Letters

A Simpler Approach

We disagree with the hedge-effectiveness testing method described in “Practical Issues in Implementing FASB 133” (JofA, Mar.01, page 26). Our experience advising companies on interest rate risk and foreign-currency hedging transactions, and our related consulting work on applying FASB Statement no. 133, have led us to draw a substantially different conclusion—that while more than one approach may be employed, the simplest often is the best.

The article states that “the [dollar offset] method does not provide the best measure of a hedge’s expected effectiveness….A correlation analysis is a superior approach….” Our experience shows that choice of the most appropriate test method relies chiefly on the nature of the hedged risk and the type of hedging instrument used. (Statement no 133, in fact, says much the same—in paragraphs 62 and 386–390).

We assist with a great number of hedge transactions and find that in some cases regression or other statistical methods make sense. However, often they are overkill for interest rate hedges whereby all important terms are perfectly matched or only timing differences exist. For many of these situations, the accounting standards (Statement no. 133, paragraph 68, and the Derivatives Implementation Group Issue G9, for example) allow use of simple qualitative assessments that involve neither dollar offset nor statistical tests.

Jeff Kutz and Sandy Crawford
Chatham Financial Corp.
Kennett Square, Pennsylvania

The Four Musts for VCs

“How to Help Your Client’s Business Win Venture Capital” (JofA, Feb.01, page 16) is a nice enough list of dos and don’ts, but it misses the main point.

The opening line, “Venture capital is more plentiful than ever” is misleading. While significant sums of money are “in play,” my experience with Silicon Valley venture capitalists has been that it’s extremely difficult to dislodge any investment without overcoming hurdles much higher than they were in the past.

If you are new to the scene, to succeed in getting venture money, your business plan must

Show revenue.

Show signed contracts from real customers.

Demonstrate how your product will clearly solve an identifiable problem or provide real cost savings to businesses (compared to a hot new product or technology that may or may not be needed). As one venture capitalist explained to me, “We want painkillers, not vitamins.”

Last, you need to demonstrate the product or technology can scale to large volumes of business.

If your plan doesn’t have these elements, stick to getting money from friends and family.

Brian Rowbotham, CPA
Rowbotham & Co., LLC
San Francisco

Online Order Form Alternatives

“Do It on the Web” (JofA, Mar.01, page 43) gave a good, basic overview of creating an active server page (.asp) form for taking online orders and capturing the information in an Access database as part of a retail-enabled Web site.

However, before spending hours designing and writing the FrontPage code, the user needs to be aware that not all Internet service providers (ISPs) support the FrontPage.asp forms described in the article. For example, Earthlink provides Web-hosting services on Unix Servers only, so a FrontPage order form created with .asp extensions for Access will not run.

Here are several alternatives for the user who wants to offer an online order entry form on a Web site when the ISP does not support .asp extensions.

Have a programmer or Web site service company develop the order form in “cgi” script (consult your FrontPage Help for details).

Design your FrontPage order form and set Form Properties so it will “e-mail” the order information to you.

Add an HTML link from your Web site to your credit card authorization company’s Web site and let it process the order.

Bob Sheridan, President
RestaurantPlus.com
La Verne, California