Today In Finance

Revenue Recognition: Will a Single Model Fly?

2009-07-02T12:00:00Z

Elements unique to long-term contracts pose a challenge for FASB and IASB in their bid to create one standard covering all customer relationships. Can U.S. and international accounting standard-setters realize their dream of fashioning a single revenue-recognition standard that would apply to all customer contracts? While the answer won't be known for some time, it's safe to say there are hurdles on the road ahead. In a joint discussion paper issued last December in which the Financial...(read more)

Twice the Effort for a Revolver: A Good Deal

2009-07-02T11:00:00Z

It took some doing, but Ducommun is among the few companies able to recently acquire a five-year line of credit with decent terms. Joseph Bellino, CFO of Ducommun Inc., has a new, rare prize he can use to show customers and suppliers that aerospace-parts maker is on solid ground, an envious position to be in during this recession. A recently signed deal with five banks for a five-year, $120 million unsecured credit line shows "that we're going to be around to ship products," he says...(read more)

CFOs on the Move: Week Ending July 3

2009-07-02T09:00:00Z

Facebook, eGistics, Spansion, Charles & Colvard, NeuStar, Cumulus Media, QL2 Software, Century Payments, SeaBright Insurance Holdings, Aspen Technology, Akebia Therapeutics. David Ebersman is the new head of finance at social-networking site Facebook. Ebersman, formerly executive vice president and CFO at Genentech, will start at his new position in September. Hosted document-management company eGistics Inc. has appointed Timothy Kick to head the finance function. Kick comes to the firm from...(read more)

Treasurers Cling to Safety

2009-07-01T15:00:00Z

When it comes to short-term investments during the downturn, treasury departments see protecting their principal, rather than making money, as a top priority. Burned by the credit crisis, finance executives are in cash-hoarding mode. Liquidity is top of mind as companies' ability to quickly get outside financing has shrunk. Nearly three-quarters of companies increased or maintained their cash balances this year, according to a new survey by the Association for Financial Professionals. Moreover...(read more)

Will Whopping Goodwill Hits Hurt Deals?

2009-07-01T13:00:00Z

The big question for many investors is whether the backlash from past mergers will cool deal valuations going forward. The hits just kept coming last winter, as company after company reported huge goodwill impairment charges along with their 2008 earnings. Among the biggies: Conoco Phillips's $25 billion writedown and CBS Corp's $14 billion one, plus multi-billion impairment charges from Citigroup, Regions Financial, and AIG. A billion here and a billion there, and it starts to...(read more)

Banks Take Aim at Revolvers

2009-07-01T11:00:00Z

With lenders shrinking the length and size of their commitments to companies and charging more, liquidity risk is rising. Companies are finding themselves in a liquidity squeeze. At a time when financial markets and counterparties are companies' liquidity with a sharpening eye, a large swathe of lenders is tightening access to revolving lines of credit, recent data shows. Indeed, banks are "universally adjusting" the terms on revolving lines of credit, according...(read more)

Leadership in Finance: ICE Energy's David Schwarzbach

2009-06-30T17:00:00Z

The unlikely CFO moved from agriculture to activist to financial anchor for a burgeoning technology company. It's not every corporate finance chief who authors an article in Scientific American opining on Iran's nuclear weapons program. But David Schwarzbach didn't take an ordinary route to the CFO seat. The 40-year-old finance chief of ICE Energy studied physics and ecology - not finance - as an undergrad at the Davis campus of the University of California, a haven for scientific...(read more)

Disciplinarians' Dilemma

2009-06-30T14:00:00Z

Derided as enemies of innovation, CFOs can, in fact, be its valuable friends. In a 2000 interview with CFO, business guru Gary Hamel claimed that finance executives are the enemy of innovation. And that was when times were good. Today nearly all CFOs have a mandate to conserve cash, and that intensifies the pressure to put a cap on corporate creativity. Indeed, a new McKinsey study finds 40% of companies surveyed are actively seeking to reduce research-and-development costs and reducing the number...(read more)

