1(d). Other
PROFESSIONAL INVESTOR[S'] VIEWS OF VARIOUS TYPES OF INFORMATION]
For [the statement below], would you say that you agree or disagree with it?
I mainly buy stocks of companies that I think may be taken over, so annual reports don't matter to me.
Results in percentages
TOTAL
AGREE 5.3
DISAGREE 88.7
DON'T KNOW/NO ANSWER 6.1
TOTAL 100.1
[HILL KNOWLTON, TABLE 3]
For [the statement below], would you say that you agree or disagree with it?
Annual reports give me a feeling for the "personality" of the company and the management.
Results in percentages
TOTAL
AGREE 49.4
DISAGREE 43.3
DON'T KNOW/NO ANSWER 7.3
TOTAL 100.0
[HILL KNOWLTON, TABLE 6]
For [the statement below], would you say that you agree or disagree with it?
Annual reports use too much technical and industry jargon.
Results in percentages
TOTAL
AGREE 34.4
DISAGREE 59.5
DON'T KNOW/NO ANSWER 6.1
TOTAL 100.0
[HILL KNOWLTON, TABLE 9]
Do you agree or disagree with the following statements: All too often, annual reports fail to --
Percentage Agreeing
with Statement
A. Display business
segment numbers
prominently and 76
clearly.
B. Candidly discuss
bad news,
problems, and
what management 92
is doing to solve
them.
C. Present
information that
reveals the
underlying values 58
of the company
D. Present
information on
company's
competitive
situation in its 92
various
businesses.
E. Clearly discuss
the outlook for
the current
year. 62
F. Clearly present 56
management's
goals and
strategy.
[HILL KNOWLTON, p. 14]
__________
A basic information set reported, in summary form [in] analysts [reports] includes EPS, the PE ratio, dividends per share, dividend yield, book value per share, cash flow per share, and return on equity. Analysts report many more items on a per share basis than are currently permitted by GAAP. [PREVITS, p. 12]
[Sell-side] analysts may not believe that investors have lengthy horizons in assessing company performance. One analyst, for instance, stated: "We continue to rate these shares as neutral,. . . in the belief that investors are not yet ready to discount earnings growth 24 months in the future." [Also included in 1(c)] [PREVITS, p. 12]
There is more analyst coverage of larger companies than of smaller companies as indicated in the fact that no reports are found for many of the "Small cap" companies. . . . [PREVITS, p. 12]
A possibly more significant policy concern demonstrated . . . is the lack of sell-side reports for the bulk of publicly traded companies and/or "Small cap" companies which comprise an important part of capital market information demand. Investors or employees or the public who have an interest in such firms are left to their own resources and to general purpose statements to ascertain the information needed. [PREVITS, p. 21]
[A]ttention [is directed to] the need for a better understanding of buy-side analysts' behavior. If the major sell-side analysts, equity and debt, can be generally characterized as income/performance and asset/leverage driven in their information requirements, how does this compare with the information need factors which drive buy-side analysts? [PREVITS, p. 21]
[Context] The final two sections of the AIMR report, Financial Reporting in the 1990's and Beyond, are reproduced in this category of the database to show them as a whole. These excerpts from the "Executive Summary" of the report serve as an introduction [summaries of the seven positions emphasized also are included in the other categories identified in the brackets following each]:
Many recommendations are made throughout the report in the context of individual topic discussions. Those singled out for special emphasis at the end of the report are:
1. Strive for world-wide acceptable GAAP, including disclosure standards. [18(a)-International harmonization of standards]
2. Set financial information in its business context. [1(b)-Types of information that investors and creditors use and the relative usefulness of that information]
3. Continue to deliberate the role of current values in financial reports. [4-Value information]
4. Recognize all executory contracts. [8(c)-Accounting for leases and other "executory" contracts]
5. Develop standards for reporting comprehensive income. [5(a)-Income statement, including core earnings and comprehensive income]
6. Provide frequent and detailed financial reports. [11(a)-Frequency of interim reporting]
7. Consider cost/benefit analysis from a user viewpoint. [18(c)-Resistance to change]
CONCLUSIONS
Throughout the report we make many other recommendations and establish positions on a variety of issues. Those mattes are set forth for two purposes. First, they announce to the rest of the world our thoughts on issues of mutual importance to investment professionals and to other constituents in the world of financial reporting. Second, they provide an opportunity for AIMR members themselves to form their individual thoughts about the implications of financial reporting and its potential effect on their work in the 1990's and beyond. [AIMR/FAPC92]
SUMMARY OF IMPORTANT POSITIONS AND GUIDE TO FUTURE ACTIONS
