| Cover
Story Core
Earnings
-- Easwar
SA
Crucial
information about a company's earnings is lost in the myriad
reporting procedures that have gone unchecked for years. With
the amount of restatements running into billions of dollars,
the logic of earnings statements is being questioned. In the
light of such skepticism, Standard & Poor has launched a
new metric to measure earnings, that it feels will bring about
uniformity and facilitate comparison. Will the new metric be
the holy grail the markets seek desperately?
©
IUP. All Rights Reserved.
Financial
Reporting
Segment
Reporting
-- Dr.
Niranjan Swain, Anil Kumar,
Sumit Arora, Garima Gupta
The recently
introduced standard on segment reporting definitely has
enhanced understanding of companies' operations. It is easier
to get a handle on various segments of a conglomerate although
the standards enhance reporting. There is still scope for
refinement as many companies are yet to disclose under new
regulations. It is expected that disclosure practices will
improve in future.
©
IUP. All Rights Reserved.
Governance
And Ethics
Hold
Up Your Hand
-- Bob
Ferchat, Tony Carlson
The board of
directors and other members of the top management are paid to
make rational decisions that benefit the shareholders and
ultimately the investors of the company. Traditionally, the
role of boards of directors is to ensure that the financial
statements of the company they represent depict a true and
fair picture. They are expected to object to any deviations
arising in these financial statements. Their role in the
real-time world scenario is however doubtful. The never ending
list of frauds has posed serious doubts on boards' capability
to act as caretakers of the company. The boards' need to take
a proactive approach rather than reacting to the situations as
and when they arise.
©
Bob Ferchat, www.I-Magin-ation.com. Reprinted with permission.
Corporate
Governance: Pushing Ahead Without Best Practices
-- Stanley
J Dubiel
The East
Asian financial crisis has drawn attention to the corporate
governance practices followed by companies in many emerging
markets, as it was widely believed that poor governance norms
were the main cause of the crisis. Reforms are bound to happen
in these emerging markets as the corporate governance
practices in these countries are nowhere in comparison to that
of the western markets. Investment managers and US pension
funds operating globally are the main force behind the efforts
made in these countries for the improvement of governance
norms. The author throws useful insights about the corporate
governance practices followed in the emerging markets.
©
Center for International Private Enterprise (www.cipe.org).
Reprinted with permission.
Accountant
The
More Things Change
-- John
G Emrich
The
accounting and auditing profession has undergone a lot of
change in the past 25 years. The size of Big Eight has come
down to Four with Andersen facing enormous task of rebuilding
its credibility. The accounting firms have been neglecting the
small clients who produced nominal amount of business with
many going for the big international clients. This has
provided the small firms with an opportunity to grow by
exploiting this niche market, which many have grabbed with
both their hands. The profession is facing even bigger
challenge in terms of its responsibility to the investing
public with many accounting frauds seeing the light of the
day.
©
CAmagazine, May 2002. The magazine is published by the Canadian
Institute of Chartered Accountants, Toronto, Canada. Reprinted
with permission.
Debate
Can
We Trust Company Financial Reports?
As skeletons
come tumbling out of corporate America's cupboard, it is time
to turn the spotlight on our own corporates and the quality
and integrity of their financial reports. The three experts
tell us what ails our system and what can be done to remedy
matters.
©
The Economic Times, July 9, 2002. Reprinted with permission.
Financial
Accounting
Intangibles
An Overview
-- Srinivasan
Natarajan
The most
significant value generators for the creation of intangible
assets are new discoveries, organizational practices and human
resources. Innovation creates intangibles and investment in
intangibles fructifies into innovation, thereby augmenting
dynamism in the much-needed entrepreneurial activity. When
investments on innovations fetch positive returns, value
addition occurs by the conversion of intangibles into tangible
revenues. The critical barrier in measuring intangibles is
their intangibility. Uncertainty characterizes investments in
intangibles. The article touches upon how companies have
managed to synthesize physical assets with intangible assets
to create value.
©
IUP. All Rights Reserved.
