16(a). Databases
Videotape, audio tape, personal computer diskettes, and on-line access to a service organization are not attractive options for most individual investors. Videotape and audio tape are seen as too inflexible and somehow not appropriate for investment information, and even less so for the annual report. The other two options require computer literacy and access to appropriate equipment--capabilities that are not yet typical among the individual investors interviewed. [Also included in 15 and 16(b)] [SRI, p. 69]
Professional investors express a different level of interest and are more computer literate. When asked, "Would receiving company information in any of the following ways be useful to you?" their responses were as follows: [Also included in 15 and 16(b)] [SRI, p. 69]
Yes No
On videotape? 34.9% 64.7%
On audio tape? 31.4 68.6
On diskettes for
your
personal computer? 60.9 38.8
From on-line access
to
a service 67.6 32.1
organization?
[Also included in 15 and 16(b)] [SRI, p. 69]
Videotape is seen by all professionals except retail stockbrokers as inflexible, and not at all useful for investment analysis; audio tapes are thought to be even less useful. Retail brokers see the possibility of using videotapes in the sales process. [Also included in 15 and 16(b)] [SRI, p. 69]
Diskettes for personal computers have initial appeal, but concern about their usability prevails. To ensure compatibility with various computers, the diskette would have to be created in one or a very few standardized formats. In addition, most professionals, especially the analysts, have developed individualized approaches to security analysis. These problems are more perceived than real, however. As these technologies become better understood and more widely available, the personal computer will become an increasingly important element in financial information distribution. [Also included in 15 and 16(b)] [SRI, p. 69]
On-line information is appealing to all segments of professional investors. Most analysts, surprisingly, are not aware of the SEC's experiment with EDGAR (Electronic Data Gathering and Retrieval). As EDGAR is just such an on-line service, professionals are likely to receive it with enthusiasm. [Also included in 15 and 16(b)] [SRI, p. 69-70]
Technological advances, especially in data analysis and communications, will significantly affect all corporate reporting, including the annual report. The SEC's EDGAR project, the increasing numbers of analysts using computer-aided analytical techniques, and the interest of professional investors in receiving annual report information in PC-compatible form and from on-line access to data services are just three examples of recent influences. [SRI, p. 72-73]
__________
[Context] The AIMR position paper provides a summary of the section (pages 11-20) entitled "The Changing World and Its Implications for Analysis," which describes the effects on financial analysis and financial reporting of three major phenomena:
The world constantly is changing and everyone must adjust to accommodate those forces over which they have no control. The nature and implications of three major phenomena that are expected to affect financial analysis and analysts are considered here. Those matters also have considerable influence on the views and conclusions expressed later in the paper. . . . [Also included in 7(b), 18(a), and 19] [AIMR/FAPC92, p. vi]
Second, the accessibility of computing power continues to rise as rapidly as its cost falls, which has several implications for financial analysis. Quantitative analysis becomes practicable to an extent never dreamed of previously. There are more and ever increasing demands for and uses of databases of financial information. We look forward to the inauguration of the SEC's Electronic Data Gathering And Retrieval (EDGAR) system. All this means that financial analysis will require more emphasis than ever before on recognition and measurement in financial reports so that we may be assured that the contents of databases are both complete and comparable. [AIMR/FAPC92, p. vii]
[Context] Those two paragraphs introduce the following excerpts pertaining to the second major phenomenon listed. Excerpts pertaining to the other two phenomena are included primarily in 18(a)-International harmonization of standards and 7(b)-Other intangible assets, 8(b)-. . . [A]ccounting for business combinations, and 19-Financial instruments and off-balance-sheet financing, with a few excerpts included in other categories.