Much of this report relates to the present state of the art and implications for future developments in financial reporting. Rightfully, so do most of the positions stated in this section. Before presenting them, however, we must note that they all build on positions taken by AIMR in the past. For many years, the AIMR's Corporate Information Committee (CIC), SEC Liaison Committee (SECLC), and Financial Accounting Policy Committee (FAPC) have spoken often and forthrightly in presenting our views and those of our predecessor association, the Financial Analysts Federation. [Also included in 18(d)] [AIMR/FAPC92, p. 59]
The Financial Accounting Policy Committee "maintains contact with both private and public sector accounting groups that establish accounting standards to assure the needs of investors are communicated and included as standards are promulgated." Its primary activity is to react to initiatives from those bodies. The extent of that activity can be noted from Appendix A, a list of the letters of comment produced and sent by the FAPC over a five year period ended April 1, 1992. In addition to its comment letters, the FAPC issues broad position papers on financial reporting and accounting matters. It also has sponsored research on accounting matters, the most recent being quarterly segment reporting. It was commissioned by AIMR to draft this report. [Also included in 18(d)] [AIMR/FAPC92, p. 60]
The SEC Liaison Committee is the subcommittee of the Financial Accounting Policy Committee that takes responsibility for AIMR relations with the Securities and Exchange Commission. Appendix B contains a list of its communications with the SEC over the period February 2, 1989 through April 10, 1991. The major work of the Corporate Information Committee is to evaluate the quality of financial reporting and to designate awards to firms that excel in meeting their reporting obligations. Each year, the committee publishes a lengthy report of its findings together with a description of its activities and criteria for selection. Copies of that report are available from AIMR.26 [Also included in 18(d)] [AIMR/FAPC92, p. 60]
We expect the positions set forth below to build on the precedents of the past. That does not prevent them from breaking new ground, but they do not introduce significant inconsistencies with previous AIMR positions. To the extent that they do establish new stances those are largely the result of the changing world that we describe earlier in this report. [AIMR/FAPC92, p. 60]
Strive for a World-Wide Acceptable GAAP, Including Disclosure Standards
This report discusses at some length the rapid pace of financial market globalization. One of the main impediments to the efficient movement of capital to the places it is best employed is a lack of information that is comparable in either quantity or quality. We support enthusiastically the efforts of the IASC, IOSCO and others to remove or at least reduce that hindrance. [Also included in 18(a)] [AIMR/FAPC92, p. 60]
Our enthusiasm is expressed with an unequivocal caution. We will not consent to a lowering of the standards of disclosure that we currently possess. Investment professionals have been integral constituents in establishing the disclosure system currently in effect. Our criticisms of it notwithstanding, there is none better in the world. Some persons in authority have suggested that it is more important for the United States to conform to a global set of disclosure standards than it is to maintain the level of disclosure that now prevails in the United States. We disagree. Our reasons are discussed in detail elsewhere in this report. [Also included in 18(a)] [AIMR/FAPC92, p. 60]
Set Financial Information in Its Business Context
In order for financial analysts to make sound judgements and draw rational conclusions, they must judge the performance of individual business enterprises. Performance appraisal is largely a matter of evaluating how well the management of an enterprise has achieved its goals. Businesses are for the most part operated according to plans, either explicit or implicit. Investment professionals aspire to allocate capital to those plans that seem most likely to succeed. In order to do so, they need information of two types. [Also included in 1(b)] [AIMR/FAPC92, p. 61]
First, management should explicitly reveal its strategies, plans and expectations. Much of this must come in the form of narrative descriptive material. Dollar amounts of budgeted and other anticipated amounts are useful for expressing plans in more concrete terms. Goals for growth rates in revenues, market share and the like should be stated. Analysts need anticipated amounts of key ratios, such as the return on total invested capital or on equity, the ratio of debt to equity and so forth. Factors that are expected to affect those ratios should be divulged, eg. major financing or capital spending plans. [Also included in 1(b) and 12] [AIMR/FAPC92, p. 61]
Second, results need to be reported in a manner that is consistent with the organization and management of the firm. Different entities, even within the same industry, may organize their operations in totally dissimilar ways. Financial analysts need information in formats that allow them to compare those firms both against each other and against their own business plans. The task of devising accounting and disclosure standards to mandate dissemination of information in the fashion we advocate is perhaps not totally surmountable. Thus we look to business enterprises themselves to act with goodwill and in their own interests to explain themselves and their operations in "user friendly" ways even when it is not strictly required. [Also included in 1(b)] [AIMR/FAPC92, p. 61]
