Financial Reporting & Financial Markets

October 31, 2016
I know it’s not April Fool’s Day, when I usually write about inept data presentation, but Halloween is a reasonable second choice for this sort of thing. A graph appeared today in a Seeking Alpha blog about Gilead Sciences Inc. (GILD) that wins my black pumpkin award! HAPPY HALLOWEEN!

December 28, 2015
Dishonesty can take many forms. Many are easy to spot, or at least will get caught out by a little research – or by the increasingly large number of journalists and organizations focused on fact-checking. Other forms are subtler. My “favorite” with respect to numerical information is cherry-picking – using a few carefully selected facts to support or refute an argument. The facts cited are usually correct, and the presenter might be well-intentioned, but the approach is intellectually dishonest. Let's consider some examples...

December 15, 2015
Last time we used a GRAPH to appreciate the long-term average performance of the U.S. stock market. It’s an important message for U.S. workers trying to save up for retirement. In this post, we look at equally important issue – the risk and uncertainty around that average, and this time it’s a TABLE that works best.

December 07, 2015
A really good example of data visualization used properly is looking at the performance of the U.S. stock market over a very long period of time. Moreover, it’s an important subject that’s critical to almost everyone’s financial security. In this post, we look at an example of data visualization that can make an intimidating subject less terrifying.

September 09, 2015
The model we’ve been looking at – to help make your management reporting software decision – also provides an example of model design to ensure objective and honest analysis. In this post, we talk about why that’s so.

September 01, 2015
What’s the “right” way to decide between different approaches to management financial reporting, such as building your reports in Excel, writing custom code in-house, using the report-writing capabilities of your ERP system, or installing special-purpose planning & budgeting software? They all have their strengths and weaknesses. In this post, I describe a process that will help you make the right decision for your enterprise.

August 20, 2015
A surprisingly interesting Proformative webinar, “Dean & Deluca: Uncompromising Standards in Excel-Based Reporting,” describes how Dean & Deluca – an upscale grocery store chain and food purveyor with a high-end ERP product as its accounting system – generates financial statements and other management reports using an Excel application. That runs counter to much current thinking – some would call it a primitive approach – but perhaps we should look at this question differently.

February 16, 2015
Six years ago David Friehling, Bernie Madoff’s auditor, pleaded guilty to aiding and abetting the fraud, but he still hasn’t been sentenced. It’s a drama eerily reminiscent of the old “Weekend Update” bit on “Saturday Night Live,” where newsman Chevy Chase announces that “Generalissimo Francisco Franco is still dead.”

February 11, 2015
A recent (2/9/15) Reuters article suggests that the accelerating trend of large U.S. companies reincorporating abroad, sometimes called “tax inversions,” is NOT motivated by the statutory U.S. federal tax rate, at 35% one of the highest corporate rates in the world. An interesting perspective, but the numbers they cite don’t support it. Yet again, this is an instance that illustrates how important it is that we be careful about the words that we wrap around the numbers.

January 05, 2015
In one of my last 2014 posts, I lambasted a particularly silly Yahoo! Finance blog titled “This Signal Has a Perfect Record of Forecasting Year-End Gains,” in which the author used a convoluted calculation based on the Market Volatility Index (VIX) to predict the S&P 500’s performance for the remainder of the year. We rarely have the opportunity to skewer such pontificating so promptly, but this “signal” no longer has a perfect record.

December 15, 2014
I try to be positive. I really do. But yesterday I came across a post that is so ridiculous that I can’t stay silent. The writer observes that in every year since the Chicago Board Options Exchange’s Market Volatility Index (^VIX) was created in 1986, if the VIX traded at more than 34% above its one-month low at least once during the month of December, the S&P 500 showed a gain from that point until the end of the year. (Got that? There will be a quiz on this later.) The writer claims to have found a predictor “whose results have been so overwhelmingly consistent that it is hard to ignore.”

April 15, 2014
Developing scorekeeping metrics is a critically important yet undervalued role of the chief financial officer. CFOs ignore this role at their and their organizations’ peril, because if they don’t set the scorekeeping metrics, others will, and will make a mess of it.

March 26, 2014
This piece appeared originally on, an excellent website for senior finance professionals. It’s a little technical, and pretty long as my posts go, but very spicy – I take a novel perspective on what really went wrong in the Madoff fiasco. If it’s not your cup of tea, feel free to scroll down to the next post. Thanks for your interest.

March 24, 2014
Again, we look at how the way numbers are presented can affect how the presenter’s integrity and ethics are perceived. But this time, we look at what’s omitted. Our subject is again Constant Contact’s (Nasdaq: CTCT) investor presentation.

March 16, 2014
Yes, we’re still looking at Constant Contact’s (Nasdaq: CTCT) investor presentation, and the topic is still how tiny changes in the way we present numbers can have a significant impact on how our integrity and our ethics may be perceived.

