On the one hand, it is not difficult to imagine that tax changes would have some effect, at the margin, on the mix of the various forms of employee compensation – current cash, deferred/contingent cash, or equity scrips. On the other hand, it is difficult to conjecture a causal relationship between changing financial reporting requirements and lower aggregate (risk-adjusted) take-home worker compensation.
The Financial Reporting Blog
A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals.
David Einhorn of Greenlight Capital Inc. is no stranger to controversy. His current project is General Motors Corp. He put a flashlight on its common shares on March 28 arguing that they are unreasonably cheap. Immediately before the proposal was made GM’s shares were trading just below $35 per share, which equates to 5.8x 2016 earnings of $6.00 per share and 5.6x the midpoint of management’s 2017 guidance ($6.25 per share). The dividend yield is high at 4.4%, more than double the yield of the S&P 500. As Einhorn points out, the yield is not high because the payout ratio is high; the $1.52 per share dividend equates to just one quarter of (current) earnings.
The new revenue recognition standard has been called “historic in its breadth and impact across industries.” The standard itself was introduced back in 2014 with the FASB’s issuance of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Since that time, accountants and preparers have grappled with preparing for the new guidance. The focus of this post is not to comprehensively explain the new rules. Instead, we examine one public company’s experience with the transition (Workday) and then highlight a few areas that may be of interest to analysts, finance managers, and interested onlookers – from a valuation perspective.
l was struck by how the Ruth’s Chris Steak House in Lafayette, La. was packed on a mid-March Tuesday night. When I ate there a year ago, I was one of a half-dozen people in the restaurant. Perhaps it is just a coincidence, but the price of oil nearly doubled over that period. The regional economy may not be that responsive to moves in the price of crude, but people’s reaction of being tight-fisted vs. loosening-up can change quickly based upon perceptions.
Mercer Capital supports the new credential for valuation professionals whose practices are dedicated to valuing businesses and intangible assets for U.S. public companies. The CEIV™—Certified in Entity and Intangible Valuations™—is now available to current or prospective members of the American Society of Appraisers (ASA), the American Institute of CPAs (AICPA), or the Royal Institute of Chartered Surveyors (RICS).
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