Investopedia.com discusses how to read 'footnotes'.

"The composition of the board of directors says a lot about corporate management and governance. A company loses credibility if its board is stacked with insiders that rubber stamp accounting and compensation issues that were decided by the CEO."

Greekshares.com discusses efficient market hypothesis.

"But if markets are efficient and current prices fully reflect all information, then buying and selling securities in an attempt to outperform the market will effectively be a game of chance rather than skill!"

Buy and Hold. Professor Bainbridge says that Martha Stewart must be kicking herself now. ImClone stock recently closed at $79.75.

What you may not remember is that Martha sold her 3,928 ImClone shares at an average price of $58.43. if she had held on, she'd be a free woman and about $8000 richer. Heh.

MSNBC News discusses the relationship between stock options and tech profits.

"Stock options drove the whole tech boom because companies could use a free, unexpensed incentive,” Coleman said. “But today executives are stepping back and asking what sort of compensation makes the best sense for the company, and in many cases that’s not stock options."

The The Motley Fool discusses the best stock options model. Bill Mann argues that the perfect model doesn't exist. But the one we have now falls substantially short of adequate in its disclosure of information to shareholders about the impact of stock option grants on their investments. He address a few of the myths of expensing opponents, then he discusses an appropriate treatment of stock options.

All other forms of derivatives have an accounting treatment on the balance sheet, employee stock options have none. It would be far more instructive to know what the derivative liability would be in a mark-to-market entry on the liability ***account*** with corresponding credits. In this way, investors can see the contingent potential exposure to options that at present actually exists as a form of off-balance sheet financing. Companies extend to employees the opportunity to purchase shares at a price -- a form of liability for the company since it cannot renege on this obligation. All adjustments would trigger credits or debits from the income statement.

This CNet.comarticle from last year says that AOL faced some tough accounting decisions in regards to how they report some of their advertising revenue.

AOL said the SEC has told the company that the agency's "preliminary view" is that the revenue should not have been recorded as advertising revenue but as a reduction in costs of AOL's $800m repurchase of its stake in AOL Europe from Bertelesmann.

This Reuters.com article discusses a proposed new accounting rule set to hit the international rule books that has several European institutions in an uproar. The proposed rule deals with the reporting of derivatives and while it wouldn't immediately affect our FASB standards, the day when international standards are formed and accepted draws closer.

The new IAS 39 forms part of the International Accounting Standards Board's revised global rule book, which is set to be adopted by the European Union's listed firms next year.

Fiercely opposed by many European banks and insurers, it will require companies to book all derivatives and some of their major assets at market value and could send their profits on a roller-coaster ride. For firms sitting on over-valued investments in shares and bonds, it could lead to big losses.

In an article on Forbes.com, Dr. Vahan Janjigian describes both sides of the argument about expensing stock options and offers his opinion:

"Those who favor the FASB's proposal say it will improve accounting honesty. Yet the truth is that expensing options before they are exercised obscures economic reality. Whether the accounting is done for financial purposes or tax purposes, the honest thing to do is to require expensing only when there is an expense, i.e., when the option is exercised. The FASB's proposal merely kowtows to those who want to punish corporations for the excesses of the 1990s. It does little to serve the interests of shareholders."

IPO. According to CNNMoney, Google has finally filed for an IPO with the SEC (worth $2.7 billion). In the filing, Google disclosed its financial numbers.

In the filing, Google said that it generated revenues of $961.9 million in 2003 and reported a net profit of $106.5 million. Sales rose 177 percent from a year ago although earnings increased by just 6 percent.
For the first quarter of 2004, Google reported sales of $389.6 million, an increase of 118 percent from a year ago. Net income was $64 million, up 148 percent from the first quarter of 2003.

Earnings Management. Forbes.com has a good article on the five most common techniques used in earnings manipulation. Techniques addressed are Accelerating Revenue, Delaying Expenses, Accelerating Expenses, Off Balance Sheet Accounting and Pro Forma EPS.

The article may not come from the most credible source, The Motley Fool, but the discussion describing the magnitude of cashflow Microsoft creates through stock options is very interesting. Why Microsoft's Stock Options Scare Me.

Forget Windows 2000. As far as I can tell, the single most lucrative product Microsoft sells is its own stock. Microsoft receives almost as much cash inflow from the stock market as it does by selling goods and services...Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market last year (fiscal year ended July 1999), tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive.

Stock Options. Technology companies would take the largest hit if the FASB Requires Expensing of Stock Options. A Yahoo Finance article shows the effect the reporting change would have made on various companies' earnings had the rule been imposed in 2003.

