Banks' Loan Loss Reserves

Banks' Loan Loss Reserves. BW online has a commentary about how banks adjust their loan-loss estimates to manage earnings.Last year the banks had an easy way to juice their profits. All they had to do was allocate a little less money to loan-loss reserves -- the money they set aside to cover bad debt. As the economy has improved and defaults have slowed, many decided they didn't need as much in

Leaking the News. MSNBC reports that there was increased volume in the traded options of P&G and Gillette just prior to the announcement of the merger. Well before the investing public learned of the $57 billion takeover of Gillette by Procter & Gamble, traders apparently got wind of the deal: Options-trading volume in both companies spiked more than fourfold on Jan. 27, before news of the

Stock Options. An article at Law.com quotes a couple of lobbyists as saying that they plan to mount an attack on the FASB's new rule requiring the expensing of the cost of stock options. That's likely to be an uphill battle given thatThe SEC has also thrown its support behind FASB.

Donald Nicolaisen, the SEC's chief accountant, said in a prepared statement that companies should focus their

Conservatism is Back. Wary Auditors, Clients Worry FASB's HerzFinancial Accounting Standards Board chairman Robert Herz told the Financial Times he is concerned that auditors as well as the companies they audit are acting too conservatively when preparing financial reports especially given the Securities and Exchange Commission's (SEC) endorsement of a principles-based approach.

Herz contends

Restatements. The NY Times reports that the number of restatements was up again in 2004. Although several theories to explain the increase are proposed, I believe the correct one is that auditors don't want to take any chances so are making clients restate items that in the past would have been rolled over into future numbers.Some of the restatements may simply reflect the fact that auditors are

Analysts. CFO.com says that fewer companies have analyst coverage than anytime since 1995. Where's the Coverage?Although the number of equity analysts in the United States has climbed 7.5 percent since 2003, up to 3,207 from 2,983 a year earlier, that number is still 9.5 percent lower than it was during 2000...

Managing Earnings. USA Today reports that an independent review of Nortel has concluded that company executives juggled figures to earn bonuses.As the telecom bust spawned layoffs and huge losses at Nortel in 2001 and 2002, there was 'a decline in financial discipline,' the report says.

Dunn and other executives began to 'stretch the judgment' as to when certain charges could be taken, the