Transcript Hedging Overview - The Computer Science Department

Fair Value Accounting
FAS 105, 107, 115, 130, 133, 141, 142, 155, 157, 159
Bob Jensen
Emeritus Professor of Accounting
Trinity University in San Antonio
190 Sunset Hill Road
Sugar Hill, NH 03586
603-823-8482
[email protected]
http://www.trinity.edu/rjensen/
Bob Jensen’s Summary of Accounting History and Theory
http://www.trinity.edu/rjensen/theory.htm
“Not everything that can be counted, counts. And not everything that counts can
be counted.”
Albert
Einstein
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The government gave them 105% for their $200,000 subprime mortgage.
They then sold the house for $37,000,
got married, and
are escaping from California.
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So are we now that we flipped the doghouse!
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Alternative Accounting Measures of Value
of Assets and Liabilities
“Skate to where the puck is going, not to where it is.”
Wayne Gretsky (as quoted for many years by Jerry Trites )
Historical Cost of Individual Assets and Liabilities
Summed in Balance Sheet (Book Value)
Historical Cost With Price Level Adjustments (PLA)
Entry Value (Replacement Cost, Current Cost)
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Alternative Accounting Measures of Value
of Assets and Liabilities
“Skate to where the puck is going, not to where it is.”
Wayne Gretsky (as quoted for many years by Jerry Trites )
Exit Value (Net Liquidation Value)
Economic Value (Discounted Cash Flows, FCF, Residual Income)
Market Value of Entire Firm (Cash Versus Stock Trade)
Market Value of All Shares Outstanding
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FAS 33 from 1979-1984 (ended with FAS 82)
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In 2007 International Harmonization
is Becoming a Reality

In Year 2008 foreign corporations may file reports with the SEC
and be listed on U.S. stock exchanges using IASB standards
rather than FASB standards without reconciling the two.

The U.S., Canada, and other nations are working toward
adoption of IASB standards in place of domestic accounting
standards.
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Fair Value Accounting Under the IASB & FASB

IASB is exploring, with FASB input, overhaul of fair-value
accounting as part of a wider project on measurement. It is in the
context of this long-planned effort, and not some recent reaction, that
the IASB is planning to and will explore issues related to fair-value
accounting.

IAS 32 and 39 Require Fair Value Accounting for Financial
Instruments in Many Instances
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Alternative Accounting Measures of Value
of Assets and Liabilities
Skate to where the puck is going, not to where it is.
Wayne Gretsky (as quoted for many years by Jerry Trites )
Graduate student Derek Panchuk and professor Joan Vickers, who discovered
the Quiet Eye phenomenon, have just completed the most comprehensive, onice hockey study to determine where elite goalies focus their eyes in order to
make a save. Simply put, they found that goalies should keep their eyes on the
puck. In an article to be published in the journal Human Movement Science,
Panchuk and Vickers discovered that the best goaltenders rest their gaze
directly on the puck and shooter's stick almost a full second before the shot is
released. When they do that they make the save over 75 per cent of the time.
"Keep your eyes on the puck," PhysOrg, October 26, 2006 --http://physorg.com/news81068530.html
Investors want us to give them a puck to focus on at all times.
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Fair Value Accounting Under the IASB & FASB
The main problem of fair value adjustment is that many
(most?) of the adjustments cause enormous fluctuations
in earnings, assets, and liabilities that are washed out
over time and never realized. The main advantage is
that interim impacts that “might be” realized are
booked. It’s a war between “might be” versus “might
never.” The war has been waging for over a century
with respect to booked assets and two decades with
respect to unbooked derivative instruments,
contingencies, and intangibles.
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Fair Value Accounting Under the IASB & FASB

Holder, Hopkins, and Wablen (The Accounting Review, 2004, pp.
453-472) found, in a sample of 200 banks, that fair value
accounting gave rise to more than five times more earnings
volatility than traditional GAAP earnings.

Much of the volatilty washes out over time such that earnings
increases and decreases from fair value adjustments have zero
effect on cash in most instances. This is misleading for going
concerns.
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Paragraph 15 of FAS 157
15. A fair value measurement assumes that the liability is transferred to a
market participant at the measurement date (the liability to the
counterparty continues; it is not settled) and that the nonperformance risk
relating to that liability is the same before and after its transfer.
Nonperformance risk refers to the risk that the obligation will not be
fulfilled and affects the value at which the liability is transferred.
Therefore, the fair value of the liability shall reflect the nonperformance
risk relating to that liability. Nonperformance risk includes but may not be
limited to the reporting entity’s own credit risk. The reporting entity shall
consider the effect of its credit risk (credit standing) on the fair value of the
liability in all periods in which the liability is measured at fair value. That
effect may differ depending on the liability, for example, whether the
liability is an obligation to deliver cash (a financial liability) or an
obligation to deliver goods or services (a nonfinancial liability), and the
terms of credit enhancements related to the liability, if any.
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Credit Spread
In finance, a credit spread is the yield spread, or difference
in yield between different securities, due to different
credit quality. The credit spread reflects the additional
net yield an investor can earn from a security with more
credit risk relative to one with less credit risk. The credit
spread of a particular security is often quoted in relation
to the yield on a credit risk-free benchmark security or
reference rate.
There are several measures of credit spread, including Zspread and option-adjusted spread.
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Morgan Stanley Illustration
First Quarter on 2009

Reduced credit spread on a bond investment ceteris paribus
increases market value of a bond and, thereby, results higher
unrealized earnings due to mark-to-market upward
adjustment of an asset. Reduced credit spread on a liability
has the opposite impact on earnings for the unrealized loss
due to a mark-to-market adjustment that increases the fair
value of the liability. This is a bit confusing, since by reducing
credit risk on their debt, debtors take an earnings hit when
adjusting the debt to fair value.

