAIN, ON AGAIN? re 166 and 167. I don’t know how many of you tried to teach this last year or now, but this is one difficult to get one’s arms around standard. It is not so concept-based. The underlying transactions are a little [...] Read more > >