Financial
Reporting
The
Travails of Tyco
-- Paul Sweeney
Tyco was
touted as one of the rare success stories in the business
world by heavyweights like Lehman Brothers and professors of
Harvard Business School. But Tyco's credibility has been
eroded and its stock price hit the pits with several separate
filings of restatements of earnings made to SEC. Tyco has been
accused of aggressive accounting and financial engineering.
But few tend to differ on Tyco's worth and are still holding
their faith in it.
©
Financial Executive, June 2002, www.fei.org. Reprinted with
permission.
Auditing
There's a Monster in Finance
-- David
M Katz
Corporate
finance departments are about to experience power struggle in
the wake of accounting scandals that seems to be
inexhaustible. The internal auditor is becoming the center
point of struggle between the audit committees and the CFO. As
more and more companies are finding the role of an internal
auditor crucial from facilitating Information Systems to
checking the accounts rigorously, they have occupied the
center stage in the transparency issues. But is this new
function of internal auditors encroaching that of the external
auditors? The happenings of WorldCom point out that an
internal auditor is more effective than an external auditor in
detecting frauds. The article talks about the future role to
be donned by internal auditors and its consequences.
©
www.cfo.com. Reprinted with permission.
Speech
Opening Remarks Before the
Symposium on Enhancing Financial Transparency
-- Cynthia
A Glassman
As financial
transparency is indispensable because it is the bedrock of
financial markets and absolutely essential for today's
investors, SEC is working towards enhanced financial
transparency on both the regulatory and enforcement fronts.
The Commission has proposed several new regulatory initiatives
designed to enhance information for investors.
©
www.sec.gov. Reprinted with permission.
Corporate
Finance
How to Use Transactional
Databases for M&A
-- Shannon
P Pratt
Pricing and
structuring the M&A transactions has been a hard nut to
crack for analysts and investment bankers. Understanding the
completed M&A transactions will surely help in pricing and
structuring M&A transactions. With Internet making vast
databases available covering details of thousands of M&A
transactions, these databases provide valuable benefits to
those involved in this exercise. The author talks about the
two methodsEquity and Invested capitalthat can be used for
valuation with the transactional databases available.
©
Business Valuation Resources, LLC. The article appeared in
Business Valuation Update® Newletter, March/April
2002. Reprinted with permission.
Does Market Efficiency Trump
Behavioral Bias in Finance Decisions?
-- L
Wayne Gertmenian, Nikolai Chuvakhin
An
understanding of efficient markets and common behavioral
biases can help investors reconcile instinct and reason. From
the origins of the efficient market hypothesis to tests of
market efficiency, numerous researchers have churned out
hypotheses that support or disprove various views and beliefs
of the market. The conclusion is that without clear indication
of an equity portfolio manager's ability to beat the market,
the investor may be better off with a passive strategy. As
there is rarely an indication in the equity markets,
individual investors are suggested to index their equity
holdings and seek skill-based return enhancements elsewhere.
©
Graziadio Business Report, Spring 2002. Reprinted with permission.
Information
Systems Audit
Due Professional Care
-- Frederick
Gallegos
Due
professional care is a necessary component of the audit
process. Although many people define it in different ways, the
fact remains that it denotes the care to be taken by auditors
in performing their duties. The auditor is ultimately
responsible to the board of directors and hence in the process
dons the role of a policeman in identifying potential fraud
areas. The auditor has to know the importance of peer review,
auditor conduct, judgment, technical competence, business
knowledge, certification and standards. The article throws
useful insights into the areas where an auditor should pay
attention to.
©
Information System Audit and Control Association(TM)
2002, Rolling Meadows, IL, USA, 60008. The article was first
published in Information Systems Control Journal, Vol 2, 2002.
Reprinted with permission.
Management
Managers Must Give People
as Much Emphasis as Financial Results
-- Gordon L Simpson
Success or
failure of any organization is dependent on the quality and
performance of its people. Inadequate control of an
organization's direction and insufficient attention to
managerial and employee performance are two determining
factors for success. To address the two major challenges of
better control and increased productivity, organizations
require an effective performance management system. To develop
these skills, good training programs are needed so that these
skills and knowledge are built into the individuals' jobs,
required to use them in their work.
©
Gordon L Simpson. Reprinted with permission. |
