- Equities - In financial markets, stock is the capital raised by
a corporation or joint-stock company through the issuance and
distribution of shares. A person or organization which holds at
least a partial share of stocks is called a shareholder. The
aggregate value of a corporation's issued shares is its market
capitalization. Several clients have assisted in interacting and
operating trade capture systems,
- Mortgage Backed Securities - A mortgage-backed security ("MBS")
is an asset-backed security whose cash flows are backed by the
principal and interest payments of a set of mortgage loans. Payments
are typically made monthly over the lifetime of the underlying
loans. The corporation has supported both major handlers in this
field with their restatements and aligning their financials with
Generally Accepted Accounting Principles' reporting standards,
- Asset Backed Securities - An asset-backed security ("ABS") is a
type of bond or note that is based on pools of assets, or
collateralized by the cash flows from a specified pool of underlying
assets. Assets are pooled to make otherwise minor and uneconomical
investments worthwhile, while also reducing risk by diversifying the
underlying assets. Securitization makes these assets available for
investment to a broader set of investors. These asset pools can be
made of any type of receivable from the common, like credit card
payments, auto loans, and mortgages, or esoteric cash flows such as
aircraft leases, royalty payments and movie revenues. Typically, the
securitized assets might be highly illiquid and private in nature.
During several projects, companies held ABS securities which were
impaired,
- Cash Flows - valuation method used to estimate the
attractiveness of an investment opportunity. Discounted cash flow ("DCF")
analysis uses future free cash flow projections and discounts them
(most often using the weighted average cost of capital) to arrive at
a present value, which is used to evaluate the potential for
investment. If the value arrived at through DCF analysis is higher
than the current cost of the investment, the opportunity may be a
good one.
Calculated as:
CF1
CF2
CFn
DCF =
+
+...........+
(1+r)1
(1+r)2
(1+r)n
CF = Cash Flow
r = discount rate (WACC)
There are many variations when it comes to what you can use for your
cash flows and discount rate in a DCF analysis. Despite the
complexity of the calculations involved, the purpose of DCF analysis
is just to estimate the money you'd receive from an investment and
to adjust for the time value of money. At several clients the
solutions used to develop, test and use a cash flow generator,
- Impairments - From an accounting standpoint, an "impairment" of
a debt or equity security occurs when the fair value of the security
is less than its amortized cost basis, i.e., whenever a security has
an unrealized loss. In this situation, examiners often refer to the
security as being depreciated or under water. At client sites,
implemented systems to deal with securities impaired and amortize
them accordingly. With current developments in the market and FASB
(157 & 159) most clients are going to switch from impairing
securities and fair valuing their assets going forward in 2008.
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- Generally Accepted Accounting Principles - Generally Accepted
Accounting Principles (GAAP) is the standard framework of guidelines
for financial accounting. It includes the standards, conventions,
and rules accountants follow in recording and summarizing
transactions, and in the preparation of financial statements.
Assited several clients with complex accounting issues and
contacting the FASB to comply with accounting standards,
- International Financial Reporting Standards - International
Financial Reporting Standards (IFRS) are standards and
interpretations adopted by the International Accounting Standards
Board (IASB).
Many of the standards forming part of IFRS are known by the older
name of International Accounting Standards (IAS). IAS were issued
between 1973 and 2001 by the board of the International Accounting
Standards Committee (IASC). In April 2001 the IASB adopted all IAS
and continued their development, calling the new standards IFRS.
Currently working with a client needing to adhere to complex
accounting between GAAP and IFRS,
- Foreign Currency & FAS 52 - The functional currency
translation approach adopted encompasses:
Identifying the functional currency of the entity's economic
environment
Measuring all elements of the financial statements in the functional
currency
Using the current exchange rate for translation from the functional
currency to the reporting currency, if they are different
Distinguishing the economic impact of changes in exchange rates on a
net investment from the impact of such changes on individual assets
and liabilities that are receivable or payable in currencies other
than the functional currency ,
- FAS115 - Debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified as
held-to-maturity securities and reported at amortized cost.
Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains
and losses included in earnings.
Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of shareholders' equity. Corporation has
extensive knowledge in treatment and classification of securities
under this standard,
- FAS133 - The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use
of the derivative and the resulting designation.
-For a derivative designated as hedging the exposure to changes in
the fair value of a recognized asset or liability or a firm
commitment (referred to as a fair value hedge), the gain or loss is
recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributable to the risk
being hedged. The effect of that accounting is to reflect in
earnings the extent to which the hedge is not effective in achieving
offsetting changes in fair value.
-For a derivative designated as hedging the exposure to variable
cash flows of a forecasted transaction (referred to as a cash flow
hedge), the effective portion of the derivative's gain or loss is
initially reported as a component of other comprehensive income
(outside earnings) and subsequently reclassified into earnings when
the forecasted transaction affects earnings. The ineffective portion
of the gain or loss is reported in earnings immediately.
