I have often started a class discussion with the following series of statements: We learned in Finance 101 that the value of a business is the present value of expected future distributions of cash to owners. Financial statements are the…
Every three months, the SEC Regulations Committee of the AICPA takes SEC staff members to lunch, and discuss emerging issues relating to SEC financial reporting rules and regulations. Sometimes the SEC will use the Regs Committee as a conduit to…
Jonathan Weil, the accounting and corporate finance columnist for Bloomberg News, has written an excellent column (read it!) on auditors failing to provide going concern qualifications in reports when they are clearly warranted. I want to comment briefly on the…
FAS 52 on foreign currency translation took effect in 1982 after one of those infamous 4 - 3 votes. Like other accounting rules promulgated by the FASB, it is nonsense, for the sole purpose of helping CEO's smooth their reported…
Auditors are not priests, immune to the temptations of the material world. Many of us have come to realize that even priests are not priests. Granted, the mindset may have been different in 1933. That's when representatives of the accounting…
Mechanical measures of earnings quality, though far from perfect, can direct the attention of audit committee members and others to matters that may require their attention. The authors of an academic paper (funded by the Big Four accounting firms) entitled…
This is a rather long post, for which I apologize in advance. It is an adaptation of a much more diplomatic comment letter that I wrote to the PCAOB, criticizing its proposed, and ultimately adopted, definitions of 'material weakness' and…
Rule complexity is not solely the province of accounting in the world of business. Just trying to list the others--taxes, securities, labor, environmental, trade, etc.--boggles my mind. But, I do know that accounting rules can, and should, be a lot…
In Finance 101 it is taught that the decision to acquire assets involves two steps. First, you figure out which assets you want to acquire (capital budgeting), and second, you figure out how to pay for them (capital structure). If…
The FASB has belatedly, and only half-way closed the proverbial barn door on misleading pension accounting in FAS 158. In re-measuring pension assets and liabilities on the balance sheet, Paragraph 16a of SFAS 158 requires that the effect on equity…