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International Financial Statement Analysis

Book Description

Written with both the established and aspiring financial professional in mind, this book will help you understand the mechanics of the accounting process, which is the foundation for financial reporting; comprehend the differences and similarities in income statements, balance sheets, and cash flow statements around the globe; and assess the implications for securities valuation of any financial statement element or transaction. Along the way, you'll also discover how different financial analysis techniques—such as ratio analysis and common-size financial statements—can provide valuable clues into a company's operations and risk characteristics.

Table of Contents

  1. Title Page
  2. Copyright Page
  3. Foreword
  4. PREFACE
  5. Acknowledgments
  6. Introduction
    1. HISTORY
    2. BENEFITS
    3. CONVENTIONAL WISDOM
    4. THE TEXTS
  7. CHAPTER 1 - FINANCIAL STATEMENT ANALYSIS: AN INTRODUCTION
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. SCOPE OF FINANCIAL STATEMENT ANALYSIS
    4. 3. MAJOR FINANCIAL STATEMENTS AND OTHER INFORMATION SOURCES
    5. 4. FINANCIAL STATEMENT ANALYSIS FRAMEWORK
    6. 5. SUMMARY
    7. PRACTICE PROBLEMS
  8. CHAPTER 2 - FINANCIAL REPORTING MECHANICS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. THE CLASSIFICATION OF BUSINESS ACTIVITIES
    4. 3. ACCOUNTS AND FINANCIAL STATEMENTS
    5. 4. THE ACCOUNTING PROCESS
    6. 5. ACCRUALS AND VALUATION ADJUSTMENTS
    7. 6. ACCOUNTING SYSTEMS
    8. 7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS
    9. 8. SUMMARY
    10. PRACTICE PROBLEMS
    11. APPENDIX 2A: A DEBIT/CREDIT ACCOUNTING SYSTEM
  9. CHAPTER 3 - FINANCIAL REPORTING STANDARDS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. THE OBJECTIVE OF FINANCIAL REPORTING
    4. 3. FINANCIAL REPORTING STANDARD-SETTING BODIES AND REGULATORY AUTHORITIES
    5. 4. CONVERGENCE OF GLOBAL FINANCIAL REPORTING STANDARDS
    6. 5. THE INTERNATIONAL FINANCIAL REPORTING STANDARDS FRAMEWORK
    7. 6. COMPARISON OF IFRS WITH ALTERNATIVE REPORTING SYSTEMS
    8. 7. EFFECTIVE FINANCIAL REPORTING
    9. 8. MONITORING DEVELOPMENTS IN FINANCIAL REPORTING STANDARDS
    10. 9. SUMMARY
    11. PRACTICE PROBLEMS
  10. CHAPTER 4 - UNDERSTANDING THE INCOME STATEMENT
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. COMPONENTS AND FORMAT OF THE INCOME STATEMENT
    4. 3. REVENUE RECOGNITION
    5. 4. EXPENSE RECOGNITION
    6. 5. NONRECURRING ITEMS AND NONOPERATING ITEMS
    7. 6. EARNINGS PER SHARE
    8. 7. ANALYSIS OF THE INCOME STATEMENT
    9. 8. COMPREHENSIVE INCOME
    10. 9. SUMMARY
    11. PRACTICE PROBLEMS
  11. CHAPTER 5 - UNDERSTANDING THE BALANCE SHEET
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. COMPONENTS AND FORMAT OF THE BALANCE SHEET
    4. 3. MEASUREMENT BASES OF ASSETS AND LIABILITIES
    5. 4. EQUITY
