ag, did you come up with that revolutionary analysis all by yourself?
also, an "imo" insert at the beginning of that would be a nice display of respect to the rest of the board instead of writing as if you are the accounting god or the sole vote on the FASB board
i'll agree with you in so much as you are essentialy referring simply to balance sheet issues in your analysis, which I happen to agree are most certainly appropriate
however, i think that the "stink" is being raised in concern to the income statement adjustments being made......if there is severly hindered liquidity and you have not actually made the sale, imo, there really should be no IS adjustments at all....
also, I think a good point raised in the article is that if a company issues debt at par, and the market values the notes at less than par, should they be able to recognize the liabiilty at less than par? imo, its ludacris to even consider it
i think that is was too convenient this ruling was issued after the market debacle of the last 12 months.......to me it seems it was nothing more than a rigged attempt to slap some "headgear" on the US financial markets prior to a powerful "straight right" to the face that the last 12 months has brought about
it would have been a refreshing splash of water to the face to have seen 4,5 or 6 dissenters on the matter instead of just two....but hey, in the circus we call the markets today that would surely be asking too much
opinions from anyone/everyone very much welcome i think this is a very issue important today....less important to NRF only because of their credit quality, but i believe this ruling is taking in a direction for future accounting procedures that undermines the #1 pillar of all accounting theory....CONSERVATISM
The most important of which is that your original post and the article are much more relevant to the more complex issuers (such as AFN, RAS, C, WB to name a few) than to NRF.
The flaw with your analysis below is this: how would you propose to change the Balance Sheet without having any effect on the Income Statement? I agree that FAS 159 is a flawed solution to problems created by an earlier flawed solution.
Brings to mind the introduction of kudzu to stop erosion in gullies in the South.
They now say kudzu is edible! Probably tastes as good as mark-to-market accounting.
The accounting profession is skating on thinner and thinner ice with pronouncements like FAS 159, as they drift further from original cost as a measurement basis and cash flows as a primary measure of results. Mark-to-market accounting reminds me of Alice in Wonderland.
"The flaw with your analysis below is this: how would you propose to change the Balance Sheet without having any effect on the Income Statement? "--ag55
Simple, and its not a flaw: No IS adjustment, period. Simply adjust the value of the assets on whatever line they might be classified under. Short term investments, Avail for sale securities, or any other asset classification line. In NRF's case, adjust Operating Real Estate line or Real Estate Debt Investments Line as well if applicable. Preferably with a contra account "line" underneath the regular lines to distinguish change in market value from normal sales. However, I think the main point I am trying to make, regardless of the specifics of exactly how to accomplish the task, is that these value adjustments should affect the underlying BV of the company, not the income statement. I think this is especially appropriate here because REIT's and other high cash flow businesses should truly be valued, imo, based on cash flow to perceived risk of sustaining that flow vs. other traditional metrics.