Financial reporting

The Securities and Exchange Commission's Advisory Committee on Improvements to Financial Reporting has released a progress report on its work to date.

Senator Jack Reed, D-R.I., has written letters to the heads of the Financial Accounting Standards Board and the International Accounting Standards Board asking how to improve the transparency of the types of assets linked to subprime mortgages.

The Foundation for Financial Planning has awarded nine new grants totaling $565,272. The grants went to:

Are you feeling overwhelmed by the task of sorting through a multitude of mutual funds to offer clients? Think of narrowing down the appropriate funds as a funneling process.This technique works for Sean Bergin, managing director of Citrin Cooperman Wealth Management Co., based in Philadelphia. For him, the key is to slim the selection down via a handful of requirements.

The challenges for creating an effective executive compensation package are many. The executive wants more pay but less taxation, while the company wants incentive-based benefits that bind the executive more closely to the company.The traditional solution for these needs is a nonqualified stock-option program. The executive gets both a potentially high payout and the ability to time the taxation of the payout. The employer likes the program because stock options are a cashless, incentive-based package with vesting restrictions.

Two accounting statements from the Financial Accounting Standards Board could have a large impact on accounting firms and their business clients, said accounting firm BDO Seidman.

The Governmental Accounting Standards Board has a host of complex projects on the docket for 2008. The first half of the year will see a few new documents, while the second half will entail mostly discussions.

Are your clients pointed in the right direction? Gail Cunningham of the National Foundation for Credit Counseling recommends that people review where they are in order to determine where they’re headed, as well as encouraging them to consider implementing certain tips. The NFCC was founded back in 1951 and is the nation’s largest and longest serving national nonprofit credit counseling organization. She says that a few simple steps can make a dramatic difference in one’s financial life.

The Financial Accounting Standards Board has decided to issue final guidance that would defer for a year the effective date on which private and public entities would have to account for fair value measurements.

The American Institute of CPAs and Fiduciary360 have published the U.S. edition of a handbook for investment advisors.

Deloitte Financial Advisory Services has introduced a service that issues fairness opinions on the consideration offered to companies on financial deals such as mergers, acquisitions, going-private transactions and divestitures.

The American Institute of CPAs has written to the Treasury Department and the Internal Revenue Service about proposed regulations for automatic contributions to 401(k) plans, as well as cafeteria plans.

Did you know that today most investment advice zeroes in on the development of portfolios that are on the “efficient frontier,” which is one where no added diversification can lower a portfolio’s risk for a given return expectation? At least, that’s according to my friend Larry Swedroe who is the principal and director of research for both Buckingham Asset Management and BAM Advisor Services in St. Louis. He’s also the author of the recently released Wise Investing Made Simple plus a half dozen other best sellers. His words are deemed golden. In any event, working with this efficient frontier, Swedroe says that investment advisors can then tailor portfolios to the individual investor’s unique situation but unfortunately far too many investors and their advisors focus only on the risks of the investments themselves. Swedroe believes that when developing the overall financial plan, there are other risks that are important to consider and that not integrating the management of these risks can cause the best investment plans to fail. These other risks are human capital (which means wage earning), mortality, and longevity. Taking these one at a time, Swedroe notes that as we age and accumulate financial assets and the time we have remaining in the labor force decreases, the percentage of human capital to financial assets shrink. “This shift over time should be considered in terms of the asset allocation decision.” He also considers that with all else being equal, people with a high earning capability have a greater ability to take more financial risk because ether can moiore easily recover from losses. “However, they also have a lower need to take risk.” As to mortality, he believes that protecting the capital via the purchase of life insurance should be part of the overall financial plan. “Life insurance is the perfect hedge for mortality risk as its return is 100 percent negatively correlated with the human capital asset.” Looking at longevity risk, which he defines as the risk that you will outlive the ability of your portfolio to support your desired lifestyle, he suggests that investors might consider purchasing annuities at around 65 years of age and certainly buying them before reaching 85. All in all, in general younger investors with more labor capital should invest more in stocks than older investors and that individuals with safer human capital have a greater ability to invest more in risky assets. Of course, those whose human capital more highly correlates with equity risks should allocate more to safer fixed income investments. Swedroe also believes that individuals should diversify their human capital, minimizing investments in assets that correlate with their labor income and should hedge their human capital risks through the use of insurance contracts such as disability, life and long-term health care. Finally, individuals should consider hedging their longevity risk through the use of payout annuities.

