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 In
the News:
Texas Lawmakers Seek to Avoid New Accounting Rule
The New York Times, March 12, 2007
McCombs Accounting Professor Michael Granof has been
a critic of proposed Texas legislation that would allow
government officials to sidestep a new national accounting rule
that takes effect this year. The rule calls for state and local
governments across the country to report obligations for future
costs for medical and related benefits that their employees will
receive when they retire. Texas, however, is looking to opt out of the
process. “Our legislature does crazy things,” said Granof in
The New York Times. “We have a law for blind hunters. This
is probably the dumbest bill since that.” In an op-ed published
in the Austin American-Statesman (March 13, 2007), Granof
wrote, “The pending legislation is especially pernicious because
it will undermine the authority of the independent accounting
board to objectively establish standards. Each state will then
be free to set its own rules. Just imagine how reliable
financial statements will be when it is the politicians who
determine our accounting principles.”
Read the New York Times story.
Read Michael Granof’s Austin American-Statesman op-ed.
Read follow-up story in Austin American-Statesman.
“Navigating the Global Workplace” Focus of
This Week’s MBA Alumni Conference
 The
annual McCombs MBA Alumni Network Business Conference will
focus this year on the topic of “Navigating the Global Workplace.”
The two-day conference held March 22-23 in Austin will feature, among
other events, McCombs faculty Michael Brandl, John
Doggett (left), Prabhudev Konana and Vijay
Mahajan sharing the
latest research on important global business issues. Alumni
representing a diverse set of companies from around the country
are expected to attend this event. Now in its second year, the
McCombs MBA Alumni Conference is a great way of keeping up with
current trends in the business world while reconnecting with old
friends and meeting new ones.
Get the full story.
 “Mad
Money” a Hit With McCombs Students
Austin has long been known as the capital of the Republic of
Texas, but for a couple days this week Austin—or at least the
campus of The University of Texas—became the official center of
Cramerica, a nation headed by Jim Cramer and populated by fans
of his hit stock-picking show “Mad Money” on CNBC. The effusive
Cramer brought his passion for investing and for engaging
college students (plus a whole lot of sound effects) to Austin as
a part of the show’s “Back to School” tour, which culminated
with a taping at the Hogg Auditorium March 20 in front of 800
students, mostly from the McCombs School of Business.
Get the full story.
In
the News:
Gray Area: Idle Assets Lead to Accounting
Questions for Company
The Wall Street Journal, March 20, 2007
Like many businesses, Martek Biosciences Corp. believes its
products will soon be the next big thing. So it has ramped up
its capacity to make food additives based on the omega-3 fatty
acid found in fish. The problem is that it has struggled to gain
market share, and now one of its accounting practices has raised
concerns—specifically Martek’s treatment of what it calls
“idle” assets. Martek noted in its fiscal-first-quarter results
that it has $94.3 million of
property, plant and equipment “being
held for future use.” Martek, however, doesn't depreciate
these assets. Such an approach is pretty rare because
companies typically depreciate assets they are either using
or could be using. Robert N. Freeman, accounting professor, said
the company’s approach may find support in accounting principles
laid down in the early 1950s that say depreciation should occur
when an asset is used. “You’re in a gray area,” he added.
Get the full story.
 In
the News:
McCombs MBA Students Meet with Minister of Indian Railways
in New Dehli
The Hindu, March 17, 2007
During the 50-minute interaction with MBA students on a
global trip for the McCombs School, Railway
Minister Lalu Prasad “bowled them over with his rustic
humbleness combined with witty humour” while sharing the success
story of the Railways. Prasad interacted with the students in a
mix of Hindi, English and Bhojpuri often giving them examples of
how the Railways managed to turnaround and post a huge profit
this year.
Get the full story.
In
the News:
Research from McCombs’ Griffin Finds
Hedge Fund Returns Unimpressive
BusinessWeek Online, March 19, 2007
John Griffin, associate professor of finance, and his
co-author have some bad news for proponents of hedge funds in
their new paper “How Smart Are the Smart Guys?” After reviewing
the quarterly stock holdings of about 300 hedge fund firms
against equity mutual funds from 1980 through 2004, the
researchers found that hedge funds failed to deliver except
during the Internet bubble. On average, hedge funds outperformed
mutual funds by 1.4 percentage points per year, but three-quarters
of the outperformance was due solely to inflated technology
profits during 1999 and 2000. The remainder without those years
is statistically insignificant.
The hedge fund returns are also measured before fees, so after
the
hedge funds’ greater fees, the outperformance would be even
smaller.
Get the full story.
McCombs School Job Postings:
See past issues of McCombs Weekly.
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