The danger of a single story - By Chimamanda Adichie .
December 23, 2009 | Leave a Comment
“We cannot solve problems using the same mindsets that created them” - Albert Einstein.
Our lives, our cultures, are composed of many overlapping stories. Novelist Chimamanda Adichie tells the story of how she found her authentic cultural voice — and warns that if we hear only a single story about another person or country, we risk a critical misunderstanding.
Chimamanda is a best selling author from Nigeria. To read more about her, click here.
Introducing Jelani Aliyu - Lead Creative Designer General Motors.
December 11, 2009 | 5 Comments
“Seest thou a man diligent in his work? He shall stand before kings; he shall not stand before mean men” - Holy Bible (King James Version).
“As a man thinketh, so is he” - Proverbs 23.
It is our pleasure to introduce Jelani Aliyu - Senior Creative Designer General Motors. He is a testimony to the fact when we dream we can achieve a lot and that we should never let anybody set the limit of our achievements - He is from Sokoto, Nigeria (Up Eagles!!). This short video clip was culled from Youtube and presented to motivate you to aim for the highest heights in your fields of endeavor. Don’t ever settle for less and never let anybody tell you, you can’t. Impossible is nothing!! Yes we can 
.
Tupac’s Song “Changes” Selected for Vatican Playlist.
December 5, 2009 | Leave a Comment
“Instead of war on poverty, they gat war on drugz so that the police can bother me” - Tupac Amaru Shakur in one of his songs - Changes.
WASHINGTON DC - One of Tupac Amaru Shakur’s songs was selected by the Vatican for its playlist on Myspace. It is actually a welcome development because I have always believed that Tupac is one of the greatest poets ever. Very few singers are as politically and socially conscious as Tupac was during his lifetime. The song “Changes” is perhaps one of his best songs lyrically. Only twelve (12) songs were selected for the playlist, how great is that ? This is a clip from Youtube, so listen, enjoy and let the beat gravitate to your soul y’all!
FAS 157 - Fair Value Accounting for Dummies.
December 4, 2009 | Leave a Comment
“We should acknowledge immediately that, no matter how sophisticated mathematical models have become, they are idealizations of reality. They are bound to be approximate at best; at worst they can be misleading. Nonetheless, they are indispensable.” - Jacques Pezier.
WASHINGTON DC - FAS 157 simply requires that financial instruments should be marked-to-market every reporting period and that changes in the fair value or market value of securities (gain/loss) be taken into earnings. FAS 157 has three (3) hierarchies, they are explained as follows:
- Level 1 - If the financial instrument in question is quoted on the stock exchange, the security should be marked to market using market data.
- Level 2 - If the financial instrument is not quoted and securities similar to the one been valued are quoted, the financial instrument should be valued using the market data of its peers as proxy.
- Level 3 - If the financial instrument is not quoted and no proxy data is available, the securities should be marked to model.
NOTA BENE: Note that Level 1 > Level 2 > Level 3.
We are going to use a Level 3 illustration (using a foreign currency swap) to further explain the concept. The FAS 133 elements will be treated in a later lesson, however, this example will form the building block of our FAS 133 illustration which will be coming shortly.
In order to fund expansion into other countries Cashflow Inc., borrowed $500M from a consortium of lenders. Worried about exchange rate fluctuations and other macro-economic indices, TFLASH, the CFO of Cashflow Inc., entered into a foreign currency swap as follows:
- Receive 10% per annum in CNY and pay 7% in USD per annum.
- Swap will mature in one year i.e. time left on the swap agreement is 1 year.
- The principal in USD is $500M.
- The principal in CNY is $500*6.83840 = CNY 3,419.2B.
- Interest Yield is 5% and 8% in China and US respectively with continuous compounding.
- 1 US Dollar = 6.83840 Chinese Yuan Renminbi as of December 2, 2009.
- 1 Chinese Yuan Renminbi (CNY) = 0.14623 US Dollar (USD) as of December 2, 2009.
- 1 US Dollar = 6.89293 Chinese Yuan Renminbi as of December 2, 2008.
- 1 Chinese Yuan Renminbi (CNY) = 0.14508 US Dollar (USD) as of December 2, 2008.
- Transaction was entered into on December 2, 2008.
VALUATION:
Vswap = Bond Value in Local Currency - Bond Value in Foreign Currency*Exchange Rate
DAY 1 - December 2, 2008
Value of Swap is Zero. The notional is exchanged in both currencies.
December 2, 2009 - Cashflow Inc. reporting date.
Value of Foreign Currency Receiving Bond is Calculated =
Value of USD Paying Bond:
Value of Foreign Currency Swap 
a gain.
MARK-TO-MODEL ACCOUNTING ENTRIES:
Dr. Swap Asset $29.31M
Cr. Unrealized Gain - Earnings - $29.31M
PS: The above illustrations will form the basis for a lesson on FAS 133 Accounting for Foreign Currency Swap that will be treated shortly.
NOTE: Thanks to our partners at Blackinsey & Company for providing the solution. Blackinsey & Company is a top tier strategy & management consulting outfit based in Washington, DC - Blackinsey & Company is an equal opportunity employer and we do not discriminate based on race, color, national origin, sexual orientation or gender . This was created under creative commons and is copyleft. The interpretations and analysis presented in this article are purely for pedagogical exercise and Black Herald cannot be held responsible for any error of commission or omission.
Thanks for visiting our website . In the coming series, we will focus on cash flow and foreign currency hedges. We will also examine other types of derivatives namely forwards, futures, swaption, equity index and other exotic and examine different valuation tools including binomial theorem and Black-Scholes. Other third-party valuation tools will also be discussed.
If you like this article check out:
FAS 91 for Dummies and stay tuned for the following:
- FAS 133 for Dummies
- FAS 91 for Dummies (Sample with Prepayments)
- FIN 46 for Dummies
- FAS 115 for Dummies
- FAS 123(R) For Dummies