Morgan Stanley took a $1.5 billion hit in earnings due to
improving its credit rating.
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Fair Valuing Debt
Better/Worse Credit Standing = Loss/Gain
Barge (James Barge, senior vice president and controller
for Time Warner) also cited as problematic the
hypothetical case of a company whose creditworthiness
is downgraded by the rating agencies. By marking down
the debt's value on its balance sheet, the company would
realize more income, a scenario Barge called
"nonsensical." He warned of a host of such effects
arising under fair value when a company changes its
capital structure.
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Collatateralized Debt Obligation (CDO)
(CDOs) are a type of structured asset-backed
security (ABS) whose value and payments are
derived from a portfolio of fixed-income
underlying assets. CDOs are assigned different
risk classes, or tranches, whereby "senior"
tranches are considered the safest securities.
Interest and principal payments are made in
order of seniority, so that junior tranches offer
higher coupon payments (and interest rates) or
lower prices to compensate for additional
default risk.
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David Li’s Gaussian Copula Function
For five years, David Li's formula, known as a Gaussian Copula
Function, looked like an unambiguously positive
breakthrough, a piece of financial technology that allowed
hugely complex risks to be modeled with more ease and
accuracy than ever before. With his brilliant spark of
mathematical legerdemain, Li made it possible for traders to
sell vast quantities of new securities, expanding financial
markets to unimaginable levels.
His method was adopted by everybody from bond investors and
Wall Street banks to ratings agencies and regulators. And it
became so deeply entrenched—and was making people so
much money—that warnings about its limitations were
largely ignored.
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Key FASB Standards on Fair Value Acctg.

FAS 105 --- Disclosure of OBSF and market risks of instruments

FAS 107 --- Requirements for disclosure of FV

FAS 115 --- HTM vs. AFS vs. Trading

FAS 124 --- Investments Held by Not-for-Profit Orgs

FAS 130 --- OCI offset instead of current earnings

FAS 133 --- FV required for derivative instruments

FAS 141 --- Identify and FV intangibles in acquisitions

FAS 142 --- Must est. FV of “Goodwill” remaining

FAS 155 --- Requires FV acctg. for hybrid securities

FAS 157 --- Defines FV and hierarchy of meas. pref.

FAS 159 --- FVO for financial instruments
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"How to Save the Financial System," by William M.
Isaac, The Wall Street Journal, September 19, 2008

Suspend the Fair Value Accounting rules
“Biggest culprit for banking collapse” is FAS 115 that in bad
times requires markdowns to “fire sale” values

Clamp down on abuses by short sellers
Short sellers are engaged in abuses such as purchasing credit
default swaps on corporate bonds (essentially bets on whether a
borrower will default)

Withdraw the Basel II capital rules (2007)
Allow high leverage capital ratios in good times, but require much
higher ratios for banks losing money.
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Markowitz Portfolio Diversification Theory
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Shredded Mortgages Among CDO Bonds
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Coopula Formula Ignored
Homeowner Default Covariances
The reason that ratings agencies and investors felt so safe with the triple-A
tranches was that they believed there was no way hundreds of homeowners
would all default on their loans at the same time. One person might lose his
job, another might fall ill. But those are individual calamities that don't
affect the mortgage pool much as a whole: Everybody else is still making
their payments on time.
But not all calamities are individual, and tranching still hadn't solved all the
problems of mortgage-pool risk. Some things, like falling house prices, affect
a large number of people at once. If home values in your neighborhood
decline and you lose some of your equity, there's a good chance your
neighbors will lose theirs as well. If, as a result, you default on your
mortgage, there's a higher probability they will default, too. That's called
correlation—the degree to which one variable moves in line with another—
and measuring it is an important part of determining how risky mortgage
bonds are.“
“There it is again, the Invisible Hand giving us the finger.”
New Yorker Cartoon
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Shredded Mortgages Among CDO Bonds
Too Much Confetti Turned Toxic Simultaneiously
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CDO Rating Downgrades
From 2003 to 2006, new issues of CDOs backed by asset-backed
and mortgage-backed securities had increasing exposure to
subprime mortgage bonds. Mezzanine ABS CDOs are mainly
backed by the BBB or lower-rated tranches of mortgage
bonds, and in 2006, $200 billion in mezzanine ABS CDOs
were issued with an average exposure to subprime bonds of
70%.
As delinquencies and defaults on subprime mortgages occur,
CDOs backed by significant mezzanine subprime collateral
experience severe rating downgrades and possibly future
losses.
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Difficulty in Pricing CDO Investments
+ Collateral Calls
As the mortgages underlying the CDO's collateral decline in value,
banks and investment funds holding CDOs face difficulty in
assigning a precise price to their CDO holdings. Many are
recording their CDO assets at par due to the difficulty in pricing.
The pricing challenge arises because CDOs do not actively trade
and mortgage defaults take time to lead to CDO losses. However,
in June 2007, two hedge funds managed by Bear Stearns Asset
Management Inc. faced cash or collateral calls from lenders that
had accepted CDOs backed by subprime loans as loan collateral.
The now defunct Bear Stearns, at that time the fifth-largest U.S.
securities firm, said July 18, 2007 that investors in its two failed
hedge funds will get little if any money back after "unprecedented
declines" in the value of securities used to bet on subprime
mortgages.
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.
Statement 157 – Valuation Hierarchy
Fair Value
Hierarchy
Level 3
Level 1
Level 2
Market- based
Extrapolate
Objective
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Income/FCF
Model
Subjective
AIG Insured Billions of Dollars in CDO Bonds
With Credit Default Swaps (CDSs)
Many investors (like Goldman Sachs) insured
CDO investments against credit default with
AIG CDOs.
Unlike real insurance, AIG did not have to have
adequate capital reserves to back up CDOs.
Hank Paulson’s hidden agenda.
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But Most Banks Holding Toxic CDOs
Were Not Insured with Credit Derivatives
Well over a trillion dollars invested in CDO bonds sit on
troubled banks balance sheet.
No active markets until Geitner’s Plan creates a market.
No quoted prices for valuation purposes.
Inputs other than quoted prices are not observable from
due to varying credit risks and volatile default rates.
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Former FDIC Chief William Isaac:
Fair Value Caused the Crisis
So say bankers, Isaac, Stever Forbes, & Buffett
The devastation that followed stemmed largely from the tendency of
accounting standards-setters and regulators to force banks, by means of
their litigation-shy auditors, to mark their illiquid assets down to
"unrealistic fire-sale prices," the former FDIC chief asserted. The fairvalue rules "have destroyed hundreds of billions of dollars of capital in
our financial system, causing lending capacity to be diminished by ten
times that amount," he said in his prepared remarks.
Noting that 157 was issued in 2006, Isaac noted that he wasn't "asking that
we change the whole system of accounting that has been developed for
centuries." Instead, he said, "I'm asking for a very bad rule to be
suspended until we can think about this more and stop destroying so much
capital in our financial system. I think that's a basic step that needs to be
taken immediately.“
http://www.cfo.com/article.cfm/12502908
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Congress Ordered SEC Research Study
SEC concluded Fair Value Acctg. Not the Problem
The wonderful December 30, 2008 research report of the SEC
shows that fair value accounting is neither the cause nor the
cure for the banking crisis. The liquidity problem of the
holders of the toxic investments is caused by trillions of dollars
invested in underperforming (often zero performing) of bad
investments mortgages or mortgaged-backed bonds that have
to be written down unless auditors agree to simply lie about
values. That is not likely to happen, but client pressures on
auditors to value on the high side for many properties will be
heavy handed.
The wonderful full SEC report that bankers and regulators
do not want to read can be freely downloaded at
http://www.sec.gov/news/studies/2008/marktomarket123008.p
df
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FASB Eases Fair /Value Requirements
The Decision is Praised and Damned
Political pressures mounted in spite of the SEC research
findings. On April 2, 2009 in a 3-2 vote the FASB reached a
highly controversial decision bifurcate impairment losses
and defer non-credit losses to OCI rather than earnings.
Reaction favorable from the bankers and government, but
the FASB’s decision was despised in the financial media.
Jonathan Weil called the FASB the Fraudulent Accounting
Standards Board
Professor Ed Ketz calls for the resignation of FASB
Chairman Robert Herz
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Three Infamous FASB Staff Positions (FSPs)
April 9, 2009

