NIH Syndrome

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Sounds to me like the Financial Accounting Standards Board is on another one of its intellectually stimulating but oh-so-impractical tangents in testing its new format for financial statements ("A New Vision for Accounting," February). Before companies are forced to pursue this expensive exercise in futility, FASB needs to be reminded of Rule #1 for financial statements: their primary intent is to provide timely, accurate, and useful information to users.

FASB needs to ask users what they find really useful in financial statements, rather than what strikes accountants' fancy. I think users and providers of financial statements would be far better served if FASB spent its time defining EBITDA. Every fundamental analysis of a business starts or ends with this metric. But FASB and the Securities and Exchange Commission seem to suffer from NIH ("Not Invented Here") Syndrome. Again, they need to get their heads out of the theoretical sky and put their feet on the ground where financial-statement users — that is, their constituency — have to operate.

Jim Davis
Via E-mail

The Difference Between RECs and Offsets

I applaud January's cover story "Carbon Trading" for attempting to bring some common business sense to one of the hottest corporate-social-responsibility tools du jour: voluntary carbon offsetting. However, as an active participant in the carbon market, I must take offense at the author's treatment of Renewable Energy Certificates (RECs) and carbon offsets as identical, interchangeable goods: they are decidedly not.

The key difference between these two intangible environmental commodities is so-called additionality (that is, the assurance that the credited emission reductions would not have occurred in a "business-as-usual" scenario). Carbon offsets are certified as representing real, additional reductions; RECs are not.

Given the deep confusion in this marketplace, it is essential that the press clearly report on integral policy differentiations. While additionality might seem like a trivial nuance to some readers, the concept is actually the very crux of carbon offsetting.

Tim Stumhofer
Portland, Oregon

The Price You Pay

It's pretty amazing what can be done when Big Brother (in this case, shareholders and Sarbanes-Oxley) isn't watching every move you make in order to pounce on the thinnest hint of impropriety (On the Record, January).

Koch Industries's Steve Feilmeier offers an engaging description of the main benefit of private ownership — the creation of long-term value precipitated by internal entrepreneurialism. If Koch were a public company, perhaps it would have been driven more by quarterly reports than by solid, sustainable growth and would not have achieved its current level of success. Public ownership is a wonderful way to raise revenue and to cash out, but it also sacrifices the spirit of independence. And that's a rather large price to pay.

Frank Settineri
Veracorp LLC
Sparta, New Jersey

Round and Round on VSOE

Allocating multiple deliverables such as software to revenue is tough enough, but now throw in a customer solution that contains leasing, a situation that any CFO with a captive finance company faces ("Why VSOE Spells Trouble," January). Under FAS 13, the finance rate to be allocated is a function of equipment fair value, which, arguably, could be a function of the finance rate (and also is effected by the value of software, maintenance, and other services). The whole thing becomes very circular and difficult to implement, as Xerox unhappily discovered.

Shawn Halladay
The Alta Group
Salt Lake City

Keeping 401(k) Plans on Track

Reading "The New Mix" (December 2007) brings to mind the issue of monitoring the "correct" investment choices. The selection, approval, and documentation process can be as important as the actual investment choices.

The board of directors should empower an investment committee, made up of a cross section of corporate disciplines, with the fiduciary authority and responsibility to monitor and change the investment structure of the 401(k) program. This committee should have an investment policy statement that outlines strategic investment guidelines for the investments. Then, periodically, the committee should monitor and document the review and any changes to the investment aspects of the program.

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