07/14/2014

It has occurred to us that in our shop talk about extended yield methods, we did not point out the fact that under the traditional sinking fund method or Standard Sinking Fund Method as it is alternatively called, earnings are reported on a much more even basis for all years over the entire life of the transaction (see Exhibits A,B,C -3). That fact when combined with all the other virtues of the traditional method  seems to make it a prime candidate for consideration as a method for reporting lessor leveraged lease interest income. It has the virtue of preserving the after tax considerations of leveraged lease accounting and helps provide the impetus (though not as great due to the loss of up fronting income on early years EPS) to continue doing leveraged leases should the tax appetites and/or market ever return for what ever reason(s). Where the FASB is going to land is anybody's guess! Retaining the MISFM-Legacy is certainly an option, though an unwieldy one, to be sure. I must repeat what I said on my blog  earlier on referring to the MISFM-Legacy...."Born of Ignorance, lived in Glory and should die in ignominy". Perhaps having up fronted all the income in leveraged deals done "back in the day" has helped lead some companies to consider leaving the business for more fertile grounds as what is left in income can't support the carrying costs. Does anyone have any companies in mind? The ole matching costs against revenues issue is rearing it's ugly head. What goes around, comes around! .........Just saying.

We now have a clearly defined mission. It follows:

Doing DCF analysis without access to a computerized system is impossible given our life spans. The use of a capable, versatile, easily and quickly manipulated computerized system is absolutely necessary. PAMS-DCF is just such a system thanks in part to the choice of EXCEL as its database,  which most people have and are familiar with. Excel, when coupled to the front-end input software and powerful yield analysis engine make an unprecedented combination for dealing with DCF analysis.

PAMS-DCF is a tool that is affordable and easily learned and should be as basic to the tool box of every financial industry person and financial educator as a hammer is to a carpenter.

 We at PAMS-DCF Inc. intend to see to it that everyone can afford to have access to this tool and the knowledge to use it,  that is our Mission.   

7/7/2015

After reviewing some literature about the current accounting developments, I am arriving at the conclusion that if nothing else changes in leveraged lease reporting from the lessor side, it is highly likely that the MISFM is history. It is a positive development as the method had no basis in logic or good discounted cash flow techniques. Along with the elimination of the MISFM will likely go the elimination of all after tax techniques in the accounting for leveraged leases on the lessor side. That is too bad! I am not certain what is driving leveraged deals today. I have read that few are getting done. Perhaps the lowering of effective tax rates, the off-shoring of income and other avenues of shelter have made the need for leveraged deals less. Lower interest rates also reduce the need for tax benefits. Whatever the reasons, the MISFM never had a place in good DCF theory or practice. It's only reason for existence was that it was used in distributing income in the leveraged lease lessor reporting arena. If that goes away it has no reason to ever exist (except to review past bad reporting). RIP MISFM...you were born from ignorance, lived in glory, and died in ignominy. You drove the boom in the leasing industry for such greats as GE Capital for many years, and for that you deserve your glory.