The most recent issue of The Accounting Review (March 2012) contains a study by Barth, Ormazabal, and Taylor that examines the association between two measures of credit risk and asset securitizations. I found the study to be interesting and relevant to standard setters. Accounting for asset securitizations is controversial, and critics have charged that GAAP [...] Read more > >
Financial institutions complained loudly two years ago when the FASB issued a proposed standard on financial instruments that would require fair value reporting for loans with changes in FV being recognized in earnings (FV-NI). I would describe the bases for these complaints falling into two broad categories. The first category is the notion that it [...] Read more > >
I have started to think recently quite a bit about firm’s own credit risk and I think it is an area research has the potential to be helpful to standard setting. Barth Hodder and Stubben (TAR 2008) investigate the association between equity returns and credit risk changes. Consistent with Merton (1974), the relation between credit [...] Read more > >
…or so says The Economist in this article. While I generally think highly of the The Economist, this article contains one of my pet peeves, which is a loose discussion of fair value. In particular, the article states that “In 2009, under its previous chairman, Bob Herz, FASB narrowly voted 3-2 that all assets should [...] Read more > >
No I am not going to do a book review on financial instruments. This is an interesting concept being considered as part of the financial instrument project. As many of you already know, the FASB is attempting to develop a single impairment model for financial instruments. In January, the Boards issued a supplementary document that [...] Read more > >
Last Wednesday, I enjoyed our most recent FASRI Round Table. Ben Couch discussed the new guidance for making Fair Value Measurements (hereafter, FVM) as well as the new disclosures about FVM. Part of the discussion centered distinguishing between level 2 and 3 measurements. For a FVM that uses some market information, how does the accountant [...] Read more > >
UPDATE: AUDIO FOR THE SESSION IS HERE. Our next FASRI roundtable is scheduled for 4pm-5pm ET Wednesday, November 17th. Richard Frankel (Washington University) will be joining us to talk about his recent paper, Panacea, Pandora’s Box, or Placebo: Feedback in Bank Mortgage-based Security Holdings and Fair Value Accounting. The paper continues several themes that FASRI [...] Read more > >
I’ve just finished reading the IASB/FASB exposure draft on revenue recognition, and I have all kinds of questions running through my head. But before I get to those questions, let me first say that I am very impressed with this document. In fewer than 90 paragraphs of guidance (ignoring application guidance), the IASB/FASB have laid [...] 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 > >
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 [...] Read more > >