Monthly Archives: August 2013

Qualitative Easing? Where are we going with new QRM proposal?

English: mortgages Green Bay, WI

A story by Bloomberg anticipates the arrival of a new version of the Qualified Residential Mortgage (QRM) rule. Coordination with the CFPB‘s Qualified Mortgage (QM) rule, issued in January, is expected. It is essential that these two rules agree, but are they going in the right direction? Continue reading Qualitative Easing? Where are we going with new QRM proposal?

Motley Fooled Again, More On AMZN R&D

In two earlier posts on this blog, we talked about the way that Amazon (AMZN) reported certain expenses which it termed “technology and content.” I didn’t have much to say about that choice. They’ve been consistent in the way they report and describe this item almost from their first 10-K. But it isn’t research and development expense, and there was only one year (2006) when the phrase ‘research and development’ wandered into the description of technology and content. No, what bothers me is the way other people decide to reclassify all of this amount as R&D, and how that affects their thinking. In this post, we’ll see that the Motley Fool investment service was fooled in exactly this way. Continue reading Motley Fooled Again, More On AMZN R&D

PCAOB: Tag the Audit Report

Proposed changes in the audit report should include the creation of tagged data (XBRL) within the audit report itself. This tagged data would represent the information conveyed in the audit report, which is being expanded under the proposed rules. Tagging would allow audit firms to use standard tags, and improve the usability of the audit report in computer searches and other analysis. Continue reading PCAOB: Tag the Audit Report

Is Quarterly Reporting A Bad Thing?

Recently, I wrote a blog about transaction taxes on high frequency trading that referenced the Kay Review. This is a study done on behalf of the UK government to examine equity market participation and long-term perspectives. One of the most frequently heard criticisms of the equity market is that it is too focused on short-term results. Continue reading Is Quarterly Reporting A Bad Thing?

AMZN: $0 R&D??? $51MM R&D Tax Credit!!! Making Money The Old Fashioned Way…

Susan Strausberg of 9W Search has pointed out that  the recent 10-Q filing of Amazon (AMZN) contains $0 in R&D expenses, though it does contain almost $1.6 billion in “technology and content” expenses. She finds this surprising to say the least. I agree.

Other large technology companies use the standard XBRL tag for R&D, and report substantial amounts, as you would expect. Amazon, in contrast, uses its own tag, which is described as capturing:

Payroll and related expenses for application development, editorial content, merchandising selection, and systems support; and costs associated with computing, storage and telecommunications infrastructure.

My plain reading of that is that these are bog standard expenses, and not research and development. If I was an infomediary, I wouldn’t lump that in with R&D. Microsoft has Microsoft Research, and Google is basically a free-standing computer science department that happens to own some fantastically valuable IP and know what to do with it.

Amazon? They sell stuff on the internet. Are there ongoing Kindle development expenses? I haven’t heard of a new Kindle tablet announcement in a while. Did Amazon develop any of the Kindle IP themselves, or did they buy the whole package from a third-party? So at one level, I think Amazon not using the R&D tag is appropriate, and anyone that remapped that expense to R&D is making a mistake.

On the other hand, Amazon in the same filing says they are claiming $51 million retroactively for an R&D tax credit. So here to me is where things get interesting, since I don’t know how you can claim an R&D tax credit without doing any R&D worthy of showing up on your financial statements.

Audit Data Standards, Who Got Left Out?

Eight different random walks.
Eight different random walks. (Photo credit: Wikipedia)

Recently, the AICPA released new guidance on Audit Data Standards. These new standards are not requirements, but they are best practices for the exchange of data. Not surprisingly, XBRL (in the form of XBRL GL) plays a big part in these standards, forming the basis of the XML version (there is also a CSV format).

If we look at the statement of the AICPA, this advance in data standardization will help management, internal auditors, and external auditors. That is fine as far as it goes, but can it go further?

Once a data exchange standard is in place (and this one isn’t, yet) its usage goes on a random walk. Some standards collapse down to zero usage, while others find more and more uses. More users and more use cases are added to its portfolio.

This growth clearly should happen with respect to these Audit Data Standards. If the external auditor, looking for evidence of fraud or imminent failure, can benefit, so can a bank trying to decide on whether to loan money, or due diligence procedures, or even a regulator.

These are just the first steps towards standardized exchange of dis-aggregated data. They are not the last.