Volume 20, No. 10

Midyear Inventory: Accounting Issues In The Second Half:  The debt ceiling drama is temporarily behind us, replaced by the current “Rome is burning” excitement (along with“the rest of Italy, and Greece, and Portugal, and the United States is burning” drama.) The macro view of the stock market hasn’t provided participants this kind of dizzying, fear-fueled adrenaline rush since the last economic crisis.

In complete contrast, the accounting discipline has been downright dull. No drama over restatements of financials, options backdating, adroit revenue recognition, pension plan assumptions or funding, or off-balance sheet subsidiaries - not even SEC investigations of mere muffed lease accounting. In short, the investment world now views the accounting world as it always has: a dull, occasionally necessary, discipline that’s not much fun to observe in comparison to the market - unless it’s affecting the markets.

That’s a bit short-sighted. Accounting hasn’t been page one news for a long time: companies haven’t blown themselves up via accounting high jinks ever since Sarbanes-Oxley put more stiffness in auditors’ spines. Yet like the serene duck swimming on a pond’s surface, there’s a lot of furious paddling underneath. Now that the first half’s earnings releases are out of the way, it’s time to take a look at what the accounting ducks have been working on - and what investors will be quacking about in the second half of 2011.

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