Quantum Increases in Computing Power and Access to It
One wonders if and when the pace of progress in computing will ever slow. Processing speeds and storage capacity continue to become available in large quantities and at low prices unheard of previously. A corollary is that computing also has been made available to individuals and become portable. Where it all will lead ultimately is not for us to guess. Our task here is to assess how it has and will change financial analysis and investment techniques as well as the implications of those effects for financial reporting. [AIMR/FAPC92, p.14]
The preceding section of this report deals with globalization of the securities industry. In many respects that happening has been made possible by computing power aided by similar advances in telecommunications. As a result, money can be moved around the world quickly to take advantage of investment opportunities wherever and whenever they appear. Records can be updated instantly. Information may be formatted for computer processing and transmitted via modem or equivalent. [Also included in 18(a)] [AIMR/FAPC92, p.14-15]
Use of Databases and Quantitative Techniques
More and more financial data are to be found in databases, some of which are publicly available while others are proprietary. Of the publicly accessible databases, one extreme is represented by COMPUSTAT, which contains financial statistics on over 10,000 U.S. companies, organized by industry code and arranged in a standardized financial statement format. At the other extreme, is NAARS (National Automated Accounting Retrieval System). It contains the actual text of the financial reports of over 5,000 companies. Both of those databases include several years of data. In between are an unlimited variety of specialized databases offered by all sorts of vendors, including, among others, the FASB itself. [Also included in 1(b)] [AIMR/FAPC92, p. 15]
Use of databases varies from analyst to analyst. Some analysts ignore them and continue to obtain all of their company and industry information from more traditional sources. Others may use them to screen a large universe of companies to weed out those that do not meet certain criteria. The screening process often involves the use of financial ratios and the program employed is generally concerned more with processing large quantities of data rather than performing sophisticated computations. Another group of analysts will use highly complex quantitative techniques to make portfolio selections and as a guide to other market transactions. [Also included in 1(b)] [AIMR/FAPC92, p. 15]
The implications for both financial analysis and financial reporting are profound. A common computer expression is GIGO (garbage in, garbage out). Much of the analysis work performed by computers involves comparisons of company-specific data or of ratios constructed from those data. One needs to read but a few annual reports to realize that such comparisons are fraught with danger if made on the basis of unadjusted data. There are too many dissimilarities in how different companies record similar transactions, events and happenings to draw any but rough comparisons from unadjusted data. Some services, such as COMPUSTAT, attempt to adjust the data themselves; others do not. The need to adjust will be diminished and the quality of comparisons elevated to the extent that financial accounting standards produce financial statements that are consistent from period to period and comparable from company to company. That is a goal to be coveted, but analysts themselves should realize it will never be totally attained. [Also included in 2(c)] [AIMR/FAPC92, p. 15
The SEC's Electronic Data Gathering And Retrieval system (EDGAR)
We look forward to the imminent arrival of the SEC's new method of making company filings available. Although it has been many years in development and subject to multiple delays, it promises to be a vast improvement over the present system. It will place documents in electronic storage and overcome the frequent problems of missing and misfiled documents now encountered by analysts or the agencies serving them. It will also dispense information faster than currently by placing a document in the database when it is received. It will not be directly accessible by analysts; instead its contents will be marketed by vendors selected by the SEC. It promises to surpass all other databases for its sheer quantity of information about public companies. Eventually, it may make even the most recalcitrant analyst into a database user. [AIMR/FAPC92, p. 15]
__________
All fundamental analysts use databases of one sort or another. They may be commercial in origin or they may be assembled by the analyst himself or herself. They may be accessed electronically or they may be in hard copy form. They may be extensive or limited in scope. The point is that they are used to make comparisons between and among firms, and over periods of time several years in length. The validity of those databases may be enhanced in one sense, but certainly will be impaired in another every time a new accounting standard is issued. As some or all enterprises adopt the new standard, it ought to have the effect of improving interfirm comparisons by eliminating differences attributable only to accounting. But it is certain to destroy the continuity of previous periods' accounting numbers with those of the present and future. [Also included in 2(c)] [AIMR/FAPC92, p. 48]
If FAS 96 and its successors were an isolated instance, our cause for complaint would be modest. But it is not. FAS 106, "Employers Accounting for Postretirement Benefits Other Than Pensions," has resulted in perhaps the most sizable cumulative adjustments in the history of standards setting. Companies adopting that standard also have been given considerable time (1990-1993 for domestic plans: 1990-1995 for foreign plans) and a choice of methods (immediate or delayed recognition of the transition amounts). In one way, FAS 106 is much more destructive of database construction than FAS 96 and its successors. Delayed recognition of the transition amount will extend over twenty years subsequent to adoption of the statement. For enterprises adopting it for domestic plans in 1993, their financial statements may include this vestige of the past until the beginning of fiscal year 2013. It will take an astute and perspicacious financial statement reader to abstract from footnote data required by FAS 106 the facts necessary to adjust financial statements to be comparable. Those who rely on commercial databases do not even have the opportunity to make such adjustments. [Also included in 2(c)] [AIMR/FAPC92, p. 49]
