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SFAS 155 Update

October 25, 2006
James V. Lorentsen

As discussed in yesterday’s Disciplined Investor® concerning SFAS 155, the Financial Accounting Standard Board met this morning to discuss the implementation issues and industry concerns surrounding SFAS 155. The Board approved the staff’s recommendation to issue a narrow scope exception for securitized interests that only contain an embedded derivative that is tied to the prepayment risk of the underlying assets and for which the investor does not control the right to accelerate the settlement. In layman’s terms, it appears that discount MBS and CMOs will be exempted from the bifurcation test and thus not required to be marked-to-market through earnings.

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SFAS 155: Clear, Consistent, Logical?

October 24, 2006
James V. Lorentsen

In his letter to Berkshire Hathaway shareholders in 1998, Warren Buffet commented on how he wanted accounting rules to impact his decision-makers. He stated, “they should not let any of their decisions be affected even slightly by accounting considerations. We want our managers to think about what counts, not how it will be counted.”

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Driving Blind

October 11, 2006
Kurt A. Fritz, Robbie Howland

I (Kurt) drive a Dodge Ram 1500. It’s black. Couple of dents. Not very fancy. It does not have many bells and whistles.

Robbie Howland and I were talking about cars the other day. We were talking about all the cool new gauges some of today’s vehicles have. Direction finders, digital read-outs, and mapping systems; some even have video cameras for when you back up. Maybe some day cars will even drive themselves. I wonder if we will feel safe.

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