FSP FAS 157-4, Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are
Not Orderly ("FSP FAS 157-4") --http://www.fasb.org/pdf/fsp_fas157-4.pdf

• FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments ("FSP
FAS 115-2") --http://www.fasb.org/pdf/fsp_fas115-2andfas124-2.pdf

• FSP FAS 107-1 and APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments ("FSP FAS 107-1") --http://www.fasb.org/pdf/fsp_fas107-1andapb28-1.pdf /
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Three Infamous FASB Staff Positions (FSPs)
April 9, 2009
In response the PCAOB issued "Staff Audit
Practice Alert No. 4," April 21, 2009 --http://www.pcaobus.org/Standards/Staff_Questions_a
nd_Answers/2009/04-21_APA_4.pdf
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PCAOB issued
"Staff Audit Practice Alert No. 4

Reviews of interim financial information

Audits of financial statements, including integrated
audits

Disclosures

Auditor reporting considerations
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Credit Versus Non-Credit Loss
Credit Loss = Decline in expected NPV of future cash
flows such as significant changes in an obligor’s
creditworthiness on an HTM classified security
Non-credit loss = Decline in fair value net of credit loss
The fair value of a security may decline even when the
NPV of collections is unchanged. This decline in fair
value may arise due to changes in market rates of
interest and disruptions of orderly markets for
securities due to economic and liquidity crises.
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The Main Issues in the Revised FAS 157-4
Will be Summarized in Later Slides
FSP FAS 157-4 allows all business firms to weigh the evidence
whether the a transaction involved an orderly market.
Unfortunately it will permit managers to ignore distressed
conditions and subjectively estimate value with great discretion.
Clearly, this will buoy toxic asset prices on the balance sheet and
reduce losses or create gains on the income statement. “Much of it
may be fiction” wrote Professor Ed Ketz at Penn State.
FSP 157-4 made it much easier for firms to jump from Level 2 to
Level 3. The final version makes it slightly less easy to the chagrin
of some bankers.
Effective after June 15, 2009
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Deloitte Letter to IASB April 22, 2009
We believe that the FASB Staff Position FAS 157-4 is broadly
consistent with the principles of fair value in IFRSs and the
Expert Advisory Panel document and therefore an
amendment to IFRSs is not necessary. However, in light of the
IASB's imminent release of an exposure draft on Fair Value
Measurements, the IASB should consider whether the words
used in the FASB Staff Position FAS 157-4 are consistent with
the exposure draft and whether the wording of the exposure
draft should be aligned with the FASB Staff Position FAS
157-4. In addition, the IASB should seek the views of the
Expert Advisory Panel to establish whether differences in the
words of the FASB Staff Position FAS 157-4 and the Expert
Advisory Panel report are expected to have any practical
effect.
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.
Statement 157 – Valuation Hierarchy
Fair Value
Hierarchy
Level 3
Level 1
Level 2
Market- based
Extrapolate
Objective
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Income/FCF
Model
Subjective
The Main Issues in the Revised FAS 115-2
Will be Summarized in Later Slides
Note that the FASB is amending more than just FAS 157
Equally controversial are the amendments FAS 115-2,
124-2, and EITF 99-20-b
FSP FAS 115-2 amends other-than-temporary (OTT)
impairments guidance by allowing business firms to
avoid impairment write downs on securities that are
declared not available for sale at the moment (not
necessarily, however, to be held to maturity).
Seeking Alpha calls this a “huge mulligan for banks with
junky securities.”
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Deloitte Letter Regarding FAS 115-2 and 124-2
Implications for the IASB
As noted in the request for views, the differences between U.S.
GAAP and IFRSs with respect to scope, impairment triggers,
impairment measurements, and recoveries are numerous and
complex. A short term project to fully converge with FASB's
amendment would entail substantial changes to IFRSs that
would require significant efforts and would create unnecessary
complexities (e.g., recognizing impairments of held-to-maturity
securities that are not due to credit in other comprehensive
income). Instead, we would encourage both Boards to expedite
their work on a joint standard that would improve reporting for
all financial instruments including impairment issues (e.g., loss
recognition triggers, measurement of losses, recognition of
recoveries, etc.).
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FSP 157-e versus FSP 157-4

When released for comment, FSP 157-e proposed
making it simple as can be for banks to bypass Levels 1
and 2 in favor of highly subjective Level 3 valuations.

