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Presentation - Maria Gebhardt - Advanced Analysis of Accounting Data
The document discusses the impacts of recent market events and the use of fair value accounting. It notes that major banks had $540 billion in level 3 assets and provides an image to illustrate the scale of that amount. It then discusses how fair value accounting involves assigning market values to assets and liabilities using three levels, and the implications this has for both managers who must reduce costs and risks, and investors who still value historical reporting. The presentation recaps the recent market conditions of falling stock prices, consumer confidence, and new home sales as well as rising unemployment, and suggests additional resources on the topic.
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Presentation - Maria Gebhardt - Advanced Analysis of Accounting Data
- 1. Did You Know? “Didyou know that the Level Three Assets totaled an incredible $540 billion just for Morgan Stanley, Goldman Sachs, Merrill Lynch, Lehman Brothers, JPMorgan Chase, and Citigroup.” Source: (Moyer, 2008)
- 2. Did You Know? Butwhat 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.
- 3. Fair Market Accounting Advanced Analysis and Application of Accounting Data ACG 6315 Dr. Jian Cao Maria Gebhardt December 1, 2008
- 4. Overview • Recent MarketConditions • Fair Value Accounting • Implications for Managers and Investors • Important Points of Interest • Recap of Presentation • Suggested Web Sites
- 5. 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 points during October and November 2008.
- 6. Recent Market Events DowJones Industrial Average 2006 to Present Source: Yahoo! Finance
- 7. Recent Market Events Consumer Confidence has also seen a significant decline. Source: National Association of Realtors Economic Information
- 8. Recent Market Events NewHome Sales in the last 16 months: Source: National Association of Realtors Economic Information
- 9. Recent Market Events Unemploymenthas risen to a 14-year high: Source: Bureau of Labor Statistics
- 10. Banking & FinanceIndustry
- 11. Fair Value Accounting •Accounting Term • Market Value • If Asset • If Liability
- 12. Fair Value Accounting Three Levels: Source: Federal Reserve Bank of San Francisco
- 13. Implications : Managers& Investors • One Uniform Model Managers: • Reduce Costs • Reduce Potential Risk Exposure Investors: • Historical Reporting Still Has Value
- 14. Important Points ofInterest • Consistent Reporting Model • Valuation Guides and Instructions • Historical Reporting, Not History • Gain Support, More Information
- 15. Recap • Recent MarketConditions • Stock Market • Consumer Confidence • New Home Sales • Unemployment Rate • Banking & Finance Industry Collapse
- 16. Recap • Fair ValueAccounting • Implications for Both Managers and Investors • Points of Interest • Consistent Reporting • Valuation Guides • Historical Reporting • Gain Support
- 17. Thank you foryour 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