Technology companies top the list of businesses whose earnings stand to be hit hardest by a decision by the Federal Accounting Standards Board to require companies to treat stock options as expenses.

Stock Options. Can FASB Prevail? An article from the Wharton School at U Penn discusses the debate about employee stock options.

When the Financial Accounting Standards Board (FASB) recently announced it may require companies to recognize the value of stock option-based compensation by expensing the value on the income statement (current regulations permit footnote disclosure in financial reports), it appeared to be ready to resolve a contentious issue. But the proposal has generated a war of words, pitting heavyweights like Alan Greenspan and Warren Buffett – who favor the expense model – against powerful opponents like SEC Commissioner Paul Atkins and Louisiana Rep. Richard Baker, chairman of the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises...

Demise of APB. It was difficult to find anything comprehensive but the one sentence I did find was on this website. The relevant sentence is: "Also, the demise of the APB is often attributed to the failure to build a consensus among users and others." If you read the article, it's sort of counterintuitive - one the one hand, the APB required a supermajority to pass laws, but on the other hand, the article muses that there still was not enough assent.

CNN Money reports that Google is considering an Initial Public Offering (IPO).

While an IPO may bring certain benefits -- like raising capital -- it also brings more scrutiny and the added expense and legal requirements of filing with regulators.

But for Google, which has been very tight-lipped about its current or future business plans, its own growth may have forced its hand.

Securities regulations mandate that once a company reaches a certain size, it must publicly disclose its financial information. So in the case of Google, it's more of a "why not?" decision, said Peter Astiz, a securities attorney and partner with law firm Gray Carey.

Google faces a delimna, as the owners want to keep their tight grip on the operations, but may have to succumb to government regulations and employees with stock options interest to cash in on the public's interest.

Revenue Recognition. The New York Times reports that Computer Associates has ended an internal investigation into its accounting practices. To do so, they restated $2.2 billion in sales that were improperly booked during 1999 and 2000.

Computer Associates acknowledged today that it had backdated $1.8 billion in contracts in the fiscal year ended March 2000, nearly 30 percent of its total sales. But the company emphasized that the sales were real and that the problem related to the timing of revenue recognition, not to falsifying contracts.

Why do Firms Smooth Earnings? This link provides access to a research paper that argues that "information asymmetry" explains why a firms smooth reported earnings.

The key to the analysis is that, when the volatility of the firm's earnings is high, private information about the firm is more valuable, and more investors become informed. This means higher expected losses for shareholders who trade for liquidity. Shareholders, therefore, abhor earnings volatility and pay less for firms with higher earnings volatility.

The manager responds by smoothing earnings to affect market perceptions of earnings volatility and hence the firm's stock price. However, the market understands this in equilibrium and is not fooled. This means that there is no overall benefit from smoothing in equilibrium. The phenomenon persists nonetheless because not smoothing when the market expects smoothing can result in the firm's stock price being lower than its true value. It is interesting that what causes smoothing in our analysis is the manager's concern about long-term stock price performance rather than just the current stock price. A "myopic" manager would simply inflate earnings.

The Atlanta Business Chronicle reports that NDCHealth Corp. has has received notification that the Securities and Exchange Commission is conducting an informal inquiry relating to revenue recognition matters.

On April 8, the first of several suits seeking class action was filed alleging NDC issued quarter after quarter of strong financial results, but failed to disclose that the financial results were only made possible through improper revenue recognition practices in violation of Generally Accepted Accounting Principles.

Stock Options. The WSJ [subscription required] says there's a lobbying blitz gaining momentum on Capitol Hill to scuttle FASB's stock-option accounting proposal.

A House bill, introduced by Rep. Richard Baker (R-La.) has more than 100 bipartisan co-sponsors. It would prohibit the SEC from enforcing the new accounting rule until the SEC studies its economic impact. It would also require companies to count as expenses only the cost of options offered to their top five executives, rather than the cost of all options, which frequently are offered to far more employees.

Cash Flow. This New York Times article discusses the importance of cash flow management and 10 different things a company can do to increase cash flow.

Maintaining smooth cash flow requires juggling nearly every facet of a business, from staying on top of accounts receivable, to extending lines of credit, to managing inventory. The essence of successful cash flow management is regulating the money flowing in and out of your business. Increasing your cash flow reduces the amount of fixed capital that you need to support the given level of your business. An increased, consistent cash flow also creates a predictable business pattern, making it easier to plan and budget for future growth.