The Role of Current Values in Financial Reports
A great controversy has arisen recently over "mark-to-market" accounting. Feelings are strong both in favor of it and against it with a spectrum of opinion in between. Financial analysts also have diverse views, even though they are not as extreme as others may be. No financial analyst is opposed to the disclosure of current values, in fact most would welcome it. On the other hand, no analyst is at this time prepared to abandon totally the historic-cost-based but eclectic system of valuation used in accounting today. In fact, most financial analysts are going to require much persuasion before they will be willing to accept expansion of the role of current value in financial statements themselves. [Also included in 4] [AIMR/FAPC92, p. 61]
Much of the unwillingness of financial analysts to accept immediately a greater use of market values in financial statements stems from a perceived need for utmost reliability in the numbers provided to them. They feel that even though historic costs are subject to certain manipulation, the situation could be worse with respect to numbers that are not verifiable by reference to a transaction in which the enterprise participated. Some analysts are concerned also about partial measures. They feel, for example, that marking the securities portfolio and (perhaps) other assets of a bank to market is misleading if that institution's liabilities are not revalued also. Their concern is the one expressed in the preceding section, that the financial report on the business will not reflect the manner in which it is managed. [Also included in 4] [AIMR/FAPC92, p. 61-62]
The process of learning to understand and use new and unfamiliar financial information is longer and more arduous than anyone might expect. In FAS 33, we were provided with information that, although imprecise, was a godsend to those financial analysts who understood it and were able to use it in their work. Unfortunately, the FASB's five-year experiment came to an end before more than a modicum of financial analysts were able to take the necessary time from the press of their day-to-day duties to study and grasp the significance of inflation-adjusted data. That experience also was undermined by the incessant claims of individual business enterprises that the disclosures required by FAS 33 were worthless, and by the rapid decline in the rate of inflation during that five-year period. [Also included in 4] [AIMR/FAPC92, p. 62]
Our position is that we would like current value reporting to be given a chance. We need to be able to assess the extent to which volatility really exists even though the financial statements themselves may, as a political matter, need to be shielded from it. As long as current values are not seen, financial analysts cannot use them. However, the vehicle of disclosure should be used so as to offer financial analysts the opportunity to use current values. They should not be coerced into it by a sudden and unilateral removal from financial statements of the historic costs and other amounts which are familiar and useful to so many financial analysts. [Also included in 4] [AIMR/FAPC92, p. 62]
Recognize All Executory Contracts
We all have struggled to understand the immense body of detailed rules that govern accounting for leases. Sometimes it seems as if the only persons having sufficient motivation to study their particulars are those who need to write lease contracts that produce desired outcomes. We know that the criteria for distinguishing between capital lease and operating lease set forth in FAS 13 and its supplements are arbitrary and their application often is willfully capricious. Sometimes it seems as if the opportunities to manipulate the rules are in direct proportion to their copiousness. [Also included in 8(c)] [AIMR/FAPC92, p. 62]
We believe the rules could be simplified. First, we would drop the current dichotomy between accounting standards for leases and those for other executory contracts. We would have them treated in the same way. Second, we believe that financial reporting would be improved considerably if all executory contracts of more than one year duration were to be capitalized. That would result in the recognition of all receivables and payables at the present value of future legally enforceable commitments to exchange cash in the future. Our reasoning is set forth earlier in this report. [Also included in 8(c)] [AIMR/FAPC92, p. 62]
Develop Standards for Reporting Comprehensive Income
Financial analysts continue to place heavy emphasis in their work on the income statement. It produces the numerator of earnings per share calculations and the denominator of the price to earnings ratio, two stalwart numbers in the investment world. Analysts also recognize that earnings comprises a multitude of components of varying quality: some are repetitive, others are not; some are operating items, others are not; some are the product of accounting rituals, others are not; some represent economic events of the current period, others do not. Much effort is required of analysts to locate and evaluate all of the income statement items that can have a bearing on their forecasts of the future and the valuation of the firm. [Also included in 5(a)] [AIMR/FAPC92, p. 63]