It seems as if the FASB has tended in recent years towards longer transition periods and more choice on the part of business firms on how to account for mandated changes in accounting principles. We understand that motivation for such flexibility derives from the complexity of certain recent standards as well as the magnitude of their effect of financial statements. From the standpoint of financial analysts, recent relaxation by the FASB of quick and strict transition procedures are untimely. Increased availability and use of electronically-accessed financial databases, with the promise of the SEC's EDGAR scheme to be available soon, reduces substantially opportunities for analysts to fashion the tedious adjustments necessary to make financial statements comparable. Furthermore, analysts should not need to make such adjustments. Long transition periods and multiple methods may be politically prudent, but they dramatically reduce the usefulness of financial statements. [Also included in 2(c)] [AIMR/FAPC92, p. 49]
We would be better served if those who set standards and disclosure rules would designate a common date for adoption of a new accounting standard and a final date for complying with a new disclosure requirement. We also urge those dates to be as soon as feasible after the new rules are promulgated and published. Standard setters and capital market regulators need to gather evidence on feasibility as part of their normal processes. The collection of evidence needs to go beyond merely hearing the assertions of business enterprises about their anticipated difficulties in applying the prospective rule(s). As we note below, field testing often can be a vital ingredient in making transition more rapid and productive for all. [Also included in 2(c)] [AIMR/FAPC92, p. 49]
__________
[Context] Meeting of the Investor Discussion Group on March 17, 1993. Part of the meeting was devoted to the topic of databases.
Committee/Staff/Observer
Databases. We understand that investors are, with increasing frequency, purchasing databases that include information taken from external reporting. For example, those databases may include condensed financial information for a number of periods and for many companies. Do you use databases? What kinds of information does the database include and how does it help with your analysis? [Also included in 1(c)] [TI 3/17, p. 48]
Participant I-12
I create my own database because I have yet to find a decent database in my industry that I can buy that gives me the level of detail that I really want. I find database work extremely helpful; I can aggregate an industry, look at industry trends, a company against an industry, and all of that is the essence of our work. I understand that there's a couple of new databases that I haven't looked into that I may end up buying. [Also included in 1(c)] [TI 3/17, p. 48]
Participant I-16
I have spent most of my career as a generalist, which means that I have been working on companies that I haven't worked on for very long, so I don't have a database or history. So I use a database as a way to allocate my time. You can screen, using 10 years of financial statement numbers, an enormous number of companies in a couple of minutes, perhaps pop out some anomalies that are worth investigating. I wouldn't buy a stock based upon a screen because I don't know if there is enough reliability. But if it can limit the universe and enrich the likelihood of finding something good in that universe, then it's a very useful screening device. I know there are some firms that use databases to make investments, but I think most of us use them for screening purposes. It helps narrowing down my search. [Also included in 1(c) and 2(b)] [TI 3/17, p. 48-49]
Committee/Staff/Observer
Do you use your own databases or do you purchase them? [TI 3/17, p. 49]
Participant I-16
I purchase them. [TI 3/17, p. 49]
Participant I-7
[I use databases] partly from a defensive point of view. That is, to the extent that I know that much of my client base uses databases, I will use them to protect myself. I want to know what they are seeing so that I'm not naked when I walk in. If there's a change over time of some significant ratios, I don't want to be caught without having that perspective. [Also included in 1(c)] [TI 3/17, p. 49]
Committee/Staff/Observer
How do you know what's in databases is accurate or complete? [Also included in 2(b)] [TI 3/17, p. 49]
Participant I-7
You don't. [Also included in 2(b)] [TI 3/17, p. 49]
Participant I-12
Until you check it against the financial statements. If a database shows the assets of a company at $10 billion and the financial statements show total assets at $15 billion, it makes you wonder about the database. [Also included in 2(b)] [TI 3/17, p. 49]
Committee/Staff/Observer
Do you know if the databases are ever adjusted? [TI 3/17, p. 49]
Participant I-16
Generally not. You don't want them to be; you want the numbers as they were originally reported. People valuing stocks in 1982 didn't know that an acquisition would occur in 1987 and didn't value the stock based on that future acquisition. So if you're using valuation numbers from a past time period, you have to use the numbers that were reported by the accountants at that point in time. [TI 3/17, p. 50]
Participant I-5
Unfortunately, a lot of them adjust in different ways. You're not certain exactly how a database treats different items. As an analyst, it takes long enough to look at a company's financial statements for the year as they're presented; to take them as they are somehow massaged in a database, it does not help you much to get an opinion on a company. Where I found databases useful is in getting aggregate numbers; for example, the median cash flow coverage ratio for all single B credits. You can get that from a database without being that far off. [Also included in 1(c) and 2(b)] [TI 3/17, p. 50]
Participant I-7
Databases are not an end-all; they're only one more element that you have to use. [Also included in 1(c)] [TI 3/17, p. 50]
Committee/Staff/Observer
Do you find the cost of obtaining a database acceptable in relation to the benefits received? [TI 3/17, p. 50]
Participant I-16
They're very cheap. [TI 3/17, p. 50]
[Context] Meeting of the Creditor Discussion Group on December 8, 1992. Part of the meeting was devoted to the topic of creditors' objectives and approaches. During the discussion, comments were made on databases.
