Comments on: FAS 157 is stupid

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By: luckyzhu

luckyzhu — Fri, 30 Oct 2009 07:08:26 +0000

If you do not know your investment value, you should not invest someone else's money!

An LP does want to know what his/hers investments are approximately worth tiffany bracelet.

If VCs would just stop complaining they could find inexpensive ways to satisfy their auditors as well as raise the confidence of their LPs.

By: petya124

petya124 — Wed, 26 Aug 2009 23:33:11 +0000

I couldn't but help forwarding this to my team! I initially thought the auditor was trying to learn when I started explaining the valuation, but I guess I was wrong – they're just stubborn a&@$**!

By: ajax

ajax — Tue, 28 Jul 2009 00:11:53 +0000

Couldn't agree more. I especially like your choice of words — “stupid” is exactly what it is.

By: TQ

TQ — Fri, 01 May 2009 04:21:12 +0000

Jason,

VCs are just a bunch a whiners!!!

If you do not know your investment value, you should not invest someone else's money!

An LP does want to know what his/hers investments are approximately worth.

If VCs would just stop complaining they could find inexpensive ways to satisfy their auditors as well as raise the confidence of their LPs.

I think that "trust me" does not work anymore. You either know what you are doing and prove it, or you don't.

TQ

By: Pat

Pat — Thu, 09 Apr 2009 13:22:06 +0000

well seems pretty easy. If your fund's LPs are selling then a market has been established for all the companies in the fund just keep the total below the last LP bailing out.

But seriously, you mean to tell me that your LPs are not ever going to ask you how well you are doing? How do the LPs decide which fund they should invest in if you are asking them to use a Ouija board to guess how well the current fund is doing?

What about when a capital call comes up dry -- no ideas on which companies are the keepers v. which get shutdown?

Come on you can do better than this.

By: Robert

Robert — Thu, 05 Feb 2009 23:44:59 +0000

Amen, Jason.

I know many people who are functionally responsible for dealing with FAS 157 are too afraid to speak out about it. However, I have yet to meet a single CFO, GP or LP who thinks this is a good idea or solves a problem.

By: jamlin423

jamlin423 — Wed, 28 Jan 2009 04:00:50 +0000

I don't know if only FAS157 is stupid or most ideas in GAAP are as stupid as a whole. I feel FAS157's mark to no-prevailed-price market doesn't sound much worse than, say, recognizing revenues before you get paid and then write part of it off later. What's wrong with cash-basis accounting? VCs are ultimately being judged by their cash-in cash-out returns just like equity analysts eventually have to back those stupid non-cash items out of the equation when they're evaluating companies. Am I being too obnoxious or most of these GAAP rules are just there to create jobs?

By: Jose Paul Martin

Jose Paul Martin — Tue, 27 Jan 2009 12:30:28 +0000

I couldn't but help forwarding this to my team! I initially thought the auditor was trying to learn when I started explaining the valuation, but I guess I was wrong – they're just stubborn a&@$**!

By: CoryS

CoryS — Sat, 17 Jan 2009 01:17:00 +0000

Well said. The asset's intended holding period and the liquidity of the market are critical to understanding whether market pricing should be used.

By: Manu Kumar

Manu Kumar — Sat, 17 Jan 2009 00:13:16 +0000

Couldn't agree more. I especially like your choice of words — “stupid” is exactly what it is.

By: arinewman

arinewman — Fri, 16 Jan 2009 23:55:41 +0000

As a venture-backed startup, we aren't psyched on this either as it pushes more paperwork and reporting requirements on us, endlessly.

By: Mr. ad guy

Mr. ad guy — Fri, 16 Jan 2009 23:16:37 +0000

Jason,
If your entire portfolio is filled with L3 asset descriptions then you are in for a VERY long year. The odd thing is that this ruling can work in favor of some companies. As an example, my company built a product where the last 3-4 sales of companies with similar products added up to over $14B. I guess fair market value for my company just shot through the roof.
BTW – we are looking for another round and under FAS-157 I believe we have just become a hot ticket

By: WriterCPA

WriterCPA — Fri, 16 Jan 2009 22:31:06 +0000

We had far less hubris about valuation before some people confused numbers that would be automatically suspect on the back of an envelope with true precision because “its in the computer.” FASB signing off on this without really, really thinking about the potential behavioral, practical, economic, and political implications is much like the statement at the Baltimore CFA Society meeting in which it was suggested that “before we repeal anymore Depression ERA securities legislation, we should find out why they wrote it.”

Now that we have opened this Pandora's box of “fair market value,” the bigger question is how t0 undo the present state of fear that is crippling markets.

I think we would all be better served by getting off our collective high horses by only adjusting market values for assets regularly traded in transparent markets (listed stocks, Treasuries, rated corporate bonds, etc.) and do it where the valuation is merely an estimate unsupported by trading. Without a recent sale, we should not adjust book values absent hard evidence of impairment, e.g., the building burned to the ground. At the same time, we must work hard to disclose information about assets for which we do not change reported values so that other participants in the market can make their own reasoned conclusions about the prices they are willing to pay in an arms length exchange.

By: jason

jason — Fri, 16 Jan 2009 19:38:21 +0000

you are supposed to figure it out yourself. The auditors won't even tell you “here are the X things you need to do.”