Much of this report is devoted to marshalling evidence and arguments to support our position that the FASB needs to move comprehensive income from concept to application. We believe the arguments are strong and hope to see progress in this matter in the not-too-distant future. [Also included in 5(a)] [AIMR/FAPC92, p. 63]
Provide Frequent and Detailed Financial Reports
Interim financial reporting requirements in this country have been the subject of much unjust criticism. They have been blamed for everything from "short termism" to a degradation in U.S. competitiveness. Not only are those charges without merit, they also fail to credit interim reporting for its vital role in keeping investors informed, diminishing opportunities for trading on privileged information, and maintaining peak efficiency of the financial markets. We believe we present in this report and elsewhere27 valid reasons to continue mandated quarterly financial reporting. [Also included in 11(a) and 3(d)] [AIMR/FAPC92, p. 63]
One of the primary deficiencies in contemporary financial reports is the minuscule amount of disaggregated data. In annual reports, that which is provided usually is skimpy and many firms have interpreted the provisions of FAS 14 so as to report fewer segments than an analyst might expect, and sometimes segments are defined by the firm in peculiar ways. Not only are we in urgent need of new definitions and disclosure requirements to emanate from the newly-inaugurated FASB project on disaggregation, we also need segment reporting extended to interim reports. Analysis of a complex enterprise with diverse operations is futile in the absence of significant quantities of disaggregated financial data. [Also included in 11(a) and 3(d)] [AIMR/FAPC92, p. 63]
Cost/Benefit Analysis from a User Viewpoint
The benefits of producing financial statement information should exceed the cost of producing it. That is an axiom often cited by financial statement preparers in opposition to a proposed change in financial reporting practice. We not only do not object to that precept, we support it strongly. Our objection is to how it is portrayed by others. [Also included in 18(c)] [AIMR/FAPC92, p. 63-64]
We believe it is the owners of business firms who both reap the benefits and bear the costs of improvements in accounting and disclosure standards. The financial managers of business firms act simply as agents of the owners. In that regard, it is the current and potential shareholders and their financial advisors who should best be able to advise standard-setting and regulatory bodies as to the proper balance of costs and benefits associated with their proposals. [Also included in 18(c)] [AIMR/FAPC92, p. 64]
This position is corollary to the overall stance of AIMR, all other investors, and other users of financial statements. Financial statements are prepared and disseminated to provide the information that free financial markets need to operate. Users are the customers to be served. They also pay for the benefits they receive, albeit indirectly. Sometimes financial statement users are accused of being "free riders," receiving all of the benefits of financial reporting and paying none of the costs. The illogic and untruth of that statement must be apparent to anyone who makes the effort to analyze it thoughtfully. If not, then this report has failed to meet one of its goals. [Also included in 18(c)] [AIMR/FAPC92, p. 64]
CONCLUSIONS
This report is the latest in a series of occasional position papers prepared by the Financial Accounting Policy Committee of AIMR. It is the first of those to be endorsed by the entire AIMR membership. It sets forth the position of investment advisors and financial analysts on the universe of financial reporting as it affects analysis today and into the next century. It explains in much detail the function of financial analysis, its sources and uses of information in general and financial reports in particular. It speaks to trends that are expected to change practices both in analysis and accounting over the next decade or more. It addresses many issues of current importance and controversy. Some of its overall conclusions are mentioned below. [AIMR/FAPC92, p. 64]
The interaction of financial analysis and financial reporting is one that increases enormously the level of efficiency in the capital markets. One of the major tenets of a free enterprise economic system is that information is disseminated completely and fairly to all market participants. That is of course an ideal which in reality must be thought of as an unattainable standard against which to measure actual achievement. Placed in that context, our positions in this report are eminently supportable despite the fact that in many cases they call for substantial expansion of the quantity and quality of financial information now being reported. [AIMR/FAPC92, p. 64]
