How would a transaction-based framework account for warranties?

It was great to have Stephen Penman participate in our round table discussion this past week. It is worthwhile to listen to someone else’s views on standard setting, particularly when those views have been somewhat critical of the current state of standard setting. Although I still have many questions about the completeness of Stephen’s framework [...] Read more > >

Insurance accounting to change dramatically, but not really

In their joint meeting in Norwalk, Connecticut last month, the IASB and FASB affirmed an earlier decision that an “insurer should recognize all acquisition costs as an expense when incurred.  In addition, both Boards agreed that the insurer should not recognize a part of the premium as revenue (or income) at inception equal to the [...] Read more > >

Some thoughts about the "income statement view," performance management, and speculation in accounting

One of the points that Stephen made early in his remarks was that while the objectives of financial reporting were fairly non-controversial, they didn’t give one any traction in deciding what sort of accounting we should have. As I listened to the rest of his remarks, I found myself having a similar sentiment about the [...] Read more > >

Some thoughts about the “income statement view,” performance management, and speculation in accounting

One of the points that Stephen made early in his remarks was that while the objectives of financial reporting were fairly non-controversial, they didn’t give one any traction in deciding what sort of accounting we should have. As I listened to the rest of his remarks, I found myself having a similar sentiment about the [...] Read more > >

Round Table Discussion on Bridging Accounting Practice and Scholarship

On Tuesday, Nov 17th, 4 pm ET, we will be joined by Susan Krische (University of Illinois at Urbana-Champaign).  Susan recently returned from an academic fellowship with the Office of the Chief Accountant at the Securities and Exchange Commission.  In light of her experience at the SEC, Susan will be leading a discussion on how [...] Read more > >

FASB Now Taking Applications for Research Fellowship

As you probably are aware, the Financial Accounting Standards Board recently instituted a Research Fellow Program. This program allows for one academic researcher (like myself) to come to the FASB each year for a 12-month position. In my opinion, having an academic researcher in house is an excellent way to both encourage new policy-oriented research [...] Read more > >

Feedback on Stephen Penman Roundtable

The roundtable discussion with Stephen Penman yesterday was quite good.  Lots of good discussion in both voice and typed chat.  One thing I learned is that Stephen stresses subjectivity as a reason behind his views. While I am convinced that Stephen dislikes some forms of subjectivity, I think his views are more subtle than this.  Read more > >

AAA-FASC Writes Congress on Perlmutter Amendment

Here is the text of the letter the AAA Financial Accounting Standards Committee sent to Barney Frank and Spencer Bachus opposing Perlmutter’s amendment, which would allow a newly-created systemic regulator to override GAAP to achieve the goals of financial stability.  Are there any academics who would support such a proposal?  If you disagree with the [...] Read more > >

AICPA Opposes Perlmutter Amendment

I just received an email from the AICPA with the Perlmutter (D-CO) amendment to the Financial Stability Improvement Act of 2009, which gives Congress the right to override GAAP they don’t like.  Not surprisingly, the AICPA opposes it.  Here is the amendment, in all its glory (emphasis mine): “SEC. 1103. PRUDENTIAL OVERSIGHT OF ACCOUNTING PRINCIPLES [...] Read more > >

Penman on Financial Statement Presentation

In preparation for his FASRI Roundtable discussion, Stephen Penman has helpfully shared his CEASA White Paper on Financial Statement Presention, which you can download here. The paper discusses disaggregation in some depth, providing guidelines for how line items should be disaggregated on both the income statement and the balance sheet.  I need to read more [...] Read more > >

Stephen Penman Leads Roundtable Discussion

You may know Columbia Business School Professor Stephen Penman as the 14th-most downloaded author on SSRN.  Or you might know him as a Director of the Center for Excellence in Accounting and Security Analysis. Or perhaps as author of Financial Statement Analysis and Security Valuation. More recently, Stephen has been visible as a critic of [...] Read more > >

A new article on FV accounting

Very interesting. http://hbr.harvardbusiness.org/2009/11/is-it-fair-to-blame-fair-value-accounting-for-the-financial-crisis/ar/1?cm_mmc=npv-_-HBR_UPDATE-_-2009-_-NOV Read more > >

Tentative Decisions on Financial Statement Presentation

Jeff Wilks has already noted the FASB/IASB decisions regarding lease accounting.  Last week’s meetings also included a number of tentative decisions on financial statement presentation.  Several decisions pertained to cash flow reporting and supplementary reconciliation schedules.  The Boards tentatively decided that entities should be required to use the direct method of presenting cash flows.  In [...] Read more > >

GAAP and Macroeconomics: Intangibles Edition

We have seen the articles linking fair value accounting to financial and macroeconomic instability.  Now comes an article in BusinessWeek arguing that expensing of internally-generated intangibles leads firms to look first to R&D and marketing when times get tough.  Moreover, they argue that this effect distorts GDP measures, because cost-cutting show increased income due to [...] Read more > >

Lessors not to derecognize leased assets

In their joint meeting in Norwalk, Connecticut this past week, the IASB and FASB reached the tentative conclusion that lessors will no longer derecognize leased assets. Instead, lessors will recognize a receivable and a performance obligation with revenue being recognized over time. Some think this approach is more consistent with the proposed new revenue recognition [...] Read more > >

I'm in APIC hell.

I have a comment and a question for all of you. Comment, I think the credit to APIC on a non-qualified employee stock option plan is crazy.  I understand the logic that the reason why we are crediting APIC is because our GAAP compensation expense is less than the tax deduction, so to credit ITexpense [...] Read more > >

I’m in APIC hell.

I have a comment and a question for all of you. Comment, I think the credit to APIC on a non-qualified employee stock option plan is crazy.  I understand the logic that the reason why we are crediting APIC is because our GAAP compensation expense is less than the tax deduction, so to credit ITexpense [...] Read more > >

The Financial Instruments Reporting and Convergence Alliance and This Week's Joint FASB-IASB Meetings

I learned today of a consortium of financial industry groups called “The Financial Instruments Reporting and Convergence Alliance” (FIRCA).  The groups who joined together to form FIRCA include: American Council of Life Insurers, Commercial Mortgage Securities Association, Council of Federal Home Loan Banks, Group of North American Insurance Enterprises, Mortgage Bankers Association, Property Casualty Insurance [...] Read more > >

The Financial Instruments Reporting and Convergence Alliance and This Week’s Joint FASB-IASB Meetings

I learned today of a consortium of financial industry groups called “The Financial Instruments Reporting and Convergence Alliance” (FIRCA).  The groups who joined together to form FIRCA include: American Council of Life Insurers, Commercial Mortgage Securities Association, Council of Federal Home Loan Banks, Group of North American Insurance Enterprises, Mortgage Bankers Association, Property Casualty Insurance [...] Read more > >

Interesting nugget that I learned last week

The accounting department here at UT has an outside advisory council.  We had a semi-annual meeting last Friday.  We happened to be talking about the new FASB codification system.  One advisor mentioned that the consequence they have seen is companies now FORGOING any mention of any standard in their footnotes.  You know, we are used [...] Read more > >