Abstract The paper states that the Financial Accounting Standards Board (FASB ) Financial Accounting Standards Board report entitled "Selected Issues Relating to Assets and Liabilities with Uncertainties" was based on a joint 2004 project between FASB and IASB with the purpose of improving the organization's conceptual framework and concerns the ethical obligations of the accountant's reporting requirements. The paper notes that the areas the report seeks to improve focuses on establishing objectives for better financial reporting by creating qualitative characteristics to be used when conducting financial reporting. The paper comments that the main area of interest in the report is assets and liabilities, primarily the role of probability and uncertainty in defining, recognizing and measuring assets and liabilities. Thus the paper highlights that the goal of the report is to establish an objective framework to be used when reporting on the financial issue of probability and uncertainty and its role in measuring assets and liabilities.
From the Paper "According to the current conceptual frameworks, uncertainty is acknowledged as part of the proper definitions of both assets and liabilities. However, neither of the organization's frameworks impose a necessary "threshold level of probability or expectation of cash inflows or outflows in order for an item to satisfy the definition of an asset or liability." Further, the current IASB framework does include a probability threshold criterion as part of its recognition criteria, whereas no such criteria exist in the current FASB conceptual framework."
Abstract This paper is an examination of the Trust Company of the West, otherwise know as TCW, an asset management firm based in Los Angeles, California. The author talks about why the World Trade Center attack had a large effect on the asset management industry as a whole and more specifically, on the Trust Company of the West's syndicated loans group.
From the Paper "Although September 11th will forever be the day associated with dramatic change, our economy was already in a downward spiral. The markets were weak and consumers and business owners were already preparing for the uncertainties that were predicted. Just a short while before September 11th, the dot-com industry spiraled downward and took the market with it. There were already massive corporate layoffs, business bankruptcies, corporate downsizing and restructuring, an energy crisis and over-consumption in the marketplace."
Abstract This paper analyzes the Capital Asset Pricing Model, describing some of its numerous benefits. With the CAPM, traders can avoid much of the risk they incur through diversification. Therefore, only unavoidable risk should be compensated. Nevertheless, even after a trader diversifies his portfolio, some risk remains. Because some risk is associated with the market as a whole, this risk cannot be neutralized through diversification, and CAPM explains that.
Abstract This is a paper about asset valuation. We are assuming that we have a start up Retail Company that sells computers parts and accessories. The company inventory policy is to use the class FIFO "First In First out" (or LIFO) as a valuation method for inventory. Also this company uses the capitalization policy to determine the type of items that need to be capitalized and the threshold of the capitalization. The paper lists justifications for each of the policies and to show how the policies will assist the company in meeting its goals. The paper also includes a discussion of alternative methods of valuations and why those methods were not chosen
From the Paper "It is important for a company to follow a uniform policy with respect to the acquisition capitalization management and disposition of equipment and other capital assets for financial statement purposes. Assets acquired by a company are either expensed or capitalized. Companies develop specific guidelines about which purchases of assets will be expensed and which must be capitalized. Typically a company will develop a formula that will be used to determine which asset acquisitions are to be capitalized. The variables that are considered in determining whether or not to capitalize an ..."
Tags:asset valuation, inventory valuation, lifo, fifo, income statement, capitalization of acquisitions, rationale.
This paper discuses the problems created by the International Accounting Standard (IAS) 38, which prescribes the accounting treatment for intangible assets such as products of the company's research.
Abstract This paper explains that the balance sheet provides next to no use in reporting the increasingly significant intangible assets of business entities. The author points out that intangible assets, such as a highly-talented workforce who generate more revenue, represent the major value-drivers of today's economy. The paper relates that attempts to modify the traditional accounting approach have not kept pace with the changes brought bought by these intangibles. The author believes that the new rules penalize the companies, which have experienced a loss of value in their intangible assets through write-offs that immediately reduce earnings. The paper states that the best solution is to recognize intangible assets in the financial statement including the ones developed in-house; however, entities must report the future performance of their intangible assets or their earning potential before they are tested for possible impairment.
Table of Contents:
IAS 38: Intangible Assets Accounting Rules Fell Short in Valuing Intangibles
Goodwill & Intangibles
Consequences of New Rules
Summary
From the Paper "Most companies have avoided to report in a comprehensive way about their intangible assets as well as the total performance which includes any significant decrease in the value of the intangibles. These rights and the obligation to regularly valuate goodwill and intangible assets represent a major change in disclosure practice and will affect the behavior of both the managers and investors. When America Online and Time Warner merged, this merger quickly showed how goodwill accounting changes can affect shareholders' interest, and exposed the misjudgments of managers."
Abstract This paper explains that behavioral asset pricing models, based on real life behavior, are becoming more relevant and important. The author identifies the salient features of this model and compares traditional, capital (CAPM), arbitrage-pricing (APT), consumption capital (CCAPM), Fama-French 3 factor, fundamentalist and chartist and behavioral asset pricing models. The paper concludes that the behavioral asset pricing model appears to provide one of the better approaches to addressing confounding issues particularly when compared to traditional models. The paper includes detailed summary charts.