March 09, 2014
In recent posts we’ve seen how tiny changes in the way we present numbers can have a huge impact on how well the information is understood. In this post, we look instead at how those little things can affect how your integrity or your ethics might be perceived.

February 12, 2014
As a financial executive and a consultant, I’ve been a part of or observed endless debates about what is the correct cost of capital to use in evaluating a project’s net present value (NPV). And I have to ask: Does this debate really matter?

May 27, 2012
The law firm of Fenwick & West publishes an excellent quarterly report on venture capital financing activity. Their most recent report provides an opportunity to ponder how even modest changes in how information is presented graphically can make a big difference in how meaningful the information is to the audience.

April 22, 2011
Arthur Levitt, former SEC Chairman and Wall Street statesman, has an excellent piece in the Wall Street Journal, pleading for more “plain English” in financial disclosures. Invoking the ghosts of Mark Twain and Will Rogers, he observes that most readers and listeners react with suspicion when they encounter language that seems more complex and uses bigger words than necessary.

December 31, 2010
NOTE: This piece was originally posted on the 121 Silicon Valley, Inc. Website on December 31, 2010 In my last post, we introduced the idea of a “value calculator” as a powerful sales tool. To refresh your memory: The XYZ Software Company sells an add-in solution for an enterprise’s ERP system, to address situations when a single order has to be fulfilled in multiple shipments. When that happens, the enterprise’s own end customers question the invoice, causing the enterprise to have to devote man-hours to documenting and supporting a perfectly valid receivable, and delaying collections...

December 09, 2010
We all understand how critical your finance team can be in helping you negotiate and close your deals, but they can often be a huge help even earlier – in the sales process itself, by helping you make the best possible presentation of your products’ value proposition.

July 02, 2009
Wow, they really threw the book at Bernie Madoff! 150 years. Should we be satisfied? Well, sort of. As crimes go, this was a doozy, and we can certainly point to this case as proof that white-collar criminals don’t always get off with lighter sentences.

April 03, 2009
Yesterday, a laboratory assistant in the geology department at Stanford University walked past a seismograph on a workbench, and accidentally jostled it with his elbow. The contact caused the seismograph to give a Richter Scale reading of 7.6, thereby causing a massive earthquake with an epicenter 125 miles southwest of Mexico City.

March 18, 2009
A while ago, I wrote a deliberately uninformed post, suggesting that the whole Bernie Madoff fiasco wouldn’t have happened if Madoff’s fund had had an audit conducted by a reputable firm, and that this should be a requirement for all investment funds (see “Madoff and the ‘Idiot Plot’” 12/17/08).

March 15, 2009
When I posted “Boneheaded Compensation Plans #1” three months ago (12/19/08), I commented that the “#1″ was appropriate in the title because this would definitely be a recurring topic. And I was right.

February 15, 2009
Just the other day a senior corporate executive reminded us why much of the public thinks of corporate executives as not only greedy, but also contemptuous of the public’s intelligence.

December 17, 2008
First of all, a confession: I’ve read very little about l’affaire Madoff. I just don’t want the facts as I’m almost certain they are to be muddied by the facts as they actually are.

December 03, 2008
Financial Executive magazine arrived today with “Fraud’s House of Cards: Has Complexity Created an Unmanageable Situation?” by Lynn Brewer, an Enron whistleblower and founder of The Integrity Institute, as the cover story. Ironically (so say I), there’s also an interview with Charles Niemeier, a member of the Public Company Accounting Oversight Board, entitled “Can More. . . or Less Regulation Fix What’s Wrong?”

November 16, 2008
Well, are they? Should stock options be valued, and treated as an operating expense to be run through the company’s income statement? The accounting issue was “settled” a few years ago by GAAP statement FAS 123R, which requires companies to “expense” stock options.

November 05, 2008
Today’s post by Michael Arrington of “TechCrunch,” is on Newt Gingrich’s call for the repeal of the Sarbanes-Oxley Act. Often referred to as “SOx,” this law was enacted in 2002 in the wake of some sensational accounting scandals, to ensure stricter compliance with accounting standards by U.S. public companies. Very eloquently, Gingrich asserts that SOx has accomplished very little at very great expense.

October 23, 2008
At a dinner last night, the Northern California chapters of Financial Executives International had the privilege of hearing from Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB) and the person at the very top of my very short list of nominees for sainthood. Sir David spoke of the need for global adoption of the emerging International Financial Reporting Standards (IFRS).

October 17, 2008
Phred Dvorak recently wrote an excellent article on executive compensation disclosures in public company proxy statements (WSJ, 3/21/08). Her main theme was that in the face of SEC requirements for fuller disclosure of executive compensation, companies have provided so much additional verbiage that normal humans can no longer make any sense of the disclosures. Amen.

October 07, 2008
I recently had an interesting conversation about software revenue recognition with a partner at one of the “Final Four” audit firms. [Yes, I know. . . only two people like us could call such a conversation “interesting.”]

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