On April 2, 2009 the FASB voted on FSP 157-4 which
does impose some tests before a bank can jump straight
into Level 3 subjectivity. Some considerations are in
Paragraph 12 of FSP 157-4. This was a reaction to
comment letters claiming it was too easy to elect Level 3
without some added tests.
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The Main Issues in the Revised FAS 115-2
Will be Summarized in Later Slides
One of the more controversial amendments mandates that gains or
losses due to credit risk will go into the income statement, while
noncredit gains and losses will bypass the income statement and go
directly into other comprehensive income (OCI) . One huge
problem is that it is hard to distinguish credit losses from
noncredit losses. This amendment makes it much easier for
companies to manage earnings.
Seeking Alpha asserts investors lost on this vote, and they will have to
pay more attention to OCI in the future, as it becomes a more
frequently-used receptacle for unwanted debits. When investors
note these "detoured charges" in earnings, they should skip the
detour and factor the full charge into their evaluation of earnings.
A small victory for investors: the original proposal would have
included other-than-temporary impairments on equity securities.
The final decision will affect only debt securities.
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FASB News Announcement
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Key FASB Standards on Fair Value Acctg.

FAS 105 --- 1990

FAS 107 --- 1991 to be effective in 1993

FAS 115 --- 1993 to be effective in 1994 (amended in 2009)

FAS 124 --- 1995 (as amended in 2009)

FAS 130 --- 1997 to be effective in 1998

FAS 133 --- 1998 but later delayed until 2000

FAS 141 --- 2001

FAS 142 --- 2001

FAS 155 --- 2006

FAS 157 --- 2006 (amended in 2009)

FAS 159 --- 2007 to be effective in 2008
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FAS 105 in 1990
Disclosure of OBSF Market and Credit Risk

The face, contract, or notional principal amount

The nature and terms of the instruments and a discussion of their credit and
market risk, cash requirements, and related accounting policies

The accounting loss the entity would incur if any party to the financial
instrument failed completely to perform according to the terms of the contract
and the collateral or other security, if any, for the amount due proved to be of
no value to the entity

The entity's policy for requiring collateral or other security on financial
instruments it accepts and a description of collateral on instruments presently
held.

This Statement also requires disclosure of information about significant
concentrations of credit risk from an individual counterparty or groups of
counterparties for all financial instruments.
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FAS 107 effective in 1993
Disclosure of Fair Value of Fin. Instruments
This Statement extends existing fair value disclosure
practices for some instruments by requiring all entities
to disclose the fair value of financial instruments, both
assets and liabilities recognized and not recognized in
the statement of financial position, for which it is
practicable to estimate fair value. If estimating fair
value is not practicable, this Statement requires
disclosure of descriptive information pertinent to
estimating the value of a financial instrument.
Disclosures about fair value are not required for
certain financial instruments listed in paragraph 8
(mostly items covered in other standards).
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2009 Amendments to FAS 107 & APB 28
FSP 107-1
Previous requirement for annual fair
value disclosures now is a quarterly
requirement.
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FAS 115 effective in 1994
FV Reporting of AFS Investments in Debt/Equity

Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.

Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains
and losses included in earnings.

Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate
component
of shareholders' equity.
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Impairment of HTM and AFS Securities

Normally changes in value of HTM and AFS securities do not
affect current earnings.

However, if book value is greater than fair value in what as been
deemed an “impairment” event, HTM and AFS securities are
written down to fair value with the loss going to current earnings.

This was amended on April 2, 2009 such that only credit loss
portion is charged to current earnings. The remainder of the write
down goes to OCI.
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FAS 124 applied after 1996
Investments Held by Not-for-Profit Orgs

All debt must be adjusted to fair value

Equity investments must be adjusted to fair
value when fair value is deemed determinable.

Misc. stipulations about restricted gifts
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EITF 03-1 in 2003 (the OTTI)
Other-Than-Temporary Impariment
Attempted to define other-than temporary impairment in EITF
Issue No. 03-1, “The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments."
Issue No. 03-1 also established the requirement for reporting
entities to disclose qualitative and quantitative information
regarding the nature of securities in an unrealized loss
position.
Although Issue No. 03-1 was initially ratified by the FASB,
ultimately only the disclosure requirements and the guidance
on cost method investments became effective.
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FAS 115 and 124 Amendments in 2009
Also changes in EITF 99-20-1
FSP FAS 115-2 and FAS 124-2
Impairment arises when current value<amortized cost of other-than-temporary
(OTT) securities
When OTT security is deemed impaired, a firm must now declare that it has the
intent to hold the security and will not have to sell the security until “recovery”
when current value is not below amortized cost.
Impairment Loss = Credit Loss + Non-credit loss
Non-credit losses “shunted” to OCI
Credit gains and losses must be posted to current earnings
Often very subjective when bifurcating such gains and losses such that firms
have much greater discretion in keeping losses out of current earnings.
The bifurcation greatly complicates financial analysis of earnings
1-60
Paragraph 11 of FSP 115-2
Two Metrics Commonly in Financial Analysis
Tangible Common Equity
The FSP has little effect on tangible common equity
since both Retained Earnings and OCI are equity items
Net Interest Margin
The FSP impacts Net Interest Margin but it does so in
a way that correlates more highly with cash flows.
Impairment of an OTT security does not immediately
affect cash flow since such a security is being held until
recovery. Taking portion of loss out of earnings for
non-cash impairment improves that correlation.
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Page 17 Dissent of FASB
Board Members Tom Linsmeier and Marc Siegel

Linsmeier and Siegel feel that bifurcation of
impairment loss into credit and non-credit portions is
too much departure from spirit of fair value
accounting. They feel the full impairment loss should
be charged to current earnings.

