Posts Tagged ‘Oriental Financial’

Accounting Standards Designed to Increase Transparency

Thursday, October 22nd, 2009

is_accountingprinciples_440x248New accounting standards calling for property to be marked to market,  and changes in lease accounting rules will strongly impact balance sheets, income statements and the general financial outlook of American companies. Unfortunately, many corporations are not ready to deal with the changes, according to a new report from CB Richard Ellis.  The mark-to-market requirement – known as FAS 157 – became effective for financial assets November 15, 2007, and for non-financial assets such as real estate on November 15, 2008.

CBRE’s white paper – entitled “FAS Talking – Unpacking Real Estate’s Impact on Financial Statements” – notes that the estimated balance sheet impact of the lease accounting revisions will be in excess of $1 trillion.  According to the report, the combined consequences of mark-to-market and lease accounting changes might negatively impact earnings, capital requirements, debt covenant ratios, credit ratings and other yardsticks of financial health.

Todd P. Anderson, CBRE senior managing director of global corporate services, who wrote the report with Michael M. Omiya, CFO of Boeing Realty Corporation, says that the changes are “a continuation of the effort to have greater financial transparency, in particular in the financial statements of publicly traded corporations.”  According to Anderson, “In the absence of comparable sales, you have to figure out how to establish a value for your property.”  Corporations should accomplish that before the end of the year when they are on deadline to complete tax and accounting responsibilities.  “The corporate real estate department, if it understands what’s going on in the mark-to-market arena, can come in early and start to take a look at its properties and basically create an argument for why it is valuing properties the way it is,” Anderson concludes.

Keep Your Eye on the Little Guy

Monday, March 24th, 2008

With the current upheaval in the capital markets and the news that Citigroup, Merrill Lynch and Morgan Stanley have written off $70 billion in loans, it is interesting to note a whole cadre of financial institutions that are doing gangbusters.  According to an article in the 2/19/08 USA Today by Matt Krantz, smaller banks which avoided the enticement of lowering underwriting standards and issuing subprime loans, are on average, only 6% off their 52 week high.  Most of these names are unfamiliar — Danvers, First Merchants and Oriental Financial.  As the heavily leveraged buyers retrench and the access to bridge loans and mezzanine financing pulls back, could we see a number of well capitalized small cap financial institutions step in to fill the void in the commercial real estate investment market?