Off Balance Sheet Data Collection

After arriving in Williamsburg almost a month ago and getting settled in, I had my first meeting of the summer with Professors Smith and Irving concerning the first phase of my research – data collection. When I walked into the room for my meeting, I found a 122 page print out from excel containing all of the data collected by several students during the past semester waiting for me. I also received a spreadsheet template of my own with which I would be keeping track of my data collection. At first, the amount of data that I needed to sift through and collect seemed a bit daunting, but I was also eager and excited to get started.

Over the course of several eight-hour days, I went through the Management Discussion and Analysis section of each annual report for the years 2002 through 2010 for the two hundred companies in our study. As I read through the data and compiled the disclosures concerning Off Balance Sheet (OBS) Arrangements, I also went through the print out to verify the data on Contractual Obligations collected by the previous group of students. It was an extremely slow procedure at first and I didn’t make very much progress for the first few days. I found myself consulting with Professors Smith and Irving concerning the various disclosures that I came across that weren’t what I had been expecting. I soon came to find that companies rarely disclosed their OBS Arrangements in the same way as one another. Moreover, not only did I find differences in the reporting practices of different companies, but I often found that companies would change how they presented these arrangements from year to year. Before long, I found myself wishing that there were a template that all companies were required by the SEC to follow.

As I began to collect the data that I would be using for the next phase of my project, I learned what I think is a very important lesson about conducting research – be prepared to alter your procedure. In checking over the previously compiled data against the Contractual Obligation section of the annual reports, we found that there was an additional table of data in a number of filings that had previously been overlooked. As a result, we had to make alterations to my methodology to account for this and allow for this data to be collected.

Eventually I began to pick up some momentum and worked my way through the entire 1600 line spreadsheet. As I neared the end of the data collection phase, I met again with Professors Smith and Irving concerning the next phase of my research – a three pronged approach that is part data collection and part analysis. In this stage of the project I will code our database for evidence of certain OBS Arrangements such as guarantees, retained interest, derivatives, and variable interest entities, capture any qualitative amounts associated with these arrangements, and develop a measure for transparency.

As I move forward with this step, I will be reading some articles discussing financial reporting transparency in order to gain insight on possible transparency measurement techniques. My next meeting is planned for this coming Monday so that we can discuss my progress and do a bit of clean up from the first data collection stage.

I look forward to keeping you up to date on my progress.

Until next time,


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Joe Carnazza

Joe Carnazza is currently an undergraduate junior at the College of William & Mary, majoring in Accounting. He is the recipient of the Charles Center Scholarship to support his research on "Off-Balance Sheet Arrangements and the Transparency of Corporate Financial Reports."

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