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 Volume 16, No. 13 - Statements 627: Fair Value Accounting In The Wild

Plenty of ink has been spilled in the financial press about Statement 157, “Fair Value Measurements.” Most of that coverage is negative: companies have been pushing back on the standard, petitioning for its suspension. “Level 3” has worked its way into investment jargon, synonymous with the heavily-cliched “mark-to-myth” designation.

What casual observers miss: Statement 157 doesn’t appreciably expand the use of fair value measurements. What it expands, however, is the amount of disclosures surrounding fair value reporting. Without those disclosures, nobody could make clever “mark-to-myth” remarks about Level 3 assets.  Another miss: fair value reporting is nothing new. In fact, before the controversial Statement 157 was issued, the FASB’s two previous statements actually expanded the use of fair value measurements - and their arrival went unheralded. That may be due to the fact that Statements 155 and 156 were elective, rather than required to be adopted by companies. Statement 159, issued after the Statement 157 demonification began, was also elective - and it’s come in for its share of criticism ever since.

This report looks at the implementation of “Statements 627” in the real world. (That’s 155 + 156 + 157 + 159.) Lessons: you don’t hear gripes about fair value reporting when firms want it. And for all the clamor about Statement 157 at the large investment banks, there was a surprising level of early adoption among the small firms.

Volume 17, No. 12 - A Pension Deficit Disorder: End Of Year Issues

If 2008 ended in November, there would have been no tears shed on Wall Street to mourn its passing. (Except for the shorts who made the right calls on financial institutions.)

The funded status of defined benefit pension plans at 2008's end will have ongoing effects in 2009 - none of them good.

Precise estimates of how funding status will affect current balance sheets and future earnings and cash flows are not possible, but investors can at least develop ranges of outcomes to help them consider exposures. Offered here: reminders on pension reporting mechanics to help one better evaluate a firm’s pension prospects.