Accountants Mike Karlins and Glea Ramey have purchased the Woodlands, Texas office of UHY Advisors TX and opened an independent firm, Karlins & Ramey LLC, CPAs.

Small companies have been copying a method to control insurance costs and reduce taxes that used to be the domain of large businesses: setting up their own insurance companies to provide coverage when they think that outside insurers are charging too much.Often, they are starting what is called “a captive insurance company” — an insurer founded to write coverage for the company, companies or people who founded it.

65 RETIRING AS RETIREMENT AGEAmericans age 50 and over are increasingly disregarding age 65 as the time to stop working, according to a poll conducted by Penn, Schoen & Berland Associates and commissioned by Experience Wave, a project that advances federal and state policies to keep older adults engaged in work and community life.

Completing their first major joint project, the Financial Accounting Standards Board and the International Accounting Standards Board have agreed on two new standards on accounting for business combinations.FASB member G. Michael Crooch termed the new guidance “a significant convergence milestone [that] improves reporting while eliminating differences” between the standards that were previously promulgated by the two boards.

On my first visit to Washington, D.C., I almost missed the Jefferson Memorial because there were so many other memorials to look at. The same can be said of Financial Accounting Standards Board projects, because several projects are currently in progress. However, one project, referred to as the FASB Codification, is a "must see" because it is sure to create significant changes for anyone who researches accounting or financial reporting issues.The FASB Codification project is designed to present all of the relevant U.S. accounting and financial reporting literature in a single, authoritative, integrated offering in an online, real-time database. That is, the goal is to provide all generally accepted accounting principles in one location for financial professionals to access and use.

So, let me ask you something. Do you believe that a person's approach to financial planning should be based on the future well-being of the family or on meeting a set of financial objectives? By the same token, do you really want to reach financial independence? Although these two questions appear relatively simple on the surface, the answers you may give can vary greatly depending on your sex. At least, that is what the results of a survey by the Desjardins Group, Canada's largest integrated cooperative financial group uncovered. This was a survey taken in the fall of 2007 among a group of 1,400 respondents that included an equal number of women and men. It was designed to measure the differences between the two groups’ concerns and attitudes on financial planning. The survey had 40 questions that covered ease of discussing financial planning with an advisor, the importance given to the various aspects of financial planning, and the understanding of financial planning vocabulary. "Even if the average spread between men's and women's answers is relatively narrow (seven points), the trend that emerges from our study shows a significant difference in terms of the approach,” says Eric Lemieux, vice-president, Wealth Management at Desjardins. “Women see financial planning as a whole that involves the well-being of the family, while men have a more compartmentalized approach, based on fixed objectives. This observation confirms the accuracy of our orientation, which is based on personalized, value-added service,” According to the survey, women appear more concerned about the well-being of others and more worried than men about the idea of being a burden on the family. In effect, they are more concerned than men by such things as financing the children's education, the importance of having a budget, and increasing the value of investments in the short term. They are also more aware than men about the importance of having a notarized will and a health mandate in case of inability. Desjardins notes that men's targeted approach comes across mainly in their greater concern for reaching financial objectives, for the tax consequences of their financial decisions, and for their retirement planning strategy. In fact, there are also more men than women who say they are solely responsible for their decisions and are consequently less inclined to ask for advice. As to the language of financial planning, this also seems more familiar to men. They were more likely to understand expressions such as "investor profile," "investment horizon,” and "net worth.” However, keep the following in mind: the more general concept of "financial independence" is understood equally well by women as by men, while women are more likely than men to desire such independence. "This survey is a tool that can help Desjardins Financial Planning Advisors to better understand members, both men and women, and to better accompany them on the path to financial security for themselves and their families," adds Lemieux, speaking for an organization with overall assets of $147 billion, as at September 30, 2007. They must know what they are talking about, eh?

The Financial Accounting Standards Board has agreed to defer the effective date of Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," for nonpublic entities to years beginning after Dec. 15, 2007.