Stock Options Anyone? CFO.com reports that fixed price stock options may be a thing of the past.

Four years after the new economy ran out of gas, are companies finally ready to abandon fixed-price stock options? The impact of expensing, underwater options, and shareholder attempts to block companies from issuing new shares appear to be driving many to do so.

MSNBC provides this story in which the government apparantly got overcharged by defense contractor Northrop Grumman.

The accounting problems — which occurred through the end of the Cold War — are revealed in internal documents reviewed by the Journal, but that have not been made public.

The [WSJ] story also quotes a 1986 memo sent to 37 managers that said when discussing accounting faults: "We can't tell the truth."

All of this done in the spirit of maintaining eligibility to be a government contractor. Should be interesting to see how these allegations would affect future Northrop's contracts.

Some major adjustments will have to be done to Shell’s financial statements.

Reserves constitute an oil company's most valuable asset, and any reclassification of them into less certain categories is a major concern for investors.

Releasing a summary of an internal audit of the estimates, Shell announced what it said was a near-final estimate that 4.85 billion barrels were downgraded from "proven," or 700 million barrels more than its previous estimate. Shell, the world's third-largest public oil company in terms of market capitalization, said in January that it was downgrading 3.9 billion barrels in reserves, or about 20 percent of its total holdings. A March announcement brought the total downgraded to 4.15 billion barrels.

(Shell) said internal reserves auditing had been the responsibility of a single, part-time former Shell employee who had no power to enforce compliance with the company's rules and those of the SEC.

It's interesting that something as important as the auditing of internal reserves was left to a single part-time employee.

International Standards. The Accounting Web reports the chairman of the International Accounting Standards Board pushes for a global set of accounting standards, but realizes the difficulties in swaying the FASB and the U.S. Congress.

All the countries would enjoy a positive economic spin-off under a single set of standards. Foreigners will be more likely to invest if a predictable set of rules were in place, he said.

That way, it doesn't matter whether a transaction takes place in Brisbane or Beijing or Brussels or Boston, it would be accounted for in the same way, Tweedie has said. Tweedie, however, finds one set of rules is no easy sell. The IASB has met with strong resistance and political interference, not to mention the difficulties in meshing the U.S. standards with the pending international set of rules.

Conflict of Interest? The Motley Fool responds to Intel CEO Barrett's recent OP-ED in the Wall Street Journal.

...Barrett sent a fiery blast at the Financial Accounting Standards Board (FASB) on Wednesday, in the form of a Wall Street Journal article that claims the new FASB proposal to expense stock options will be a 'field day for trial lawyers and class action lawsuits.'

I note with no mild bemusement the juxtaposition between Barrett's primal scream on options and the news that the options grant he received for 2003 doubled from 2002, up to 1.35 million options.

A December CFO.com article that announced the possibility of Goodyear having to restate several years of earnings for roughly $100 million became a little more clear this week as the tire giant announced that it had been cut some slack by its lenders, but would still be announcing several major adjustments due largely to major accounting errors overseas. The new information, also reported at CFO.com, is that in addition to the adjustments announced in the Fall, other numbers will have to be adjusted.

Goodyear also announced that it will make additional adjustments to those disclosed in September, paring earnings by a total of about $65 million between 1997 and 2003. That figure includes $10 million related to the investigation, $20 million related to workers' compensation claims, $10 million to fixed assets, $8 million to product liability, $7 million to inter-company profit elimination in inventory, and $10 million to other items.

The Efficient Market Hypothesis A quick look at the EMH. I thought that this excerpt was interesting. The excerpt discusses that in the relative to company mid-term the EMH is not efficient as the short or long term. If the "relative" mid-term is years then would it not be clear to say that the EMH is not accurate/effective at determining stock values.

Where the market is least efficient is in the medium term. Traders make the short term market efficient because they trade on rumours and news and are very close to the source of this information. They move the market rapidly upward or downward when something is announced. However traders seem to be quite inept at pricing stocks properly. They move stocks up or down, but they don't settle on any correct judgement of intrinsic value. Most traders don't care about intrinsic value anyway, seeing 'truth' in prices. Thus in the medium term, that is with regard to the real economic situation of companies on a time frame of months to several years the market is not efficient. Stock prices are quickly moved by sentiment, but they aren't accurately valued by it.

[published by Benjamin Piening]

Economist.com: GE's Earnings Management under attack in 2002.