Linsmeier and Siegel feel that the delayed recognition
of non-credit impairment losses will have a negative
impact on investor confidence in the financial reporting
process.
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FAS 130 effective in 1998
Reporting Other Comprehensive Income (OCI)
This Statement requires that an enterprise
(a)
classify items of other comprehensive income by
their nature in a financial statement and
(b)
display the accumulated balance of other
comprehensive income (AOCI) separately from
retained earnings and additional paid-in capital
in the equity section of a statement of financial
position.
1-63
FAS 133 effective in 2000
Amended by FAS 137, 138, 149, 155, and 159
Accounting for Derivative Financial Instruments and Hedging Activities






Financial Derivatives & Scandals Explode in the Early 1990's
Video or Audio clip from CBS Sixty Minutes SIXTY01.avi or SIXTY01.mp3
Audio clip from John Smith of Deloitte & Touche in August
1994 SMITH01.mp3
Examples of derivative contracts that even the professional analysts could not
decipher

The derivatives that Merrill Lynch wrote that drive Orange County into
bankruptcy

Other derivatives fraud summaries are at
http://www.trinity.edu/rjensen/fraud.htm#DerivativesFraud
Video and audio clips of FASB updates on FAS 133

Audio 1 --- Dennis Beresford in 1994 in New York City BERES01.mp3

Audio 2 --- Dennis Beresford in 1995 in Orlando BERES02.mp3
Derivative
Financial Instrument Frauds --- Off line --- Click Here
1-64
FAS 133 effective in 2000
Amended by FAS 137, 138, 149, 155, and 159
Accounting for Derivative Financial Instruments and Hedging Activities

Requires booking of most derivative financial instruments at fair
value (with some exceptions for NPNS, regular-way, insurance
contracts, weather derivatives, short sales, interest-strips, etc.)

Derivatives are to be marked to current fair value at least every
90 days and on reporting dates. Changes in fair value are to be
charged or credited to current earnings unless the derivatives
qualify for hedge accounting treatment as cash flow, fair value,
or FX hedges. Not all economic hedges qualify for hedge
accounting relief from current earnings.

Hedge accounting rules under FAS 133 and its
amendments are very complex.
1-65
Key FAS 133 and IAS 39 Terms
Notional | Underlying | Net Settlement | Little or No Initial Investment
Financial Instrument
| Derivative Instrument
Purchase Commitment | Firm Commitment | Forecasted Transaction | Speculation
Stand Alone | Cash Flow Hedge | Fair Value Hedge | FX Hedge
Purchased Options | Written Options | Long Forwards | Short Forwards | Swaps | Futures Contracts
European versus American versus Asian options
Spot Price, Forward Price, Strike Price, Premium, Intrinsic Value, Time Value
Freestanding, Embedded, Structured (tailormade rather than convential financing)
OCI versus Firm Commitment | Delta
1-66
FAS 141 effective in 2001
Purchase Method Req. for Business Combinations

In contrast to Opinion 16, which required separate recognition of intangible
assets that can be identified and named, this Statement requires that they be
recognized as assets apart from goodwill if they meet one of two criteria—the
contractual-legal criterion or the separability criterion. To assist in identifying
acquired intangible assets, this Statement also provides an illustrative list of
intangible assets that meet either of those criteria.

In addition to the disclosure requirements in Opinion 16, this Statement
requires disclosure of the primary reasons for a business combination and the
allocation of the purchase price paid to the assets acquired and liabilities
assumed by major balance sheet caption. When the amounts of goodwill and
intangible assets acquired are significant in relation to the purchase price paid,
disclosure of other information about those assets is required, such as the
amount of goodwill by reportable segment and the amount of the purchase
price
assigned to each major intangible asset class.
1-67
FAS 142 effective in 2001
Goodwill and Other Intangible Assets Acquired

Purchased goodwill and other intangibles in business combinations are to be
revalued each reporting date and written down to the extent that its historical
cost valuation has been impaired. The historical cost is no longer to be
amortized except in the case of intangibles with finite lives. In theory the cost of
purchased intangibles could stay on the books for many, many years.

This Statement provides specific guidance for testing goodwill/ingangibeles for
impairment. Goodwill will be tested for impairment at least annually using a
two-step process that begins with an estimation of the fair value of a reporting
unit. The first step is a screen for potential impairment, and the second step
measures the amount of impairment, if any. However, if certain criteria are
met, the requirement to test goodwill for impairment annually can be satisfied
without a re-measurement of the fair value of a reporting unit.
1-68
FAS 155 effective in 2006
Accounting for Certain Hybrid Financial Instruments

Permits fair value re-measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation

Clarifies which interest-only strips and principal-only strips are not subject to
the requirements of Statement 133

Establishes a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation

Clarifies that concentrations of credit risk in the form of subordination are not
embedded derivatives

Amends Statement 140 to eliminate the prohibition on a qualifying specialpurpose entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument.
1-69
FAS 155

Permits fair value measurement for certain hybrid financial
instruments that contain an embedded derivative that would
otherwise require bifurcation under Statement 133.

Amends Statement 133 to require evaluation of all interests in
securitized financial assets. thus eliminating the exemption in
Statement 133 accounts for certain hybrid instruments. As a
result, entities will have to determine if such interest may be:
1. Freestanding derivatives,
2. Hybrid financial instruments containing embedded
derivatives requiring bifurcation, or
3. Hybrid financial instruments containing embedded
derivatives that do not require bifurcation

Clarifies that only the simplest and most direct separation of
interest and principal cash flows need not be evaluated for
embedded
derivatives
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FAS 155

Clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives.

Amends Statement 140 to allow a QSPE to hold passive derivative
instruments that pertain to beneficial interest that are or contain
a derivative financial instrument

Irrevocable election on an instrument by instrument basis with all
changes in fair value recognized in earnings.

The fair value election should be made at the time the financial
instrument is acquired, issued or there is a new basis in a
previously recognized financial instrument.

