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    • Time To Bail Out WaMu? [view article]
      Everyone talks about level three assets and FAS 157 and fair value accounting, but the true culprit of the banking problem that no one is speaking about is FAS 140, which allowed companies like WAMU to set up QSPE's off balance sheet and continue to lend with assets/loans off balance sheet requiring less deposits and creating a loan machine. This distorted true capital ratios and could have been prevented by better accounting regulation. By the way WAMU has yet to restate earnings for all the phantom income they have booked on their option arm porfolio capitalizing interest that they will never see. Also they haven't filed a Q or a K in almost a year. Nice to see NYSE is doing such a good job policing their listed companies. Sep 10 09:47 PM
    • Priceline: More Headwinds Ahead [view article]
      I think the best reason to be short Priceline is the change required when accounting for convertible debt. It is all there in the 10Q, and it seems to be ignored by everyone.

      The Financial Accounting Standards Board issued an accounting rule change that will significantly impact the accounting for our convertible debt.



      The Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. APB 14-a, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-a”). FSP APB 14-a requires cash settled convertible debt, such as our $520 million aggregate principal amount of convertible senior notes that are currently outstanding, to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component would be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, would be recorded as a debt discount and amortized to interest expense over the life of the bond. In addition, if our convertible debt is redeemed or converted prior to maturity and the fair value of the debt component immediately prior to extinguishment exceeds the carrying value it will result in a loss on extinguishment. Although FSP APB 14-a will have no impact on our actual past or future cash flows, it will require us to record a significant amount of non-cash interest expense as the debt discount is amortized and may result in losses on extinguishment that would not have occurred under previous GAAP. FSP APB 14-a is effective for financial statements issued for fiscal years beginning after December 15, 2008. We are in the process of evaluating the impact of this new standard, but expect that it will have a material adverse impact on our results of operations and earnings per share.




      Aug 30 12:53 PM
    • Priceline and Visa: Two Stocks To Buy Now [view article]
      Can it be any clearer from the 10Q that their large convertible debt postion will eventuall bite them and bite them hard. They have already taken steps to redeem 125 million of the 520 million because of the Accounting Change. Read below.

      In May 2008, the FASB issued FASB Staff Position No. APB 14-a, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-a”). FSP APB 14-a requires cash settled convertible debt, such as our $520 million aggregate principal amount of convertible senior



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      notes that are currently outstanding, to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount and amortized to interest expense over the life of the bond. In addition, if our convertible debt is redeemed or converted prior to maturity and the fair value of the debt component immediately prior to extinguishment exceeds the carrying value it will result in a loss on extinguishment. Although FSP APB 14-a will have no impact on our actual past or future cash flows, it will require us to record a significant amount of non-cash interest expense as the debt discount is amortized and may result in losses on extinguishment that would not have occurred under previous GAAP. FSP APB 14-a is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company is evaluating the impact of this new standard, but expects that it will have a material adverse impact on our results of operations and earnings per share.



      Aug 09 06:13 PM
    • The Short Case on Priceline [view article]
      What is the status of the proposed FSP APB 14-a and EITF Issue no. 07-5 from FASB? Here is a statement from their 10K.

      The Financial Accounting Standards Board (“FASB”) is considering accounting rule changes that would significantly impact the accounting for our convertible debt.



      During the third quarter 2007, FASB issued for comment a proposed FASB Staff Position No. APB 14-a, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-a”) that would significantly impact the accounting for convertible debt. The FSP would require cash settled convertible debt, such as our $570 million aggregate principal amount of convertible senior notes that are currently outstanding, to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component would be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value would be recorded as a debt discount and amortized to interest expense over the life of the bond. Although FSP APB 14-a would have no impact on our actual past or future cash flows, it would require us to record a significant amount of non-cash interest expense as the debt discount is amortized. As a result, there would be a material adverse impact on our results of operations and earnings per share. In addition, if our convertible debt is redeemed or converted prior to maturity, any unamortized debt discount would result in a loss on extinguishment. FASB is expected to begin its redeliberations of the guidance in the proposed FSP in February 2008.



      FASB’s Emerging Issues Task Force (“EITF”) is reviewing Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock.” This Issue addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock. Under current US GAAP, the conversion options embedded in our convertible debt are considered to be indexed to our stock. If certain of the views being discussed by the EITF are adopted, we may be required to account for our embedded conversion options as derivatives and record them on our balance sheet as a liability with subsequent fair value changes recorded in the income statement. Although EITF 07-5 would have no impact on our actual past or future cash flows, it would require us to record a significant liability on our consolidated balance sheet. Subsequent fair value adjustments could result in significant charges or credits recorded in our consolidated statement of operations. As a result, there would be a material adverse impact on our financial position and results of operations and earnings per share. The EITF is expected to continue discussing EITF 07-5 at future meetings .

      Apr 10 10:52 AM
    • 3 Long Plays for Now: MasterCard, Priceline, Intuitive Surgical [view article]
      Sinclair do a little homework on Priceline before you write your garbage. How much of their cash will disappear once their 570 million convertible comes due and they have to pay the exercise in cash. Look at their conversion hedges that will unwind and look at the true dilution of the stock. Apr 02 01:13 PM
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