Participant C-13
I have a thought unrelated to the small company issue but that should be laid on the table. That is that many investors, particularly large investors, are relying increasingly on databases for compiling, filing, and using financial information, and that's going to increase very significantly when the SEC completes its EDGAR project. So this question of consistency is particularly relevant because the information doesn't go through any kind of quality filter before it gets into the database for comparability from year to year, from company to company, consistency over time. [Also included in 2(c)] [TC 12/8, p. 43-44]
__________
Participant C-11
My comments really should be put in the context that we're not doing the very small companies or we're not doing a large amount of the high risk debt. So I'd say with that as a background we do not use a database. Our analysts are responsible for the analysis and the recommendation. One reason for being careful about a database is that we want our people to look very hard at the changes in the company, particularly when there are acquisitions that occur and divestitures, so that you know and totally understand the fact that the numbers may or may not be continuous. So we don't have a standardized ratio framework that we give to our analysts. We definitely require that if we're going to buy something, we know the management one way or another, and have talked to them about not just the numbers, but about the broader business horizons. [Also included in 1(c)] [TC 12/8, p. 62]
[Context] Meeting of the Creditor Discussion Group on February 2, 1993. Part of the meeting was devoted to the topic of value information. During the discussion, comments were made on databases.
Committee/Staff/Observer
One of the things we're thinking about in terms of the future is: are we heading towards the database or are we heading towards more sophisticated analysis of results? And that's part of the puzzle that we're trying to deal with; on the one hand, we'd like to have both sets of information (fair value and historical cost), on the other hand, that's pretty costly. And if you're not going to use it anyway, why should we provide it? [Also included in 4] [TC 2/2, p. 11]
Participant C-5
I'll make this comment about the database thinking. The database is a facility that clearly does allow you to make some cuts in data. [Participant C-11] mentioned earlier about all the footnote disclosures. We don't get those footnotes in databases. And so I would hope that even if they are supplemental or footnote type disclosures, that there's at least enough structure that those can continually be databased in such a way that whether it's unrealized gains, they will be included. So there is value to database. I want to say that there is also this individual analysis. And that's where the world is still going to be at. [Also included in 4 and 5(d)] [TC 2/2, p. 11]
Committee/Staff/Observer
Would you rather have the database? Or would you rather have what we now call financial statements that take data and bring it to one level of analysis. And the following question is: how high a level does the accountant should analyze and process the data? [TC 2/2, p. 12]
Participant C-5
In financial analysis, you realize there's no perfect point. There's a curve. And that's the problem. There's a trade-off: if you give me more detail for my database, I lose in the database in terms of numbers companies included in it. I don't know where my efficient frontier as far as trade off and how many things I can follow versus how detailed I can get. [TC 2/2, p. 12]
Participant C-2
In a database you won't have the same assurance that you get from organized financial statements and disclosures. And I think you tap into the database kind of at your own risk. [TC 2/2, p. 12]
[Context] Meeting of the Creditor Discussion Group on February 2, 1993. Part of the meeting was devoted to the topic of display. During the discussion, comments were made on databases.
