Definition of Side Letter

Side Letter

A separate agreement that is used to clarify or modify the terms of a sales agreement.
side letters become a problem for revenue recognition when they undermine a sales agreement
by effectively negating some or all of an agreement's underlying terms and are maintained
outside of normal reporting channels.

Buy-side analyst

A financial analyst employed by a non-brokerage firm, typically one of the larger money
management firms that purchase securities on their own accounts.

Insider information

Relevant information about a company that has not yet been made public. It is illegal for
holders of this information to make trades based on it, however received.

Insider trading

Trading by officers, directors, major stockholders, or others who hold private inside
information allowing them to benefit from buying or selling stock.

Insiders

These are directors and senior officers of a corporation -- in effect those who have access to inside
information about a company. An insider also is someone who owns more than 10% of the voting shares of a
company.

Letter of credit (L/C)

A form of guarantee of payment issued by a bank used to guarantee the payment of
interest and repayment of principal on bond issues.

Letter stock

Privately placed common stock, so-called because the SEC requires a letter from the purchaser
stating that the stock is not intended for resale.

Letter of comment

A communication to the firm from the SEC that suggests changes to its registration
statement.

Sell-side analyst

Also called a Wall Street analyst, a financial analyst who works for a brokerage firm and
whose recommendations are passed on to the brokerage firm's customers.

Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

Two-sided market

A market in which both bid and asked prices, good for the standard unit of trading, are quoted.

Supply-Side Economics

View that incentives to work, save, and invest play an important role in determining economic activity by affecting the supply side of the economy.

Letter of Intent

A document signifying genuine interest in reaching a final agreement, conditional upon the results of more detailed due diligence and negotiations.

Letters of Credit

A letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met.

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