Did You Know?“Did you know that the Level Three Assets totaled an incredible $540 billion just for Morgan Stanley, Goldman Sachs, MerrillLynch, Lehman Brothers, JPMorgan Chase, and Citigroup.” Source: (Moyer, 2008)
Did You Know?But what really is $540 billion? This image is of just one million dollars. For $540 billion, you would need 540,000,000 hundred dollar bills, or 54,000 piles of one million dollars.
Fair Market AccountingAdvanced Analysis and Application of Accounting Data ACG 6315 Dr. Jian Cao Maria Gebhardt December 1, 2008
Overview• Recent Market Conditions• Fair Value Accounting• Implications for Managers and Investors• Important Points of Interest• Recap of Presentation• Suggested Web Sites
Recent Market Events Significant events have greatly impacted the market. The stock market reached over 14,000 points in October 2007, yet plummeted to under 10,000 pointsduring October and November 2008.
Recent Market EventsDow Jones Industrial Average 2006 to Present Source: Yahoo! Finance
Recent Market Events Consumer Confidence hasalso seen a significant decline. Source: National Association of Realtors Economic Information
Recent Market EventsNew Home Sales in the last 16 months: Source: National Association of Realtors Economic Information
Recent Market EventsUnemployment has risen to a 14-year high: Source: Bureau of Labor Statistics
Fair Value Accounting• Accounting Term• Market Value• If Asset• If Liability
Fair Value Accounting Three Levels: Source: Federal Reserve Bank of San Francisco
Implications : Managers & Investors • One Uniform Model Managers: • Reduce Costs • Reduce Potential Risk Exposure Investors: • Historical Reporting Still Has Value
Important Points of Interest• Consistent Reporting Model• Valuation Guides and Instructions• Historical Reporting, Not History• Gain Support, More Information
Recap• Recent Market Conditions • Stock Market • Consumer Confidence • New Home Sales • Unemployment Rate• Banking & Finance Industry Collapse
Recap• Fair Value Accounting• Implications for Both Managers and Investors• Points of Interest • Consistent Reporting • Valuation Guides • Historical Reporting • Gain Support
Thank you for your time. Suggested Web sites for further information: SEC – Spotlight on Fair Value Accounting: http://www.sec.gov/spotlight/fairvalue.htm FASB – Summary of Statement No. 157:http://www.fasb.org/st/summary/stsum157.shtml AICPA – FAQs About Fair Value Accounting:http://www.aicpa.org/MediaCenter/fva_faq.htm