Participant C-11
I think that we're in a complex world and if there are "unusual or non-recurring" things going on, that's the reality. And if you force the accounting statement to do something else, to say something else, make it simple, indeed, for a database, you're making just a horrendous mistake. I think I can make an absolute statement along those lines. [Also included in 5(a)] [TC 2/2, p. 16]
Committee/Staff/Observer
Are we clear about what we're talking about, about a database? I think we need to be careful. We're talking about raw information about a company, not about a database of a lot of companies, all putting the same information in so that you can compare. We're talking about a company, in essence, opening up its books and saying, here, take whatever you want. That's what you were talking about, right? [Also included in 5(a)] [TC 2/2, p. 16]
Participant C-2
Kind of like on an on-line real time basis. [Also included in 5(a)] [TC 2/2, p. 16]
Participant C-11
As opposed to the EDGAR type. What we're talking about here is when an individual company has something occurring that either makes the reported earnings significantly different or if some restructuring or whatever is going on, that gives you specific information about something that's happened, that is not in the ordinary category of revenues and expenses. So I would answer in that context. If you talk about opening the books, that obviously doesn't work, you have to have some control and framework for the numbers that you're reporting. [Also included in 5(a)] [TC 2/2, p. 16]
Participant C-5
While you may be speaking of a database for an individual company, and getting access to that, there is a world of financial analysis out there that lives in comparability of financials. And once data get embedded into a database, they're there. Five years from now, we'll never look back and figure out what was that, was it a non-recurring item? There is a part of this accounting profession which is setting standards for things like those databases out there. Once you define them, that's what's in the database. I sat just recently with a small operational area of our credit department. It's going to take a big stick of dynamite to pull apart the whole credit department to get them to have flexibility on anything that is not accounting profession endorsed and adopted because if a lending officer might modify a number, it's a real problem for me. [TC 2/2, p. 17]
[Context] Meeting of the Creditor Discussion Group on March 11, 1993. Part of the meeting was devoted to the topic of databases.
Committee/Staff/Observer
Question 13. We've read in different documents that use of databases for analysis is becoming more and more popular but that there are limitations; I guess the extremes are you can have Compustat which puts everything in an absolute format and you can have things like the accountants use on NARS that are essentially the company's formats completely. And because of that, the comparability is very difficult because no two companies use exactly the same words. How much databases impact what you do, how much accounting either interferes with the use of databases or complements that or are there things that accounting should do to make use of databases easier? And finally we're curious about when you use databases, given that those are kind of apart from the financial statements themselves? How do you get confident that you're using numbers that are, in fact, the numbers? [TC 3/11, p. 53]
Participant C-5
I have probably in the last six years not looked at raw audited financial statements to read them myself. They're always spread by an analyst or a spreader and then the loan officers make their adjustments and their comments that describe the situation. So I'm already seeing something that's prefiltered and at times I'm actually more comfortable with a Compustat that is not trying to propose a credit that I have to make a decision on, and therefore has an interest in certain presentations that's biased to the decision that I'm supposed to be making. I'm different a little bit because I'm once removed from the first proposal. [TC 3/11, p. 53]
Committee/Staff/Observer
But for those people who are making the first cut? [TC 3/11, p. 53]
Participant C-5
No, they start out with raw data. [TC 3/11, p. 54]
Participant C-17
Databases are used as a way to increase your efficiency. You get more speed than having someone sit down and manually spread them. You use the financial statements as your source document and the only real limitation on databases has been the timeliness. It's difficult to get current numbers, you're always a quarter or so behind than what you could get if you went and made a request of the company. [TC 3/11, p. 54]
Participant C-11
We only use databases as a substitute for the need for a quick initial look at the numbers for which we don't have the financial statements in the file. We would never invest on the basis of any spread Compustat thing. Our analysts have to do their own ratio work and particularly in cases where there have been any kind of acquisitions or dispositions, the database is really going to be quite unreliable. [TC 3/11, p. 54]
Participant C-10
It seems to be a personal choice. Our equity people use databases more than what we do. To my knowledge, we don't use them at all. We tried to work with one recent high yield database company and found that there wasn't anything of value in it. [TC 3/11, p. 54]
Committee/Staff/Observer
Why did you find it to be "garbage"? [TC 3/11, p. 54]
Participant C-1
A lot of inaccurate numbers. They filtered everything; maybe it's just the nature of high yield companies, they're more in flux, but I don't think so. What we used was the in depth database that Wall Street raves about. And it would come out and their format wasn't applicable. Using their numbers it's just terrible. [TC 3/11, p. 54]
