Fix 'damaged' financial reporting system: Financial Analysts

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22 Feb 2002

The Association for Investment Management and Research has taken full-page ads in the Wall Street Journal and Washington Post with its views on How to Fix a Damaged Financial Reporting System (PDF 259k): For the past 20 years, AIMR has advocated that issuers should not be allowed to tailor transactions to get an accounting treatment that suits them.

We have repeatedly asked for accounting rules that would require issuers to:
  • Report on the balance sheet all assets under their control and all liabilities for which they have responsibility.
  • Explain how and why they use derivatives.
  • Measure and record compensation expense for employee stock options.
  • Recognize all financial assets, liabilities, and derivatives at fair value with changes reported in earnings.
  • Conduct and disclose meaningful market-sensitivity analyses or 'stress tests' so users can forecast potential risks under changing market conditions.
Despite their best efforts to enact such rules, the FASB and SEC succumbed to political pressure and issuers' objections.

Click for AIMR Press Release.

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