Table of Contents:
Introduction
Review and Discussion
Evolution of Asset Pricing Theories
Table: Comparison of Asset Pricing Models
Summary and Conclusion
From the Paper "These new concepts concerning how "real people" make decisions have fueled the rapidly growing fields of behavioral finance. This emphasis on developing a better understanding of real-world decisions made by real people, then, is the essence of behavioral finance. Therefore, from a behavioral finance perspective, economic theory should not necessarily result in the expectation that financial markets are efficient; to the contrary, significant and systematic fluctuations from efficiency can be reasonably expected to endure for lengthy periods of time."
Abstract This paper focuses on the effects of an aging population on financial asset (stocks and bonds) returns in the U.S. for the post-World War II period. The first part of the paper provides a brief review of demographic changes that will confront a selected country during the next half century. The next part presents a review of the empirical literature on demographics and financial asset demands. Next, the paper develops a conceptual framework for analyzing how an aging population triggered by falling birth rates and rising life expectancies affects the demand for financial assets. A discussion of the ideal data set and an outline of the challenges that arise in estimating how population aging will alter aggregate demand follows. Next, the paper builds up the actual models used in this paper and discusses actual data and proxies. Finally, the paper presents new findings and tests empirically the relation between aging and asset returns in the U.S. The conclusion summarizes the main findings and notes areas for future study.
Outline
The Demographic Transition in the U.S. and Other Nations
Theoretical Background and Literature Review
Conceptual Model
Ideal Data
Actual Model
Results and Analysis
From the Paper "Sell? Sell to whom? This dilemma might haunt the Baby Boomers in the next century as they attempt to unload their assets to pay for retirement. The rising number of middle-aged workers today is the direct result of the Baby Boom generation, those born in roughly the two decades following World War II. It is this high working population ratio, which has often been identified as an important factor for rises in productivity (see Shimer (1998)). As these boomers age, they will have profound social and economic implications for much of the developed world. The large increase in the ratio of retired workers to those in the labor force during the next three decades will place substantial strains on public pension programs. Just in the U.S. anticipated social security expenditures will outstrip income by 2020. In many other developed nations the fiscal prospect is even more daunting than it is in the United States."
Abstract This report brings together modern theory of corporate finance with contemporary financial developments as described in the "Wall Street Journal", print and interactive editions, to describe the phenomena known as "Asset Bubbles." Asset bubbles have been a thorn in the side of investors for centuries, and this report helps the reader understand the asset bubble phenomena and why it occurs.
From the Paper "All throughout history numerous investors have been caught off with their pants down, to say the least, by the bursting of one speculative bubble after another. Speculative bubbles are an investing phenomenon that can be like a pride of lions getting the smell of blood when an antelope has been downed. It can be said that these bubbles are usually caused by greed and others feel that they simply a lack of common sense or some type of flaw in us humans. Whatever the case, investors consistently repeat the mistakes associated with speculative bubbles. ?A bubble occurs when investors put so much demand on a stock that they drive the price beyond any accurate or rational reflection of its actual worth, which should be determined by the performance of the underlying company.?
Tags: finance, computer, technology, silicon, valley, hitech
Abstract This paper describes asset management as the business system that enables a company to collect, maintain and manage a complete list of all the components possessed by the company. The paper then goes on to explain the concept and main objective of asset management. The paper also reviews another paper written on the related topic of estimating the costs of capital, explaining that, in the paper, the authors strived to find out the appropriate method for estimation of cost of capital with respect to insurance firms and that they proved their method (the full-information beta approach) to be an appropriate and dependable one.
From the Paper "The difficulties in the estimation of the divisional cost of the capital are indicated to be the conglomerate firm itself instead of the division traded in the capital market. Universally, the pure play technique is applied to attain the desired results but specifically at the circumstances when a relatively large number of pure play firms of various sizes are found where it does not entail a satisfactory solution to the divisional cost of capital problem. Therefore, the paper applies a comparatively, new methodology, the full formation industry beta approach that resolves the principal problems of the pure play methodology. The paper mainly concentrates on demonstration of the full-information beta approach to cost of capital estimation applying a sample embracing all firms-insurance and non-insurance listed in the Compustat data base that caters to the selection criteria for the sample period 1997-2000."
Abstract This paper presents an asset valuation for a newly opened business, Classic Furniture Company, that specializes in wholesale residential furniture selling a wide array of living room, bedroom and dining room sets. The paper provides an analysis of the inventory held by Classic Furniture and examines the company's inventory and capitalization policy as well as the methodology used to value assets and calculate depreciation. The paper justifies the policies chosen and explains how the company meets the goal of using the most effective polices.