The role of the attest function receives somewhat less attention herein. We have observed much turmoil in the world of public accounting and are hard put to prognosticate its future course. We continue to consider attestation necessary to the credibility of financial reports, but have suggestions as to how it can be made more effective and efficient. We suggest a longer view of the process at present with the consequence that full annual audits of some enterprises may not be necessary. We suggest a shift of emphasis from transaction-based to systems-based auditing. The role of the external auditor might subtly shift from attestation to "reliability enhancement." [AIMR/FAPC92, p. 64-65]
A major portent for changing the future of financial reporting is the fact that capital markets now are global. That has led to both conflict and promise. The downside is the view of certain prominent market officials that the currently high level of accounting and disclosure standards that we enjoy in the United States be relaxed so that more foreign securities can be traded in U.S. markets. AIMR will continue to combat that movement with all of its resources. The good news is that there are accelerating attempts to internationalize accounting standards by the International Accounting Standards Committee together with an increased interest on the part of national standards-setting bodies to support that process. [AIMR/FAPC92, p. 65]
Finally, we note the reasons why financial analysts and other financial statement users sometimes are viewed as outsiders or even nonparticipants in the standard-setting process. Financial reporting is not the focus or total raison d'etre of their employment. Unlike accounting professionals, financial analysts participate as volunteers and oftentimes to the detriment rather than enhancement of their professional development and standing. Furthermore and more importantly, financial analysts have infrequent opportunities to sit in the seat(s) of decision-making power. Their comments are sought, but often either not heard or not heeded. The view of them as outsiders stems less from their unwillingness or inability to participate and more from their exclusion from the process. The FASB has had seven members throughout the nineteen years of its existence, a total of 133 man-years. Five of those years (3.76%) were contributed by a financial analyst. The time has come to make amends. Financial statement users need much more of a direct voice in the process than they have been given in the past. [AIMR/FAPC92, p. 65]
Throughout the report we make many other recommendations and establish positions on a variety of issues. Those matters are set forth for two purposes. First, they announce to the rest of the world our thoughts on issues of mutual importance to investment professionals and to other constituents in the world of financial reporting. Second, they provide an opportunity for AIMR members themselves to form their individual thoughts about the implications of financial reporting and its potential effect on their work in the 1990's and beyond. [AIMR/FAPC92, p. 65]
__________
[Context] Meeting of the Investor Discussion Group on March 17, 1993. Part of the meeting was devoted to the topic of auditor involvement. During the discussion, some investors addressed the distinction between the role of the accountant and the analyst.
Committee/Staff/Observer
Where does financial reporting end and financial analysis begin? [Also included in 17(c)] [TI 3/17, p. 16]
Participant I-16
Financial analysis is about making forecasts on future trends and performance of a business and then putting a value on the securities relating to that business. The financial analyst starts with the financial statements, which are very important. We're not suggesting that the auditor do financial analysis work; I don't presume that the auditor should make a statement on the future trends of a business but rather statements on the role of estimates in the financial numbers that purport to represent past transactions. Secondly, about the adequacy of control systems, I'm less convinced that it could be done; I'm not sure it is essential because that's something that a financial analyst should be able to do. It might be more important to the lay shareholder as opposed to the professional financial analyst. [Also included in 9 and 17(c)] [TI 3/17, p. 16]
Participant I-12
Coming back to the question about where the accounting profession ends and the analytical profession begins because I think this issue has come up more than once in this discussion group. My view is that the accounting profession in general records the business and it makes it available to the owners of the business to see what has happened. It's a financial analyst's job to project into the future and say what will happen. My concern is the importance of transparency of the financial statements, to see and understand where all those numbers come from. To me, disclosure is a vitally important issue to our profession. [TI 3/17, p. 16-17]
[Context] Meeting of the Creditor Discussion Group on December 8, 1992. Part of the meeting was devoted to discussing the types of information creditors use to achieve their objectives. During the discussion, comments were made on information to be disclosed by public versus private companies.
