Peeling away financial reporting issues one layer at a time

Category for Financial instruments

Non-Voting Shares are in Vogue: Do (Lousy) Accounting Rules Play a Part?

I’m starting a company and I want you to invest.  I will put up $100 of my money for $10 million of yours.  I will own 100 shares of voting stock, and you will [Read More...]

FASB Proposed Modifications to Hedge Accounting: Good Thing, Bad Thing, or Just a Thing?*

If we don’t destroy ourselves first, we will someday discover intelligent life on another planet.  But when we do, the chances are about one in a billion that we’ll find hedge accounting standards more complex [Read More...]

Classification of Debt Prepayment Costs in the Statement of Cash Flows: What was the EITF Thinking?

I have been teaching undergraduate “Accounting Theory” for the past three years.  For reasons that I will explain below, I choose to begin the course by exploring differences between accrual accounting and cash flows; and relatedly, [Read More...]

FASB Fiddles (Again) While Banks Burn (Us Again)

While on the cusp of one more financial crisis, the time has come to ask yet again: What is the FASB accomplishing that will fix the deeply flawed accounting by banks for loan losses? Answer: nada, nichts, bupkis, absolutely nothing.

Instead, [Read More...]

“The Bankers’ New Clothes” is NOT a Fable

There are two types of people in the world: those who like to divide people into two types, and those who don’t.

Too simple? OK, try this one: some people find taxonomies very helpful; and others, not [Read More...]

It’s Time to Change the Wacky Accounting for Stock Issuance Costs (Revised)

Note:  Some very helpful comments on my most recent post have led me to conclude that I made some factual and logical errors.  Fortunately, though, my main message, that stock issuance costs should be recorded [Read More...]

The CFA Institute Survey on Loan Accounting Needed to Go Deeper

(See a correction at the end of this post.)

The CFA Institute has recently published a report that summarizes the findings of its member survey on the FASB and IASB’s proposals for recognition and [Read More...]

Could a Simple Spreadsheet Error Turn into Wall Street’s Watergate?

A couple of posts ago, I waded in on the infamous Reinhard & Rogoff spreadsheet error, in an attempt to extract lessons of a cautionary nature for accountants of public companies.

Since then, two interesting [Read More...]

Is Money Market Fund Accounting Fair to Investors?

The purpose of this post is to review a recently published monograph authored by former FASB Chair Dennis Beresford. To summarize, it supports the status quo for money market funds, and I want [Read More...]

A Lesson in Loan Accounting from an Unexpected Source: Oil and Gas Companies

[This is my fourth consecutive post on loan accounting. Here are the first, second and third.]

I love finding accounting lessons buried in stories that on their surface seem [Read More...]