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July 27, 2007CFA or CFP?
The Wall Street Journal (WSJ) recently published an article, For Financial Advice: CFP or CFA?, July 8, 2007. The Certified Financial Planner (CFP) and the Chartered Financial Analyst (CFA) designations are two of the most well know financial services designations in the marketplace. To many, however, the designations seem synonymous - both deal with investments, risk, asset pricing models, valuation, security types, etc. However, while they may seem one in the same, the two designations cover the topics very differently in comprehension and application.
July 27, 2007SFAS 141R nearly final.
It appears as though SFAS 141R (Business Combinations, Applying the Aquisition Method) will be finalized by the end of September 2007. The primary changes in 141R include:
1. In-process R&D assets will be recognized as an asset and measured
at fair value. These assets will be classified as indefinite-lived
until completion or abandonment of the project. The company will begin
amortizing the asset once the project is completed, and will be tested
for impairment under FAS 142 until complete.
2. Transaction costs will now be expensed instead of included as part
of the purchase price.
3. Contingent consideration will be measured at fair value on the
acquisition date and classified as either a liability or equity. After
initial recognition, contingent consideration classified as equity
will not be remeasured, but contingent consideration classified as as
liability will be remeasured to fair value.
4. Recognize a reacquired right in a business combination as a
separately identifiable intangible asset. A reacquired right is a
right that the acquirer had previously granted to the acquiree to use
the acquirer's recognized or unrecognized intangible asset.
5. Assets held for sale should be measured at fair value and not fair
value less cost to sell.
6. Contingencies (e.g., lawsuits) should be recognize at fair value
for (a) all contingencies that arise from contractual rights and
obligations and (b) those contingencies that do not arise from
contractual rights and obligations (noncontractual contingencies) if
it is more likely than not that the contingency meets the definition
of an asset or liability.
July 17, 2007Isn't it Ironic?
Will the collapse of the sub-prime market affect the Dow? I find it ironic that the day after the Dow breaks 14,000 is the day the Bear Stearns reports that "one of its funds was worth nothing and another worth less than a 10th of its value. According to the Wall Street Journal this morning, "the pain experienced by Bear...is being felt by investors around the world. History has shown that relatively illiquid securities, based on an uncertain value of their underlying holdings (e.g. declining home values) are subject to a rapid collapse (e.g. the S&L crisis). Fear plays an important role in value as the uncertainty can very much feed upon itself and create a lopsided market (too many bears - more irony). So might there be parallels to other markets that are highly dependent on relatively illiquid investments in private entities (e.g. private equity)?
July 16, 2007Make Mine An Apple
The story is quite simple. Five years ago today Microsoft's stock was trading at $22.675 per share and has climbed all the way to $29.97. Apple closed at $7.17 on June 22, 2002 and finished Friday at $132.30. iPhones, iPods and MacBook Pros vs. Vista - not really even a fair fight. Steve Jobs has demonstrated an amazing ability to build value in his organization over the past five years and unless you are a five year shareholder of Microsoft stock or an equity analyst you probably don't realize how marginal the returns have been. However, as we all know value is based on future expectancy, which stock would you buy today?
July 05, 2007A Venture Backed Economy?
Recently, there has been a slew of blogs and articles examining the unprecedented success of private equity firms. While the success of these firms is very apparent, it is more difficult to quantify the impact they are having on the economy as a whole. Could their success have a direct impact on the average American or is it simply a lucky few reaping the rewards?