Participant C-5
We typically are legal entity reporting, and we do demand that of our borrowers. We look for legal entity statements at the borrowing/operating company level. We make that demand despite the fact that it's not required for SEC reporting. We get the kind of information we need. I would put that lower on the scale as far as requirements. As I said, the recurring nature and the projecting core earnings is really the driver for us. But if it is out there, the idea of imposing it on the small borrower or the private sector borrowing is not something that I see as necessary. [Also included in 3(e)] [TC 12/8, p. 36]
Participant C-1
That's the difference between publicly disclosed information and non-public inside information. And I think that's one of the problems; you have the ability to get non-public inside information, and we don't have that ability. And we don't want it. [Also included in 3(e)] [TC 12/8, p. 36]
Committee/Staff/Observer
Why don't you want it? [Also included in 3(e)] [TC 12/8, p. 36]
Participant C-1
The issue that we have is the ability to be active in the markets in the trade. And once we receive non-public inside information, we're frozen. And it's a very fine line that we have to walk as analysts or portfolio managers between non-public inside information and public information. And legal entity borrowing, that's just something we would never see. [Also included in 3(e)] [TC 12/8, p. 36-37]
__________
Committee/Staff/Observer
You were drawing a line for us earlier about the insider line where you say you don't want to cross it, because obviously then it hampers your ability to do anything with respect to that company. Does this need to know more about litigation get close to that line? [Also included in 1(b)] [TC 12/8, p. 54]
Participant C-1
It gets very close. I mean you don't need to know about all litigation. For example, we have a company that closed a subsidiary and the employees are suing. It's a class action lawsuit by 2,000 out of work blue collared employees. It's going to go on for years. That's the type of thing where we need to know and ask question about. I think crossing the line is knowing the risk is $100 million, and most companies won't tell you that. [Also included in 1(b)] [TC 12/8, p. 54]
Participant C-13
The key to the inside information question is the materiality question. And so where you cross the line is where it becomes material. Unless the information that you're getting about the lawsuit is such that it would trigger an investment action, then it's not material. [Also included in 1(b)] [TC 12/8, p. 55]
Participant C-5
Doesn't disclosure in effect move the line, though? I mean as this is disclosed, it becomes public information. [Also included in 1(b)] [TC 12/8, p. 55]
Participant C-13
Sure, if you get a piece of material information in a management interview, you tell them to disclose it. [Also included in 1(b)] [TC 12/8, p. 55]
Participant C-1
The real issue that we've got is that we have to constantly wrestle with wanting more public information, where you (banks) can go in and ask someone for that information? And they know it's never going to go any further anyway. For us it's more of an issue. [Also included in 1(b)] [TC 12/8, p. 55]
__________
Participant C-10
Sometimes we will get a company giving us a private placement, and then they'll put in a second package their projections. And first we're given the choice of do we want it, or sometimes they'll mail it, we'll mail it right back, because we don't want to be tied down. So we'll just work with the document that doesn't have the projections, and say we don't want it. Because otherwise we end up signing a letter of confidentiality, and our lawyers give us all sorts of hassle about how long that says we're tied down. There is a big issue here legally in terms of how far are you tied down and when are you released? [Also included in 1(c), 12, and 18(b)] [TC 12/8, p. 72]
One of the objectives of financial reporting is to provide information to analysts, investors, creditors and others that is useful in making investment, credit and other financial decisions. The questions in this section relate to the analysis of financial information and [analysts'] views relating to the importance and usefulness of various financial disclosures. [Also included in 1(b), 1(c), 4, and 10(d)] [KPMG BANK STUDY, p. A-16]
As part of your analysis of an institution, select one of the following letters that best describes the reason for adjusting the following financial instruments to fair value:
a. To evaluate the institution's earnings
b. To evaluate the institution's capital
c. Combination of a. and b.
d. No reason to adjust to fair value
e. No response
A B C D E
3% 60% 23% 10% 4 Equity
investments
securities
10 53 23 13 1 Debt
investment
securities
13 35 23 25 4 Purchased
mortgage
servicing
rights
15 30 20 30 5 Excess
mortgage
servicing
rights
15 30 18 35 2 Loans
5 28 18 45 4 Demand
deposits
5 30 20 40 5 Time
deposits
5 45 18 30 2 Long term
debt
8 38 18 33 3 Financial
guarantees
3 35 18 40 4 Commitments
to extend
credit
3 33 20 40 4 Letters of
credit
5 40 25 23 7 Swaps,
options,
futures,
etc.
0 0 0 0 0 Other
[Also included in 4] [KPMG BANK STUDY, p. A-16]
Estimates of fair value may vary by institution because of different assumptions, methodologies and the practicability of such disclosure. The following questions relate to the reliability and comparability of fair value estimates: [Also included in 1(b), 1(c), 2(b), and 4)] [KPMG BANK STUDY, p. A-20]
Detailed guidance on how to estimate fair values does not exist. Indicate how important detailed guidance is to the fair value estimation process.
73% Very important
25 Important
2 Not important
0 No opinion
Provide any additional comments:
Not important. The cookbook approach wont work. Also, loan-by-loan opinions will be used, and are subject to huge variations of value.
[Also included in 4)] [KPMG BANK STUDY, p. A-22]