-For a derivative designated as hedging the foreign currency
exposure of a net investment in a foreign operation, the gain or
loss is reported in other comprehensive income (outside earnings) as
part of the cumulative translation adjustment. The accounting for a
fair value hedge described above applies to a derivative designated
as a hedge of the foreign currency exposure of an unrecognized firm
commitment or an available-for-sale security. Similarly, the
accounting for a cash flow hedge described above applies to a
derivative designated as a hedge of the foreign currency exposure of
a foreign-currency-denominated forecasted transaction.
-For a derivative not designated as a hedging instrument, the gain
or loss is recognized in earnings in the period of change.
Under this Statement, an entity that elects to apply hedge
accounting is required to establish at the inception of the hedge
the method it will use for assessing the effectiveness of the
hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent
with the entity's approach to managing risk.,
- Internal Controls - Internal control is a process, effected by
an entity’s board of directors, management and other personnel,
designed to provide reasonable assurance regarding the achievement
of objectives in the following categories:
-Effectiveness and efficiency of operations
-Reliability of financial reporting
-Compliance with applicable laws and regulations
- Committee of Sponsoring Organizations of the Treadway Commission
(COSO) - is a U.S. private-sector initiative, formed in 1985. Its
major objective is to identify the factors that cause fraudulent
financial reporting and to make recommendations to reduce its
incidence. COSO has established a common definition of internal
controls, standards, and criteria against which companies and
organizations can assess their control systems.
-Control Environment
-Risk Assessment
-Monitoring
-Information &
Communication
-Control Activities
At several clients
our organization has created and maintained documentation
explaining the process, identifying risks in those processes and
the controls that mitigate the risks. Our documentation approach
is thorough and informative and is always in compliance with
COSO objectives.
- The Control Objectives for Information and related Technology (COBIT)
- is a set of best practices (framework) for information technology
(IT) management created by the Information Systems Audit and Control
Association (ISACA), and the IT Governance Institute (ITGI) in 1992.
COBIT provides managers, auditors, and IT users with a set of
generally accepted measures, indicators, processes and best
practices to assist them in maximizing the benefits derived through
the use of information technology and developing appropriate IT
governance and control in a company.
-Install and Test
Application Software and Technology Infrastructure
-Manage Changes
-Ensure Systems
Security
-Manage Problems and
Incidents
-Manage Operations
At several clients
our organization has created and maintained documentation
explaining the process, identifying risks in those processes and
the ---controls that mitigate the risks. Our documentation
approach is thorough and informative and is always in compliance
with COBIT objectives.
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- System Development Life Cycle ("SDLC")- is defined by the U.S.
Department of Justice (DoJ) as a software development process,
although it is also a distinct process independent of software or
other Information Technology considerations. It is used by a systems
analyst to develop an information system, including requirements,
validation, training, and user ownership through investigation,
analysis, design, implementation, and maintenance. SDLC is also
known as information systems development or application development.
An SDLC should result in a high quality system that meets or exceeds
customer expectations, within time and cost estimates, works
effectively and efficiently in the current and planned information
technology infrastructure, and is cheap to maintain and
cost-effective to enhance. SDLC is a systematic approach to problem
solving and is composed of several phases, each comprising multiple
steps:
-Project planning, feasibility study: Establishes a
high-level view of the intended project and determines its
goals.
-Systems analysis, requirements definition: Refines project
goals into defined functions and operation of the intended
application. Analyzes end-user information needs.
-Systems design: Describes desired features and operations in
detail, including screen layouts, business rules, process
diagrams, pseudocode and other documentation.
-Implementation: The real code is written here.
-Integration and testing: Brings all the pieces together into a
special testing environment, then checks for errors, bugs and
interoperability.
-Acceptance, installation, deployment: The final stage of
initial development, where the software is put into production
and runs actual business.
-Maintenance / Support: What happens during the rest of the
software's life: changes, correction, additions, moves to a
different computing platform and more. This, the least glamorous
and perhaps most important step of all, goes on seemingly
forever.,
At several clients our organization has created and
maintained documentation explaining the process, identifying
risks in those processes and the ---controls that mitigate the
risks. Our documentation approach is thorough and informative
and is always in compliance with COBIT objectives.
-
Joint Application Development ("JAD") is a popular
fact-finding technique that brings users into the
development process as active participants. The
JAD process is based on four simple ideas:
- People who actually do a job have the best
understanding of that job.
- People who are trained in information
technology have the best understanding of the
possibilities of that technology.
- Information systems and business processes
rarely exist in isolation -- they transcend the
confines of any single system or office and
affect work in related departments. People
working in these related areas have valuable
insight on the role of a system within a larger
community.
- The best information systems are designed
when all of these groups work together on a
project as equal partners.
,
- Rapid Application Development - Rapid application development ("RAD"),
is a software development process developed initially by James
Martin in the 1980s. The methodology involves iterative development,
the construction of prototypes, and the use of Computer-aided
software engineering ("CASE") tools. Traditionally the rapid
application development approach involves compromises in usability,
features, and/or execution speed. It is described as a process
through which the development cycle of an application is expedited.
Rapid Application Development thus enables quality products to be
developed faster, saving valuable resources.
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