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This paper makes the point that accounting is not necessarily deficient in omitting intangible assets from the balance sheet: there is also an income statement, and the value of intangible (and other) assets can be ascertained from the income statement. The paper is instructive, not only to those concerned with accounting issues, but also to analysts attempting to value firms with assets missing from the balance sheet.
Columbia Business School Professor Stephen Penman is an author of this Occasional Paper.
This paper challenges the view of primacy of a balance sheet-based financial reporting model and its extension into a full fair value accounting model. The paper claims that accounting concepts and measurement attributes have to be aligned with the inherent economic logic of an activity if faithful representation is to be achieved.
Andreas Bezold, a former chief risk officer and deputy CFO of a large German Bank, authored the paper.
The policy brief on the root cause of the current financial crisis is published in Ideas At Work of Columbia Business School.
This paper studies the application of fair value accounting in bank holding companies in the United States with the purpose of evaluating the effects of expanding fair value accounting in the banking industry. The primary conclusion of the analysis is that expanding fair value accounting is not likely to significantly improve the information in bank financial statements and, in some cases, may introduce distortions that reduce accounting quality.
This paper lays out principles under which fair value accounting is appropriate. Accordingly, the pros and cons of fair valuing bank loans, core deposits, inventories, investments in subsidiaries, insurance contracts, performance obligations, and debt, to name a few balance sheet items, are resolved, leading to formal financial statement templates for the application of fair value accounting in specific industries.
Doron Nissim and Stephen Penman explain why a new market-based approach to valuation may not be the best one for all industries.
The FASB adopted a balance sheet-based model of financial reporting about 30 years ago, and this model has been gradually expanded and solidified to become the required norm around the world today. Currently, the FASB and the IASB are re-considering their Conceptual Framework, and this is the right time to have a much-needed debate about the proper conceptual foundations of accounting.
Professor Ilia Dichev of the Ross School of Business at the University of Michigan has been commissioned to prepare this Occasional Paper.
This paper demonstrates that the current FASB cash flow statement classification rules are simplistic and wrought with internal contradictions, in part because they do not distinguish between financial and non-financial enterprises. Among other recommendations, the paper favors changing the classification rules to (1) require income tax allocation in the cash flow statement; and (2) distinguish between financial and non-financial enterprises.
Hugo Nurnberg is Professor of Accountancy at the Zicklin School of Business, Baruch College, City University of New York.
This White Paper lays out a comprehensive solution to the problem of accounting for claims based the performance of a firm's stock price. The accounting covers employee stock options, stock appreciation rights, put and call options, convertible debt and preferred stock, warrants, and other hybrid securities.
London Roundtable Discussion: Fair Value and the Banking Industry
Academic Roundtable Discussion: Fair Value Policy
Debt vs. Equity Project Panel Discussion
CEASA has recently received gifts of $125,000 each from Morgan Stanley and General Electric. In 2003, a founding gift from Morgan Stanley and GE was instrumental in creating the center, which has since produced a body of independent research for stakeholders across academia, industry, and government. With Morgan Stanley’s and GE's renewed pledge of support, CEASA is well-positioned to lead the next chapter of dialogue around security analysis and accounting issues and to generate practical policy solutions.
CEASA Director of Research, Suzanne Morsfield, awarded research grant from the SWIFT Institute to report on “The Future of Financial Data Standards” with co-authors Stephen Yang of Stevens Institute, and Susan Yount of Workiva.
CEASA co-founder, Stephen Penman, releases new Occasional Paper, “The Value Trap: Value Buys Risky Growth”, co-authored with Francesco Reggiani of Bocconi University.
Submit a Paper to CEASA
CEASA welcomes submissions for online publication of papers analyzing and proposing solutions to current issues surrounding accounting and/or security analysis policy.