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Upon adoption, applies to existing hybrid financial
instruments that had been bifurcated under the requirements
of Statement 133.
FAS 155
The Bifurcation Model
Paragraph 12 of Statement 133:
Yes
No
2. Would the
embedded
feature be a
derivative if it
was freestanding?
(Par 12c)
No
Do Not Bifurcate
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Yes
3. Is it clearly
and closely
related to the
Host contract?
(Par 12a)
Yes
No
Bifurcate
1. Is the hybrid
carried at fair
value through
earnings?
(Par 12b)
FAS 155
Paragraph 14 of FAS 133
However, interest-only strips and principal-only
strips are not subject to the requirements of this Statement
provided they
(a) initially resulted from separating the rights to receive
contractual cash flows of a financial instrument that, in and
of itself, did not contain an embedded derivative that
otherwise would have been accounted for
separately as a derivative pursuant to the provisions of
paragraphs 12 and 13 and
(b) do not incorporate any terms not present in the original
financial instrument described above.
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FAS 155
However, interest-only strips and principal-only strips are not subject
to the requirements of this Statement provided those strips (a)
represent the rights to receive only a specified proportion of the
contractual interest cash flows of a specific debt instrument or a
specified proportion of the contractual principal cash flows of that
debt instrument and (b) do not incorporate any terms not present in the
original financial debt instrument described above. An allocation of a
portion of the interest or principal cash flows of a specific debt
instrument as reasonable compensation for stripping the instrument or
to provide adequate compensation to a servicer (as defined in
Statement 140) would meet the intended narrow scope of the
exception provided in this paragraph. However, an allocation of a
portion of the interest or principal cash flows of a specific debt
instrument to provide for a guarantee of payments, for servicing in
excess of adequate compensation, or for any other purpose would not
meet the intended narrow scope of the exception.
1-74
FAS 155
•
Nullified Issue D1 Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets. Impact
of Issue D1 was to defer the bifurcation requirements of
Statement 133
•
Holders of beneficial financial interests must analyze
arrangements that govern the payoff structure and the
subordination status of the financial instrument
Prepayment risks in such structures could result in meeting
the 13(b) requirements of Statement 133
1-75
FAS 157 effective in 2006
Fair Value Measurements
The changes to current practice resulting from
the application of this Statement relate to
 the
definition of fair value,
 the
methods used to measure fair value, and
 the
expanded disclosures about fair value
measurements.
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FAS 157
All accounting pronouncements that require or permit fair value
measurement and include such items as:

Investment securities –
Statement 115

Derivatives – Statement 133

“Short sales” of securities –
AICPA Audit Guides for certain
industries

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Investments carried at fair value
by investment companies


Certain assets and liabilities
measured at fair value in a
business combination –
Statement 141:

Intangible assets

In process R&D
Assets measured at fair value for
an impairment test – Statements
142 and 144:

Long-lived assets held for
sale

Reporting units

Goodwill
Differences Between Statement 157 and
Current Practice
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Issue
Current Practice
Statement 157
Definition
Various definitions of fair value –
Amount at which an asset or liability
could be bought or sold in a current
transaction between willing parties, that
is, other than in a forced liquidation sale
Price that would be received for an
asset or paid to transfer a liability
between market participants at the
measurement date.
Transaction Entry Price
Presumed equal to fair value
May not be representative of fair
value; provides indicators of when
the transaction price may not be
fair value.
Highest and Best Use
Current practice is to value assets in
continued use unless identified for
disposition
Independent of the reporting
entity’s intent: considered from
market participant perspective
Use of Market Data in
Valuations
Use of market data encouraged. In
some circumstances entity intent
permitted to be considered in
valuations.
Valuation techniques must
maximize use of market observable
data and minimize use of
unobservable data
Hierarchy
No current mandated hierarchy.
Three levels distinguished between
observable and unobservable
inputs.
SOURCE: DELOITTE
Differences Between Statement 157 and Current
Practice
Issue
Current Practice
Statement 157
Defensive Value
-
New concept
Principal/Most Advantageous Market
-
Newly defined concept
Market Participants
Current guidance on
market participants is
unclear. Buyer-specific
intent may be considered
Buyer-specific intent should be
dismissed if different from that of other
multiple market participants
Block Discounts
Broker-dealers and
investment companies
permitted to apply block
discounts
Eliminated for all companies in relation
to actively traded securities
Restricted Securities
Restrictions on marketable
securities not required to
be considered in the
valuation if the restriction
terminated within one year.
Fair value measurement should include
the effect of a restriction, if the
restriction is an attribute of the security
which would pass to market
participants.
Model Risk
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SOURCE: DELOITTE
-
Assessed as a component of the fair
value measurement
Statement 157 – Valuation Hierarchy
Statement 157 provides three main approaches to measuring fair value.
Fair Value
Hierarchy
Level 3
Level 1
Level 2
Market- based
Extrapolate
Objective
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Income/FCF
Model
Subjective
FAS 157
Level 1 Inputs --- Paragraphs 24-27
Quoted prices of identical items in active
markets (full rather than thin markets)
Fungible goods
No timing distress
Options versus commodities markets
1-81
FAS 157
Level 2 Inputs --- Extrapolations from Markets or Sales
a. Quoted prices for similar assets or liabilities in active markets
or reliable component cost markets.
b. Quoted prices for identical or similar assets or liabilities in markets that
are not active, that is, markets in which there are few transactions for the
asset or liability, the prices are not current, or price quotations vary
substantially either over time or among market makers (for example, some
brokered markets), or in which little information is released publicly (for
example, a principal-to principal market)
c. Inputs other than quoted prices that are observable for the asset or liability
(for example, interest rates and yield curves observable at commonly quoted
intervals, volatilities, prepayment speeds, loss severities, credit risks, and
default rates)
d. Inputs that are derived principally from or corroborated by observable
market data by correlation or other means (market-corroborated inputs).
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FAS 157
Level 2 Inputs (Examples)
a. OTC swaps, options, and forward contracts
Extrapolations from Bloomberg databases
b. Appraisals based on similar-item sales
Such as real estate in the same neighborhood
(Supposed to be full-market estimates rather than
thin-market estimates such as a single offer)
c. Jewelry value estimates based upon markets
for components like gold in the jewelry
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FAS 157
Level 2 Enron Energy Services (EES) Example
a. Long-term contracts for power to companies such as
Eli Lili. Stripper fanatic Lou Pai was CEO of EES.
b. Enron sold 7% of EES to institutions for $130 million
c. Enron thereafter valued EES at $1.9 billion and
recorded a $61 million profit due to change in FV.
d. Within two years most of EES contracts became
liabilities totaling over $500 million. No write downs
were taken until Enron declared bankruptcy.
1-84
FAS 157
Level 2 Enron Energy Services (EES) Example
a. Fair value accounting may lead to unearned income
being recognized up front.
b. Fair value accounting may lead to inconsistencies
between valuations upward vs. valuations downward
c. Plunges CPA auditors into valuation’s stormy seas.
CPAs have no special comparative advantages here!
d. Assets may flip flop to liabilities and vice versa overnight
1-85
FAS 157
Level 3 Inputs in Paragraphs 30-32
Unobservable inputs shall reflect the reporting entity’s own
assumptions about the assumptions that market
participants would use in pricing the asset or liability
(including assumptions about risk). Unobservable inputs
shall be developed based on the best information available
in the circumstances, which might include the reporting
entity’s own data. In developing unobservable inputs, the
reporting entity need not undertake all possible efforts to
obtain information about market participant assumptions
1-86
FAS 157
Level 3 Expert Opinion and Value Models
a. Residual Income (RI) and Free Cash Flow (FCF)
Models
(Highly sensitive to terminal values & perpetuity)
(Highly sensitive to missing variables)
(Intangibles are highly volatile)
(Highly sensitive to non-stationarity)
(Competition & Law destroys excess returns over time)
b. Subjective appraisals with explicit analysis of
underlying assumptions
(Subjectivity leads to high variations in opinion)
(Moral hazard --- scandalous S&L appraisals)
(Value is so dependent upon unforeseeable events)
1-87
FAS 157
Level 3 Examples
a. Bonds of a bankrupt firm
b. Asset retirement obligation
c. Pollution abatement obligation
d. Enron’s booking of “fair value” of gas contracts
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FAS 157
Level 3 Enron “Mark-to Market” Example
a. Long-term contracts for gas to electric utilities
such as Scithe Energies.
b. Estimate gas profits over 10-20 years forward and
record present value as an asset as current FV earnings.
c. Increased gas price estimates increased value of asset
and changes in FV taken into earnings. Eventually, the
booked receivable from Scithe was $1.5 billion that
could not possibly be collected ever.
d. No write down took place until after Enron declared
bankruptcy in December 2000. Huge bonuses, however,
were paid to Enron executives all along.
1-89
FAS 157
 Determining
primary or most advantageous
market
 Assigning
and Monitoring Statement 157
hierarchy levels
 Credit
1-90
risk in valuing liabilities
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities

Allows entities to voluntarily choose to measure eligible financial
instruments at fair value (the “fair value option”)
(Exceptions for items covered by some other standards such as
consolidated entities, pensions, post-employment contracts, leases,
and financial insurance contracts)

Changes in fair value recognized in earnings. (no OCI)

Election made on an instrument-by-instrument basis

Irrevocable
1-91
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
FASB issued the FVO to:

Provide an opportunity to mitigate volatility in earnings
caused by a mixed attribute accounting model

Reduce the need for applying complex hedge accounting
provisions

Expand the use of fair value measurements

International convergence
1-92
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
Scope:
•
Recognized financial assets and liabilities (but not forecasted transactions under FAS
133)
•
Firm commitments that would otherwise not be recognized at inception and that involve
only financial instruments
•
Written loan commitments
•
Certain rights and obligations under insurance contracts or warranty obligations
•
A financial host contract in a nonfinancial hybrid instrument
•
Certain nonfinancial assets and liabilities
1-93
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
Advantages:

Eliminate arbitrary FAS 115 classifications that can be used by management
to manipulate earnings (which is what Freddie Mac did in 2001 and 1002.

Reduce problems of applying FAS 133 in hedge accounting where hedge
accounting is now allowed only when the hedged item is maintained at
historical cost.

Provide a better snap shot of values and risks at each point in time. For
example, banks now resist fair value accounting because they do not want to
show how investment securities have dropped in value.
1-94
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
Disadvantages:
Combines fact and fiction in the sense that unrealized gains and losses due to fair value
adjustments are combined with “real” gains and losses from cash transactions. Many,
if not most, of the unrealized gains and losses will never be realized in cash. These are
transitory fluctuations that move up and down with transitory markets. For example,
the value of a $1,000 fixed-rate bond moves up and down with interest rates when at
expiration it will return the $1,000 no matter how interest rates fluctuated over the life
of the bond.

Sometimes difficult to value, especially OTC securities.

Creates enormous swings in reported earnings and balance sheet values.

Generally fair value is the estimated exit (liquidation) value of an asset or liability. For
assets, this is often much less than the entry (acquisition) value for a variety of reasons
such as higher transactions costs of entry value, installation costs (e.g., for machines),
and different markets (e.g., paying dealer prices for acquisition and blue book for
disposal). For example, suppose Company A purchases a computer for $2 million that
it can only dispose of for $1 million a week after the purchase and installation. Fair
value accounting requires expensing half of the computer in the first week even though
the computer itself may be utilized for years to come. This violates the matching
principle of matching expenses with revenues, which is one of the reasons why fair
value
proponents generally do not recommend fair value accounting for operating
1-95
assets.
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
Disadvantages of Auditing FV
The purpose of this International Standard on Auditing (ISA) is to establish
standards and provide guidance on auditing fair value measurements and
disclosures contained in financial statements. In particular, this ISA addresses
audit considerations relating to the valuation, measurement, presentation and
disclosure for material assets, liabilities and specific components of equity
presented or disclosed at fair value in financial statements. Fair value
measurements of assets, liabilities and components of equity may arise from
both the initial recording of transactions and later changes in value.
1-96
FAS 159 effective in 2008
The Fair Value Option for Financial Assets and Financial Liabilities
Exclusions:






Investments in consolidated entities
Financial obligations for items such as pension benefits and other deferred
compensation arrangements
Income tax assets and liabilities
Financial assets and liabilities recognized under leases as defined in Statement
13
Deposit liabilities, withdrawals on demand, of depository institutions
Financial instruments that are, in whole or in part, a component of
shareholder’s equity
1-97
IASB Discussion Paper
IASB publishes Discussion Paper on fair value
measurements November 30, 2006 with a May 1,
2007 Deadline. Expect new standard in 2008.

The Board’s objectives in this project are to:

(a) establish a single source of guidance for all fair value
measurements required by IFRSs,

(b) clarify the definition of fair value and related guidance in
order to more clearly communicate the measurement objective,
and

(c) enhance disclosures about fair value
1-98
IASB FVO in Amended IAS 39

The European Commission has published Frequently Asked Questions providing the
Commission's views on the following questions:

Why did the Commission carve out the full fair value option in the original IAS 39
standard?

Do prudential supervisors support IAS 39 FVO as published by the IASB?

When will the Commission to adopt the amended standard for the IAS 39 FVO?

Will companies be able to apply the amended standard for their 2005 financial
statements?