"GE's reported profits continue to grow at an impressive pace. But some analysts and investors worry that the company's profits growth is, in fact, slowing. GE also has a long-standing reputation for �managing� its earnings, by taking money from one pocket and putting it into another. Depending on your sympathies, GE does this either to help smooth reported earnings (and therefore to disguise all that hidden riskinesss), or to demonstrate more clearly to investors the growth of the company's underlying businesses."

[published by: Benjamin Piening]

MSNBC reports on the sudden passing of McDonald's CEO and the impact on company stock price. The increased perception of risk involved with a sudden change in leadership can lead to a drop in the stock price, and this example provides evidence of that.

"McDonald's Corp. chairman and CEO Jim Cantalupo, who helped engineer a turnaround of the fast-food chain by focusing on better food and service during 16 months at the helm, died unexpectedly of a heart attack Monday. He was 60."

"McDonald's shares fell 42 cents to $27.04 in morning trading on the New York Stock Exchange. The stock price rose by 49 percent from the time Cantalupo was named to the job through last week."

Mutual Fund Reform: This article in USA Today reports that the planned legislation to reform the mutual fund industry is in danger of dying a quiet death:

In the spring of 2002, barely months after the Enron scandal had erupted, a reform drive in Washington to curb corporate abuses already had run out of steam. Only after a second major scandal erupted on Enron's heels -- the collapse of WorldCom -- did Congress and federal regulators overcome fierce lobbying by businesses to enact new shareholder protections.

Efficient Market Hypothesis. What Is Market Efficiency? This article is a nice explanation and discussion of the Efficient Market Hypothesis. The author concludes the following:

In the real world, markets cannot be absolutely efficient or wholly inefficient. Markets are essentially a mixture of both, and daily decisions and events cannot always be reflected immediately into a market; moreover, if all participants were to believe that the market is efficient, no one would seek extraordinary profits, the force that keeps the wheels of the market turning.

Auditor Independence. Judge Rules Against Ernst & Young. Would this issue between an accounting firm and Peoplesoft been an issue prior to Enron and the other corporate scandals?

The judge was especially critical of Edmund Coulson, the Ernst partner who was in charge of independence issues, saying he kept no written records and had failed to learn enough facts before saying the relationships between Ernst and PeopleSoft were proper, according to the paper. Coulson was chief accountant of the SEC before he joined Ernst in 1991.

Ernst & Young had argued that it was merely a PeopleSoft customer, but, the judge reportedly noted that the firm had billed itself in marketing materials as an "implementation partner" of PeopleSoft, and that it had earned $500 million over five years from installing PeopleSoft programs at other companies.

Shareholder Perks. I found this article interesting because as I read it I felt something was potentially illegal or unethical. I never experienced a company giving perks to a shareholder other than a return on their investment. [see this also]

While the case may be made that shareholder faith should be rewarded with stock gains rather than goodie bags, they are clearly not mutually exclusive. More often than not, a company that cares for its investors finds Wall Street caring right back.

Ernst & Young Suspended. Fox News is reporting that Big Four accounting firm, Ernst & Young, has been ordered by a judge to not accept any new SEC clients for the next six months.

Denny Beresford, professor of accounting at the University of Georgia, said the suspension was "relatively mild" because companies do not switch audit firms often.
"I doubt this is going to be any kind of serious business issue for Ernst & Young, but I'm sure it's not something they're happy about from a reputational standpoint," he said.

Going Public. CFO.com reports that recent business scandals and new compliance regulations cause companies to think twice before going public. The cost of going public is much greater than ever before, compounded by the observation that shareholders may not have the influence needed to gain management's attention to keep the business on the straight and narrow.

As Andrew Carnegie once said, "Anybody's business can become nobody's business" with public ownership. Today even sophisticated institutional shareholders find themselves at a loss to explain the apparent ineptitude or even criminality of once lionized executives and the evaporation of value in once feted companies.

CFO.com reports that while the increased accounting expenses that have resulted from tighter scrutiny on accounting practices in recent years has not hit the pocketbooks of corporate America's top execs as of yet, changes may be coming soon.

Although the reforms so far have created more work for finance departments, as well as higher accounting expenses, the direct impact on executives and directors hasn't been particularly troublesome. But the reforms now being demanded by investors and activist advisory groups will be much more of a burden. The investors and directors we surveyed want companies to move toward separating the roles of CEO and chairman, to make directors more independent and accountable, and to scale back and restructure executive compensation so that it is aligned more closely with the creation of long-term value.

Forbes.com The Dogs of the Dow could become a more appealing investment strategy because of administration.

