Sample Reports - Click on the title to see the full report.
Volume 15, No. 14 - Statement 157: Making Fair Value Reporting Work
Soon, all financial statements will bear disclosures with strange new terminology. Investors will be grappling with the meaning of things like "Level One inputs, Level Two inputs" and "Level Three inputs."
What does that mean? Are they references to CFA examination results? Video game challenges? Different circles of hell? None of the above. (Although some reporting firms might conclude that they’re the latter.) The answer is that they’re references to a new broad-reaching accounting standard : Statement No. 157, "Fair Value Measurements." That standard will change the way many firms measure and report the fair value of assets and liabilities in their financial statements. It comes with its own warning system indicating when the reported numbers might deserve more investor skepticism: that’s the message in those different "input levels." Understanding what’s underneath those input level warnings is a necessary skill for investors to build before they start dealing with the warnings.
Volume 16, No. 9 & 10 - S&P 500 Benefit Plans, 2006: Will Pension Panic Resurface?
A few years ago, pensions were foremost in the minds of most investors as the oft-cited "perfect storm" of low interest rates and miserable asset performance swelled the unfunded obligations of pension plans. Other postemployment benefit (OPEB) plans didn’t generate nearly the same level of investor concern, despite the fact that they were also negatively affected by lower interest rates. Because OPEB plans are rarely funded, there was little cause for concern from the falling stock markets - and because OPEB plans put more discretion in the hands of the employer/sponsor than pension plans, investors shrugged. If things got bad enough, managers could always take a hard line on the plans and terminate them.
Since those dark days for benefit plans, the accounting for them has changed - neatly slicing $152 billion from the stockholders’ equity of 309 S&P 500 companies, and mostly increasing their stated leverage. The new accounting - Statement 158 - did nothing to change the way a benefit plan’s funded status would be counted; it merely put that funded status on the sponsor’s balance sheet, whether overfunded or underfunded. That funded status improved again at year end 2006 - despite declining contributions to the plans. As share buybacks increased in popularity, benefit plan contributions decreased. What might give investors pause right now: many plans have significant asset allocations to alternative investments, which might be getting rocked in the current market tumult, prompting the question of renewed contribution increases later.