Thanks for the posting of this article. I have been trashing the last Q's numbers reported by AHR because of the bogus 159 credits. In their case they buried over 350mm in M2M losses using 400mm+ of 159 "credits". And everyone was thrilled with the "Great Numbers".
Newcastle is the only player I watch that handled the situation correctly. They took the full loss of value currently and then footnoted the statement to indicate the effect on income and book IF they used FASB 159 criteria on the liability side. They gutted up and walked away from nearly 1B in bogus but legal "book value".
I am astonished how little furor has arisen over this deceptive practice.
ag, yea, the powers that be have established that BS changes should be run through the IS to illustrate the happenings along with the CF statement in some instances. So yes, most would have a multitude of names to call me for my suggestioons. However, the first thing one learns about GAAP is that it was established to expediate and ease the reporting for entities, not increase the transparency for users, despite what FASB tries to proclaim. Off balance sheet financing, option overhang, off balance sheet lease obligations, pension issues, etc being prime examples of that. That said, my feeling is this: why not simply change the carrying value of the assets and have either 1)ample "contra" line accounts to display changes in value or 2) footnote the occurences.
I dont feel that any IS adjustment should be made at all. As I have no advanced degree in accounting or any advanced certification in the field, I am sure this would create a mound of problems, however, I like to keep things simple.
Change the carrying value, illustrate what you have done, and call it a day. Either way, as I ahve already said, GAAP leaves it up to the user to effectively rearrange to suit their needs anyway. To me, like I said in my previous post, FAS 159 was just an attempt to slap some headgear on the sparring partner to keep him standing longer prior to the one of the greatest market disturbances in decades, you know? This is just an attempt to, as both dissenters discussed in the FASB release, "smooth" earnings. I will take it further to say that it is a way to make things look good on paper and then with further research you begin to realize the stench that follows alot of this crap around.
alright i'm done.....its just said when you practicallly have to be a CPA or CFA to understand where the f&** the money is coming from and going it wears on you. Another way to fill the troughs for the people with three letters following their name and farther separate the commoner from his/her money through the furthered use of "professionals" ....whatever though, most people dont want to put in the work....i suppose the old cliche is true, a fool and his money are soon parted. Luckily, or as a result of sickly amounts of hours behind this screen, I can state that I am up pretty respectably lifetime, so I suppose I can't be called a fool YET :)
FAS 159 doesn't make a lot of sense when you apply it to debt of a parent company or debt that is guaranteed by a parent company. The only way that parent company debt is worth less than par is if the issuer actually buys it back on the cheap or goes bankrupt.
On the other hand, FAS 159 applied to the debts of a bankruptcy remote structure or subsidiary makes perfect sense when you already HAVE to apply GAAP mark-to-market accounting to assets you hold in that same structure. (In other words, it makes sense only in that it corrects some of the mistakes already existing in GAAP.)
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