The Bush administration may soon throw the "Dogs of the Dow" strategy a bone. If double taxation on stock dividends ends, high-yielding dividend-paying stocks could return to favor. After all, with money markets paying less than 1%, if you can get 4% or so tax free, you may be tempted to buy stocks again.

Dividend Yield. Here is a website dedicated to the investment technique of investing in the 10 DJIA stocks with the highest yields on the first day of the year.

PE Ratio. Paying Employees "Too Well" can hurt your stock price.

But labor costs are expensive -- they account for about 70 percent of the company's total cost of operations.

Still, some analysts have raised concerns about the company's ability to post larger profits, complaining that Costco treats its employees and cardholders better than it does investors. Costco makes about 1.7 cents for every dollar in sales. Rival Wal-Mart Stores Inc., the operator of warehouse chain Sam's Club, makes about 3.3 cents for every dollar in sales.

Costco's stock is trading at about 21 times analysts' earnings per share estimates for its current fiscal year; Wal-Mart's stock is trading about 25 times analysts' estimates.

Risk and Stock Prices. TheStreet.com reports that Goodyear's stock price rose on news that they concluded an accounting probe. The probe lowered previously reported earnings by about $65 million. Perhaps concluding the investigation has reduced the risk associated with the stock---helping the stock price.

The last leg of the probe found $10 million in overstatements related to the company's overseas operations. Other downward adjustments include $20 million related to workers' compensation claims, $10 million for fixed assets, $8 million for product liability, $7 million for intercompany profit elimination and $10 million for other items.

Faster Please. Accounting Web reports that accounting firm KPMG is fuding a new research center to research and test continuous reporting and auditing techniques.

“While the field of continuous auditing was first proposed in 1990, research on the topic has been mainly conceptual up until now,” said Miklos Vasarhelyi, a Ph.D. at RARC and Director of the CAR-Lab. “The lab will undertake applied research in the field using real-life data from complex corporate information systems to test concepts and demonstrate working examples.”

CNN Money discusses the effect of rising interest on bondfunds.

Strong economic data hammered the U.S. Treasury market last week sending interest rates higher. This came amid signs that the Bank of Japan had slowed its buying of U.S. Treasuries, putting furthur downward pressure on bond prices and upward pressures on yields.. Rates, however, are still low historically speaking. The chief economist at Daiwa Securities reports that the effects of rates are small as opposed to ones that put the economy at risk. This is due to other positive influences in the economy. If the rates keep going higher, they could pose some problems to large parts of the stock market, particullarly financials and other assets that are interest-sensitive. The impact is said to depend on the interplay of jobs and rates. Stocks could hit a wall if things do not level out.

FASB website FASB Issues Accounting Standard to Improve Disclosures about Pension and Other Postretirement Benefit Plans.

"The Financial Accounting Standards Board (FASB) has issued FASB Statement No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, that improves financial statement disclosures for defined benefit plans. The project was initiated by the FASB earlier this year in response to concerns raised by investors and other users of financial statements about the need for greater transparency of pension information. The change replaces existing FASB disclosure requirements for pensions."

FASB Establishes Small Business Advisory Committee

In an effort to increase involvement by the small business community in developing U.S. accounting standards, the Financial Accounting Standards Board (FASB) has established a Small Business Advisory Committee.

The Committee, whose members represent diverse perspectives and experiences, comprises 24 lenders, investors and analysts, preparers of financial statements from a broad range of businesses, including controllers and chief financial officers, and auditors from the small business community.

A report in CFO Magazine says that the IRS may require companies to explain differences between their GAAP income and their taxable income.

The proposed form, known as Schedule M-3, would force corporate taxpayers with assets of more than $10 million to disclose additional information about the difference between financial accounting and taxable income, and reconcile net income or loss in the income statement to taxable income. The new filing will make it easier for IRS agents to spot inconsistencies that could reveal aggressive tax treatments or even fraudulent accounting. Treasury assistant secretary for tax policy Pam Olson says the rule will cut down on unnecessary audits and allow agents to focus on aggressive positions more quickly. "The increased transparency will have a deterrent effect," she says.

International Accounting Standards. The Baltimore Business Journal describes how playing by the same rules in accounting is important because most big companies operate globally as exemplified by the fact that in the U.S., internationally based companies may use U.S. GAAP, their home country's GAAP or international GAAP.

...a new set of accounting standards being crafted by U.S. and international standards boards would force companies throughout the world to follow the same set of rules when it comes to reporting a company's financials.