Participant C-15
Compustat is owned by Standard & Poor's so I'll temper my comments but we used that as the beginning point of our analysis just to get a quick feel for a company. But if you want to do anything "serious," you have to make a number of adjustments to the financial statements which Compustat doesn't make for equity earnings and unusual items and so on. And Compustat doesn't go back and restate. I think they might go back for one year but clearly if companies have made acquisitions or had divestitures, you want to look at a five to seven year trend, you're not going to really be able to do that accurately by using a Compustat. And so much information about a company is in the footnotes which isn't captured in the Compustat or other databases; you're missing maybe two-thirds of the picture if you're just relying on the database. [TC 3/11, p. 55]
Participant C-5
We're not completely reliant on databases; we do have individual analysts. I would also suggest that you're talking about a process that's going to evolve and be making or suggesting changes that would exist three to five years from now. One of the things that Compustat is working to include in its framework are the disclosures that are currently made. The users can make their determinations off these databases but I think what you should recognize is that it's almost impossible to look at usage today and talk about it. We are increasingly using our databases. For example, I'll use it to look at potential customers and also to assess a portfolio; for example, I'll have twenty shipping companies and I want to know the other twenty I don't have and I want to know where I sit in the industry. [TC 3/11, p. 55]
Participant C-15
You're not making a lending decision based on that, though; you're using it for other purposes? [TC 3/11, p. 55]
Participant C-5
For portfolio management, for strategy, target. There's so many uses for this information and the supplemental disclosures about delinquencies, receivable agings and so forth that are not available because it's not prescribed accounting format. [TC 3/11, p. 55]
Participant C-12
We make fairly extensive use of databases in looking at domestic and particularly foreign banks. A lot of it is to get this comparability as well as the first look. But I'm not looking at one bank in isolation, I'm looking at it in the context of how they're doing compared to their peers. And a lot of the analysis is peer-based and I don't want somebody to spend a lot of time pulling together numbers necessarily because even then I have to worry about whether my junior person pulling together numbers did as good a job as IBCA(ph) does when they put together a foreign bank database? [TC 3/11, p. 56]
Committee/Staff/Observer
So your tolerance for the things that [participant C-1] ran into is high simply because it's using them at a very aggregate level? [TC 3/11, p. 56]
Participant C-15
There's also a real difference between looking at a bank which maybe lend itself to a lot more statistical comparisons and a high yield company where it's a lot more subjective. [TC 3/11, p. 56]
Participant C-13
Our use of databases is pretty similar to the last two comments in that we use a number of them fairly extensively. And I'm not entirely comfortable with the accuracy of all the data or the amount of adjustments that are necessary. But we don't use it for an individual credit decision. We're screening, we're comparing, we do things like: what's the average of these ratios for the average A rated credit? And then look at where this company is or what's the average coverage ratios in this industry and similar kinds of things like that. [TC 3/11, p. 56]
Participant C-4
Are you referring just to external packages or internally developed databases as well? [TC 3/11, p. 56]
Participant C-12
I think at the moment we were looking for information that came in on the database as opposed to databases you would have developed in turn. [TC 3/11, p. 57]
[Context] Responses to the postmeeting questionnaire to the March 17, 1993 Investor Discussion Group meeting.
QUESTION 16
We understand that investors and creditors are increasingly purchasing databases that include information taken from external reporting. For example, those databases may include condensed financial information for a number of years or quarters and for a number of companies.
a. Do you currently use purchased databases in your work?
YES 3 NO 2
If YES, which of the following identify your reasons(s) for using a purchased database? (Please check all that usually apply.)
1. The database provides 3 information on companies for which I do not have financial information. 2. The database helps compute 3 aggregate ratios and other statistics for groups of companies and industries. 3. The database helps compare one 3 company with others or industry averages. 4. The database provides quick 3 means to check data and make comparisons with little investment, but it does not provide the information needed for full analysis of a company's financial circumstances. 5. The database helps me identify 2 companies for further consideration (e.g. prospects for investing opportunities). 6. The database allows me to 3 allocate my time efficiently. 7. The database is used by 1 clients, so I need to be cognizant of the information contained in the database.
8. Something else. Please describe:
b. Which of the following describe any disadvantages you encounter with purchased databases? (Please check all that apply.)
1. Databases are generally not 2
updated on a timely basis.
2. The data are too often 2
incorrect.
3. The data are too condensed or 1
are otherwise incomplete.
4. The data are too standardized 2
in categories that do not reflect
the true economic nature of the
amounts reported.
5. I have no significant problems
with databases.