Green Counters

2009-06-29T15:00:00Z

Sophisticated tools for carbon-emissions accounting are coming to market. But are U.S. companies ready for them? As a company that sells playground equipment to publicly funded parks and schools, Playworld Systems risks any number of nasty falls. It has to worry not only about governmental agencies that try to protect children from toxic materials but also about community groups that are increasingly using their purchasing power to push eco-friendly agendas. So the company decided that it needed...(read more)

Citigroup Ready to Swallow a "Tax Poison Pill"

2009-06-29T09:00:00Z

In its recently announced stock swap deal with the government, Citi is looking to keep a poison pill handy to prevent a technical change of ownership. Citigroup announced the finalization of a definitive agreement with the U.S. government on June 10, and accordingly, will now launch its long-awaited exchange offers for its publicly held convertible and non-convertible preferred and "trust" preferred securities. In addition, the government will exchange a portion of its preferred securities...(read more)

GE,GE Capital: Parting Company?

2009-06-26T14:00:00Z

Will the Obama administration's reforms of the financial system hurt retailers and manufacturers with lending arms? The talk had become so fevered that on June 22nd Jeffrey Immelt, General Electric's embattled boss, sent out a memo to all staff to quash it. "GE is and will remain committed to GE Capital," he insisted. These words of reassurance were prompted by the financial-reform plan the Obama administration had unveiled earlier in the month, which many saw as heralding the dismemberment...(read more)

Speed Bumps for Early XBRL Filers, Users

2009-06-26T13:00:00Z

FASB is trying to overcome a mismatch between its new codification of accounting standards and data-tagged financials. That could present communications problems for CFOs. A solution is said to be coming soon to a thorny technical issue that had threatened to temporarily render electronic financial reports tagged in eXtensible Business Reporting Language less useful than had been hoped. The source of the problem is the Financial Accounting Standards Board's new codification of accounting standards...(read more)

Leadership in Finance: CDW's Ann Ziegler

2009-06-26T13:00:00Z

The CFO tries to help her staff manage in uncertain times by explaining the logic behind the numbers. Major changes began at CDW well before the market meltdown of last fall. Formerly listed on the Nasdaq, the seller of computer hardware, software, and services went private in October 2007, after the credit crunch had begun but nearly a year before the economic crisis exploded last September. The company, which reported revenue of $8.1 billion in 2008, was bought by the Chicago private equity firm...(read more)

The Recession and Pay: the Quiet Americans

2009-06-26T13:00:00Z

Employees are proving stoical in the face of pay cuts and compulsory unpaid leave. Back when times were better and the newspaper industry wasn't fighting for dear life, reporters at the Cleveland Plain Dealer would regularly grumble at the measly pay increases their union negotiated. Last month, when the union announced it had negotiated a 12% pay cut in exchange for a promise of no lay-offs, there was applause. "It took me aback," says Harlan Spector, a medical reporter and one...(read more)

AIG Sells Shares to Fed: Papa's Little Dividend?

2009-06-25T18:00:00Z

The New York Fed has agreed to get involved in the life insurance business by investing $25 billion in two special-purpose vehicles. In a move aimed at cutting American International Group's $40 billion debt to the Federal Reserve Bank of New York by $25 billion and setting up two AIG life insurance giants as initial public offerings, the N.Y. Fed has agreed to a debt-for-equity swap done via special-purpose vehicles. Under the agreement announced today, AIG will place the equity of American...(read more)

CFOs on the Move: Week Ending June 26

2009-06-25T17:00:00Z

CBS, Wyndham Worldwide, Comverge, F.N.B., Noble Energy, Unum Group, Workshare, Exar, Signet Solar. CBS Corp. has announced the promotion of Joseph Ianniello to CFO, effective July 20. He has been deputy CFO since November 2008. He takes over from Fred Reynolds, who is retiring . Virginia Wilson will be leaving hospitality company Wyndham Worldwide Corp., where she is CFO. The company has started a search for her replacement, and she will stay on through the third quarter to aid in the transition...(read more)

The Fair-Value Deadbeat Debate Returns

2009-06-25T16:00:00Z

On hiatus while other fair-value questions were debated, the hotly-contested issue of why companies can book a gain when their credit rating sinks has returned to center stage. A new discussion paper released last week by the staff of the International Accounting Standards Board has revived an old, but still fiery fair-value controversy. At issue: the role of credit risk in measuring the fair value of a liability. According to the paper's opening statement: the topic has "arguably ... generated...(read more)

Changes on the Way for Target Date Funds?