Does the amended standard for IAS 39 FVO meet the EU endorsement criteria?

What about the relationship between the fair valuation of own liabilities under the
amended IAS 39 FVO standard and under Article 42(a) of the Fourth Company Law
Directive?

Will the Commission now propose amending Article 42(a) of the Fourth Company
Directive?

1-99
What
about the remaining IAS 39 carve-out relating to certain
FAS Standards Greatly Affected by FV
FAS 32 --- Financial Instruments
FAS 39 --- Derivative Financial Instruments
FAS 41 --- Agriculture
1-100
IFRS Standards Greatly Affected by FV
IFRS 2 --- Share-based payments
(Categories of assets and liabilities to be measured at FV)
IFRS 3 --- Business Combinations
1-101
IFRC 13 and Fair Value

Question
What's the status of international accounting for customer loyalty
incentive awards such as airline miles, first class upgrades, hotel
discounts, restaurant discounts, etc.?

Answer
There is a deferred revenue and liability recognition for future
cost requirement. Allocation of the original sale is to be based
upon estimated fair value of components of the sale.
1-102
IFRC 13 and Fair Value

1. The main issue addressed in the Interpretation is the recognition and measurement of
obligations to provide customers with free or discounted goods or services if and when
they choose to redeem loyalty award credits.

2. One approach used at present is to accrue an expense at the time of the sale, when the
award credits are granted. The expense is based on the costs the entity expects to incur
to supply the free or discounted goods or services. The rationale for this approach is
that loyalty awards are incidental costs of securing the first sale, which should be
recognised when that sale is made.

3. A second approach is to divide the proceeds of the first sale into two components—an
amount that reflects the value of the goods or services delivered in the first sale and an
amount that reflects the value of the loyalty award credits. Proceeds allocated to the
first component are recognised as revenue at the time of the first sale. But proceeds
allocated to the award credits are deferred as a liability until the entity fulfils its
obligations in respect of the award credits, either by supplying the free or discounted
goods or services itself when customers redeem the credits, or engaging (and paying) a
1-103
third
party to do so.
IFRC 13 and Fair Value

4. The practical difference between the two approaches is the
measurement of the liability. The first approach measures the
liability on the basis of expected costs; the second on the basis of
selling prices.

5. The Interpretation requires entities to apply the second
approach. The requirement reflects the IFRIC’s view that loyalty
awards are separately identifiable goods or services for which
customers are implicitly paying. The general standard on revenue
recognition, IAS 18 Revenue, requires separately identifiable
components of sales transactions to be accounted for separately if
necessary to reflect the substance of the transactions.
1-104
A Formula to Remember for Later in the Day

ForwardRate(t) = [1 + y(t)]t/[1 + y(t-1)]t-1 – 1

The ForwardRate(t) is the forward rate for time period
t, y(t) is the multi-period yield that spans t periods, and
y(t-1) is the yield for an investment of t-1 periods --- for
example, if 6.5% is y(t) and 6.0% is y(t-1). Thus,
ForwardRate(2), the forward LIBOR for year 2, is
calculated as follows

ForwardRate(2) = (1.065)2/(1.06) – 1 = 0.07 or 7.0%
1-105
Checklist for Valuing a Company
Compilation of Financial Information: Financial statements and
federal income tax returns for the last three to five years should
be reviewed and the information "adjusted" and/or "weighted"
to more properly reflect future operations:

Audited vs. unaudited statements to reflect accurate levels of
inventories and receivables.

Determine latest work-in-process value -- particularly where
production costs have been expensed rather than capitalized.

Delete
extraordinary or non-recurring revenues or expenses.
1-106
Checklist for Valuing a Company

Adjust for differences in cash vs. accrual methods of reporting income.

Add back any "excess" owner/employee cash compensation and fringe benefits.

Determine net fair market value for tangible assets (eg., book value vs.
liquidation value vs. replacement value of equipment, obsolete or slow-moving
inventory, supplier return privileges, credits, etc.).

Determine undisclosed and/or disputed liabilities (eg., unfunded past service
costs or multi-employer obligations for pension plans, deferred compensation
plans; incentive bonuses; stock options; potential contract or tort claims;
potential unfunded sales income or payroll tax obligations).
1-107
Checklist for Valuing a Company
Valuation:
There is usually no "magic" correct value but rather an
appropriate range of values dependent upon the "fit" of
buyer and seller and the realism of the assumptions
utilized in the valuation methodology. Also,
consideration should be given to internal expressions of
valuation (eg., buy-sell agreements, insurance
arrangements, and deferred compensation and
noncompetition agreements).
1-108
Checklist for Valuing a Company
Obtain Outside Appraisal:
A qualified business appraiser can offer insights as to
comparable sales or to appropriate valuation calculation
assumptions (eg., industry risks and capitalization rates,
interest rates, etc.) as well as helpful analyses of
alternative valuation method approaches (eg.,
discounted cash flow analysis vs. liquidation value vs.
tangible/intangible asset valuation as set forth in
Revenue Ruling 59-60 as modified/amplified by Revenue
Rulings 65-192, 65-193, 68-609, 71-287, 80-213 and 83120; etc.).
1-109
Checklist for Valuing a Company
Strategic and/or Value Added Components:

Synergies

Supplementary product lines

Operating economies and/or vertical integration opportunities

New supply or distribution avenues

Limination of price and customer competition

R&D, Patents, Copyrights

Skilled and loyal work force

No huge owner dependencies
1-110
Checklist for Valuing a Company
Reductions or Add-Ons for Contingent Events:
Sometimes, it is appropriate to reduce or supplement a calculated
value for future possible contingencies (good and bad) -- eg., labor
union problems, plan closure obligations, multi-employer pension
plan obligations, unfunded past service pension costs, product
liability exposures, tax exposures, short-term lease rights,
uncertain supply or sales commitments or credit lines, patent
expirations or other intellectual property uncertainties and/or
exposures, as well as the prospect of greater profitability from
new customers, lines, technology or endeavors which have not yet
been reflected in historical financial results.
1-111
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
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
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
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
Zillow --- http://www.zillow.com/
1-112
Banking Concerns
BIS Paper 109 --- Online Click Here
Offline Click Here
1-113
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The End
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