Peeling away financial reporting issues one layer at a time

Category for Financial instruments

GAAP and the Federal Budget Deficit

The accounting topic of the season is income taxes.  But, as the nation contemplates what Congress could end up passing, I want to talk about how one under-the-radar amendment to financial accounting standards has [Read More...]

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...]