From the Paper "Inventories in most industries generally represent the most significant current asset. How it is valued in the Financial Statement will affect the Balance Sheet, Income Statement, Statement of Changes in Owners' Equity and the Statement of Cash Flow. There are four basic methods of inventory valuation or "cost flow assumptions." The FIFO (first in-first out) method of accounting means that the first cost into the inventory system is the first cost out and charged to cost of goods sold. Under this cost flow assumption, the oldest cost is transferred to cost of goods sold, and the ending inventory is comprised of the most resent cost. Additionally, net income is higher under the FIFO method of accounting. Disadvantages associated with the FIFO method is that it is not consistent with GAAP accounting, because the matching principal is violated resulting in higher income taxes and lower cash flows. The LIFO (last in - first out) cost flow method of accounting means that the last cost into inventory is the first cost transferred to cost of goods sold. Under this method the ending inventory is made up of the oldest cost. The LIFO method is an acceptable GAAP method as it matches expense and revenues. "
Abstract This paper examines the advantages and disadvantages of the securitization of assets. The author discusses the types of securitization. The paper relates that, if a corporation opts to securitize its assets, it then can remove certain receivables from their balance sheets, which potentially could lead to serious legal consequences, such as the situation of Enron.
From the Paper "The concept of corporate financial management has dramatically changed in the past decade from a system of checks and balances to a juggling act. Corporate finance involves following a set of accounting and financial principles, however some financial experts suggest that it is more of a gambling act. Intense competition between tele-coms corporations has forced corporate finance managers to juggle more than one set of balance sheets depending on whether the reporting is going to Revenue Canada or shareholders. The telecom industry is not exempt from financial disaster particularly in light of the recent failure of customer financing of tele-communications equipment."
Abstract The paper discusses Asset securitization as a significant source of value for prospective issuers. The paper explains that deriving the maximum value is a function of aligning the issuer's business goals and current financial objectives with the structure of the transaction and the use of securitization proceeds. The paper provides an overview of the benefits that may be derived from an asset securitization, the direct and indirect costs of such a transaction and a framework for looking at the cost/benefit ratio of the transaction.
From the Paper "The concept of corporate financial management has dramatically changed in the past decade from a system of checks and balances to a juggling act. Corporate finance involves following a set of accounting and financial principles, however, some financial experts suggest that it is more of a gambling act. Intense competition between telecoms corporations has forced corporate finance managers to juggle more than one set of balance sheets, depending on whether the reporting is going to Revenue Canada or shareholders."
Abstract This paper is a research on how America will be able to protect their ground-based assets from terrorist attacks, such as down-link radar sites, launch facilities including control rooms and fuel supplies. The author examines electronic-warfare, which is warfare is enabled through information technology and electronic communications on and off the battlefield, in space and on ground, and in real-time. The paper also includes literature reviews on the same topic and reports findings that more location specific initiatives are needed in addressing vulnerability assessments and solutions for security for these ground-based space assets of the United States military.
Outline:
Objective
Introduction
Literature Review
New Types of Training
Growing Reliance on Space: Dangerous Dependence
More Distributed and Redundant Satellite Systems
Smart Planning to Ensure Key Capabilities Remain in Place
Importance of Local Vulnerability Assessment
Terrorism in "Location Specific"
Summary of Literature Review
Bibliography
From the Paper "The literature reviewed in this study has indicated that the most vulnerable targets in terms of United States space assets are space assets located right here on earth in the form of ground stations and control centers which are communication links to and from satellites and likely to be targeted in attacks from distant computers. Even the American armed forces have experienced difficult in finding the appropriate amount of bandwidth for use due to the many electronic systems presently in operation. While space is important, it is ever so much more important that location specific vulnerabilities be assessed and the limitations and shortcomings of vulnerability that exist be addressed and solutions established."
Abstract The CEO of The CD Rack has contacted The C-Team (a local consulting firm) asking for recommendations on reporting and valuing various assets. This paper examines how the C-Team discusses and gives justifications of each of the policies and shows how the policies will support The CD Rack in meeting their business goals. It explains that The CD Rack is an up and coming, start-up retail company that sells CDs from every music genre imaginable. The CD Rack also sells accessories associated with CDs such as CD storage cases and storage units, and accessories for cleaning and protecting CDs.
Inventory Policy
Capitalization Policy
Depreciation
Depreciation Methods
Conclusion
From the Paper "A variety of cost-flow assumptions are available for determining the cost of goods sold and the cost of maintaining inventory on hand. Note the word "assumption". Companies make certain assumptions about which goods are sold and which goods remain in inventory. This is for financial reporting and tax purposes only and does not have to agree with the actual movement of goods. The only requirement is: The total cost of goods sold plus the cost of the goods remaining in ending inventory for financial and tax purposes is equal to the actual cost of goods available (Inventory Cost Flow Assumptions, n.d.). Cost of goods sold is a figure reflecting the cost of the product or good that a company sells to generate revenue, appearing on the income statement as an expense unto itself, also referred to as "cost of sales." "
Abstract This paper tells us that the asset pricing model evaluates a stock's rate of return based on a specific formula. The formula, rate of return = risk free interest rate + Beta x 8.7, is then explained by the paper.
From the Paper "1.A project cost $100,000 and offers you a beta-of-two expected return of $150,000 in one year; risk premium = 8.5%; the "Wall Street Journal" reports that the riskless rate is 5.0%; the appropriate discount factor is thus 22%; 150,000/(1.22) = $123,000 (approximately) - thus the project has a net present value of $23,000."