6. Something else. Please Participant I-9: Poor adjustment
describe: for acquisitions or sale of
business segments.
c. Even if you rely somewhat on a database, do you always refer to a company's external reporting when analyzing a company? That is, do you ever use the database as a substitute for a company's external reporting? (Please check only ONE.)
1. I always refer to the company's 4 external reporting when analyzing a company. Purchased databases are a supplement to, rather than a substitute for, external reporting. 2. I only use databases; I don't refer to the company's external reports. 3. Sometimes a database is an Participant I-7: Where ratios are effective substitute for portions offered, its a major timesaver. of a company's external reporting. Participant I-10: Per Share data (Please briefly describe in what (sales, cash flow) circumstances you are willing to use a database as a substitute for external reporting.)
[PMQI 3/17, p. 29-30]
[Context] Responses to the postmeeting questionnaire of the March 11, 1993 Creditor Discussion Group meeting.
QUESTION 16
We understand that investors and creditors are increasingly purchasing databases that include information taken from external reporting. For example, those databases may include condensed financial information for a number of years or quarters and for a number of companies.
a. Do you currently use purchased databases in your work?
8 YES 5 NO
Participant C-4: D&B Financial Ratios.
Participant C-9: No, but I would like to for the reasons in 2, 3 and 4 below.
If YES, which of the following identify your reasons(s) for using a purchased database? (Please check all that usually apply.)
6 1. The database provides information on companies for which I do not have financial information.
7 2. The database helps compute aggregate ratios and other statistics for groups of companies and industries.
7 3. The database helps compare one company with others or industry averages.
7 4. The database provides quick means to check data and make comparisons with little investment, but it does not provide the information needed for full analysis of a borrower's financial circumstances.
6 5. The database helps me identify companies for further consideration (e.g. prospects for lending opportunities).
3 6. Something Else.
Please Describe:
Participant C-8: Provide older data or current opportunities.
Participant C-13: The database allows me to screen a large number of companies for potential investments (not quite the same as five).
Participant C-14: We never fully rely on data-base numbers.
Participant C-12: The database allows us to eliminate from further consideration any obviously weak performers. To the extent a quick response is desirable and to the extent that credit resource allocation is important, a fast "no-go" is a good decision.
Participant C-11: Databases do not do a good job on financial companies. If I used them for other sectors, I would check 4.
b. Which of the following describe any disadvantages you encounter with purchased databases? (Please check all that apply.)
7 1. Databases are generally not updated on a timely basis.
4 2. The data are too often incorrect.
2 3. The data are too condensed or are otherwise incomplete.
3 4. The data are too standardized in categories that do not reflect the true economic nature of the amounts reported.
2 5. I have no significant problems with databases.
0 6. Something Else.
Please Describe:
Participant C-13: We are prepared to rely on database output in identifying companies to which we lend at short-term - i.e., up to 180 days - using very conservative criteria.
Participant C-14: Not always sure what is in a specific number.
c. Even if you rely somewhat on a database, do you always refer to a company's external reporting when analyzing a company? That is, do you ever use the database as a substitute for a company's external reporting? (Please check only ONE.)
6 1. I always refer to the company's external reporting when analyzing a company. Purchased databases are a supplement to, rather than a substitute for, external reporting.
0 2. I only use databases; I don't refer to the company's external reports.
3 3. Sometimes a database is an effective substitute for portions of a company's external reporting. (Please briefly describe in what circumstances you are willing to use a database as a substitute for external reporting.)
Participant C-12: Very low risk trades/time-sensitive/one-time only. For example: Can we sell today $2 million for Deutsche marks, for delivery in 2 days, to Bank A? To verify that Bank A exists, is of sufficient size, and reported sufficient capital and good earnings, is sufficient to approve the trade.
Participant C-17: Well backed (Baa2 or better) public companies when supplemented by industry and agency reports (D&B - Value Line, for example) and bank checks - especially when operating under a compressed time frame due to competitive pressure.
[PMQC 3/11, p. 25-27]
__________
[Context] For companies in the precious metals business, the Mining Industry Subcommittee of the AIMR Corporate Information Committee would like to see improvements in reporting the following:
Change is occurring so rapidly that well informed, readily available investor contact is crucial. [Also included in 15]
Strategic input from top management, communicated in annual reports, meetings, and or by other means. [Also included in 15]
[AIMR/CIC91, p. 2]