2009-06-24T12:00:00Z

Regulators are eyeing the popular retirement plan options, which recorded surprisingly poor results last year. For a while now, target date funds have seemed like a good option for retirement plan investors, many of whom don't want to sort through dozens of funds and don't know how to determine the right mix of investments to suit their retirement needs or their risk tolerance. Instead, plan participants could simply choose a fund based upon their retirement date, and the actively...(read more)

International Standard Setters Have Their Say on MD&A

2009-06-23T16:00:00Z

Although the IASB's first proposed guidance on management commentary purports to set up best practices, some board members think it's superfluous. The promulgator of International Financial Reporting Standards today weighed in with its first proposal for what companies that use IFRS should include in the management commentary that accompanies their financials. But some members of the International Accounting Standards Board don't think there's a clear need for the guidance...(read more)

Study: Free-Cash Rise May Signal Start of Economic Turn

2009-06-23T13:00:00Z

But without revenue strength, cost cutting and tough debt collection can only go so far. The first year-long improvement in free-cash margin since December 2007 suggests that non-financial public companies "are in the process of turning the corner in terms of financial performance," according to an upcoming research report on over 3,500 companies by the Georgia Tech Financial Analysis Lab. For the twelve months ended in March, free cash margin improved to 4.60%, up from the 4.12%...(read more)

Another Fair Value Rule Tweak Is in the Works

2009-06-22T10:00:00Z

This time, FASB is hoping to clarify the rules on valuing "alternative" investment vehicles. The Financial Accounting Standards Board (FASB) is proposing another in what has become a regular series of amendments and clarifications to its landmark pronouncement, FAS 157, Fair Value Measurements . The latest amendment/clarification, issued on June 8, is in the form of a FASB Staff Position - FSP FAS 157-g, Estimating the Fair Value of Investments in Investment Companies That Have...(read more)

CFOs on the Move: Week Ending June 19

2009-06-19T15:00:01Z

Yahoo, RecycleBank, Duke Energy, Merisel, Host Analytics, XOJET, Entech Solar, LifeVantage, Pepco Holdings. Tim Morse has been appointed to the top finance spot at Yahoo. Previously, he was CFO at semiconductor company Altera Corp., and he worked at General Electric for 15 years. John Bax has been named CFO at RecycleBank, a recycling rewards program. Bax headed finance at Sentient for four years, and before that was vice president of planning and analysis at Wal-Mart Stores. Duke Energy Corp. has...(read more)

KPMG Should Be Tougher on Testing, PCAOB Finds

2009-06-19T15:00:00Z

The Big Four audit firm was cited for not ramping up its tests of some clients' assumptions and internal controls. KPMG did not show enough skepticism toward clients last year, according to the Public Company Accounting Oversight Board, which cited the Big Four accounting firm for deficiencies related to audits it performed on nine companies. The deficiencies were detailed in an inspection report released this week by the PCAOB that covered KPMG's 2008 audit season. The shortcomings focused...(read more)

Credit-default Swaps and Bankruptcy: No Empty Threat

2009-06-19T15:00:00Z

CDSs are pitting firms against their own creditors. Six Flags, a theme-park operator, filed for Chapter 11 bankruptcy protection on June 13th, bringing its long ride to reduce debt obligations to an abrupt halt. The surprise was that bondholders, not the tepid credit markets, stymied the restructuring effort. Bankruptcy codes assume that creditors always attempt to keep solvent firms out of bankruptcy. Six Flags and others are finding that financial innovation has undermined that premise. Pragmatic...(read more)

Financial Reform: New Foundation, Walls Intact

2009-06-19T15:00:00Z

The president's financial overhaul is a curious mix of audacity and timidity. Even Merton Miller, a Nobel prize-winning economist with a passion for financial arcana, found it "deadly dull." But if ever there was a week when financial regulation set pulses racing, this was surely it-at least for those too young to remember the great reforms of the Depression. Having spent much of the past year trying to prevent all-out financial collapse, America's leaders are now turning their...(read more)