Wunderlich's 2010 Accounting Themes

Wunderlich Securities has noted accounting risk areas from reviewing 10-Qs recently filed as the following areas: benefits from purchase accounting (reversals in liabilities benefiting SG&A expenses), exposure for changes in Brazilian tax laws (denying interest deductions on certain debts) banks potentially changing methods (pools to individual loans) for loan losses, and bank disclosing broad exposures for new legislation reform, (amounts not quantified. Wunderlich wants to remind investors that within last year's (3Q09) earnings, certain companies posted "under-earned" results, mostly overlooked as they are generally considered to be non-recurring costs. Easier comparisons are expected for 3Q2010 based on overall growth rates. According to Wunderlich, headwinds can be expected as observed within Northeast Utilities (NU Buy) and Edison International (EIX Hold), as they faced significant operating cash flow so far in 2010, as a result of the bonus depreciation deduction that expired at 2009 year end. Beneficiaries to the "under-earnings" year to year comparison potentially could be Eaton Corporation ETN, Sherwin Williams SHW, and Stanley Black & Decker SWK.