The proposed set of standards are expected to land on the desks of accountants and businesses by 2005. They'll address a wide range of accounting issues, such as how stock options are reported. At least 91 countries have committed to adopting the new set of standards.

The new set of principles has been proposed by the Financial Accounting Standards Board, the Norwalk, Conn.-based organization launched in 1973 for establishing standards of financial accounting and reporting that businesses could follow, and the International Accounting Standards Board, the London-based organization that was launched in 2001 to create a set of global accounting guidelines.

Morning Star published this article signaling upcoming changes to auditing practice

Accounting reforms adopted by Congress in the Sarbanes-Oxley Act of 2002 mandated that companies conduct annual assessments of internal controls and that they be attested to by the firm's outside auditor.

and while creating this mandates the Board always keeps in mind the cost/benefit that the new mandate would yield.

"I believe that our standard on internal control passes the cost-benefit test," agreed PCAOB member William Gradison. He acknowledged that higher audit costs will be passed on to shareholders in public companies, but said they will be offset by more reliable, informative and accurate audits.

This article in the San Antonio Buisiness Journal says that KPMG quit as Lancer's auditor due to alleged irregularities on reporting.

"In addition, KPMG has orally informed Lancer's (AMEX: LAN) audit committee that it intends to withdraw its audit opinions for the years 2000, 2001 and 2002."

Allegations came right after lawsuits filed against Coca-Cola that claims, among other things, that Coke used slush funds to hide losses on the company's failed computerized fountain drink dispensing system.

Intangible Assets. Forbes.com says that "not all the glitter in a corporation shows up on it's balance sheet." Many companies are worth much more than what is on their books, through such intangible assets as reputation, innovation, management, and human capital.

Beyond the hard assets than can be quantified--the cash and factories and receivables--are intanglibles like trademarks, patents, and ways of doing business. Pepsi Co., for example, shows a tangible book value of $6.5 billion, yet a market value of $86.8 billion. Even if you include in Pepsi Co.'s book value the intangible assets, like goodwill, quantified on its balance sheet, Wall Street says you are still $75 billion short of the company's worth. What intangibles are not quantified? Brands, innovation, corporate integrity and corporate citizenship--despite their obvious relevance to performance.

The Economist reports that the outlook brightens for government bonds and darkens for riskier assets.

Americas Federal Reserve left short-term interest rates at a 46-year low of 1% in March with heavy hints that they would stay there for awhile. Extremely low rates poise a problem for investors and the Fed itself by unleashing a flood of money into riskier assets. And the riskier the assets, the loftier the price and with thinner rewards. Thus shares and corporate bonds are more expensive and government bonds are not as expensive as many had thought. The Treasury market has been given a boost by foreign banks which have been buying masses of government debt. Stocks and bonds issued by companiies most exposed to the business cycle and terroism have been hard hit. Ford, the largest issuer of corporate debt fared poorly recently. This could possibly lead to falling growth and an aversion to risk.

This joke humorously illustrates a point behind the accounting scandals... You may have heard it before. Enjoy!

Fraud. Walter Williams questions why we are so upset by the accounting deceptions and fraud by the likes of WorldComm and Enron when we can look to the wonderful world of the Government (saviour of our all problems) to realize there is no greater lie to the American people than by the people elected to protect and serve us.[Ted Leithart]

Bonds. This is a great website ran by the Bond Market Association for real-time pricing and general information on bonds and trading mechanics. It is a great resource that also adds transparency to the bond market. Does the payroll number today have you concerned about rising rates?

Stock Options. CFO.com reports about the costs of expensing stock options. FASB's decision would slash earnings of the biggest companies significantly, according to S&P.

If yesterday's long-expected decision by the Financial Accounting Standards Board (FASB) to require the expensing of stock options is implemented, the accounting change would retroactively reduce estimated 2004 earnings per share for the S&P 500 by 7.4 percent, according to Standard & Poor's

Bonds and Control Issues. Bondholders can make life difficult, A nasty fight is going on between the bondholders of HealthSouth and the company's management. The Franklin mutual fund group purchased more than 25% of the bonds through the bond market at between 51% and 69% of face value. Franklin says that although the bonds don't mature until 2009, HealthSouth's failure to file financial statements in a timely manner means that the bondholders have the right to demand payment earlier.

Franklin tried to trigger acceleration of the bond payments on March 11, before the Jefferson County Circuit Court granted a temporary restraining order leading to today's hearing.

HealthSouth claims Franklin approached HealthSouth and said it would waive any claims of a technical default if the company would pay an 11 percent premium on its bonds, which would have meant $253 million.