    6. 5. USES AND ANALYSIS OF THE BALANCE SHEET
    7. 6. SUMMARY
    8. PRACTICE PROBLEMS
  12. CHAPTER 6 - UNDERSTANDING THE CASH FLOW STATEMENT
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. COMPONENTS AND FORMAT OF THE CASH FLOW STATEMENT
    4. 3. THE CASH FLOW STATEMENT: LINKAGES AND PREPARATION
    5. 4. CASH FLOW STATEMENT ANALYSIS
    6. 5. SUMMARY
    7. PRACTICE PROBLEMS
  13. CHAPTER 7 - FINANCIAL ANALYSIS TECHNIQUES
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. THE FINANCIAL ANALYSIS PROCESS
    4. 3. ANALYSIS TOOLS AND TECHNIQUES
    5. 4. COMMON RATIOS USED IN FINANCIAL ANALYSIS
    6. 5. EQUITY ANALYSIS
    7. 6. CREDIT ANALYSIS
    8. 7. BUSINESS AND GEOGRAPHIC SEGMENTS
    9. 8. MODEL BUILDING AND FORECASTING
    10. 9. SUMMARY
    11. PRACTICE PROBLEMS
  14. CHAPTER 8 - INTERNATIONAL STANDARDS CONVERGENCE
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. THE IFRS FRAMEWORK
    4. 3. THE BALANCE SHEET
    5. 4. THE INCOME STATEMENT
    6. 5. THE CASH FLOW STATEMENT
    7. 6. STANDARD SETTERS’ AGENDA FOR CONVERGENCE
    8. 7. EFFECT OF DIFFERENCES BETWEEN ACCOUNTING STANDARDS
    9. 8. SUMMARY
    10. PRACTICE PROBLEMS
  15. CHAPTER 9 - FINANCIAL STATEMENT ANALYSIS: APPLICATIONS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. APPLICATION: EVALUATING PAST FINANCIAL PERFORMANCE
    4. 3. APPLICATION: PROJECTING FUTURE FINANCIAL PERFORMANCE
    5. 4. APPLICATION: ASSESSING CREDIT RISK
    6. 5. APPLICATION: SCREENING FOR POTENTIAL EQUITY INVESTMENTS
    7. 6. ANALYST ADJUSTMENTS TO REPORTED FINANCIALS
    8. 7. SUMMARY
    9. PRACTICE PROBLEMS
  16. CHAPTER 10 - INVENTORIES
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. INVENTORY COST AND INVENTORY ACCOUNTING METHODS
    4. 3. FINANCIAL ANALYSIS OF INVENTORIES
    5. 4. LIFO ACCOUNTING METHOD UNDER U.S. GAAP
    6. 5. EFFECTS OF INVENTORY METHOD CHOICE
    7. 6. SUMMARY
    8. PRACTICE PROBLEMS
  17. CHAPTER 11 - LONG-LIVED ASSETS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. ACCOUNTING FOR THE ACQUISITION OF LONG-LIVED TANGIBLE ASSETS
    4. 3. ACCOUNTING FOR THE ACQUISITION OF LONG-LIVED INTANGIBLE ASSETS
    5. 4. DEPRECIATING LONG-LIVED TANGIBLE ASSETS
    6. 5. AMORTIZING INTANGIBLE ASSETS WITH FINITE USEFUL LIVES
    7. 6. ASSET RETIREMENT OBLIGATIONS
    8. 7. DISPOSAL OF LONG-LIVED OPERATING ASSETS
    9. 8. IMPAIRMENT OF LONG-LIVED ASSETS
    10. 9. REVALUATION OF LONG-LIVED ASSETS
    11. 10. SUMMARY
    12. PRACTICE PROBLEMS
  18. CHAPTER 12 - INCOME TAXES
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. DIFFERENCES BETWEEN ACCOUNTING PROFIT AND TAXABLE INCOME
    4. 3. DETERMINING THE TAX BASE OF ASSETS AND LIABILITIES
    5. 4. TEMPORARY AND PERMANENT DIFFERENCES BETWEEN TAXABLE AND ACCOUNTING PROFIT
    6. 5. UNUSED TAX LOSSES AND TAX CREDITS
    7. 6. RECOGNITION AND MEASUREMENT OF CURRENT AND DEFERRED TAX
    8. 7. PRESENTATION AND DISCLOSURE
    9. 8. COMPARISION OF IFRS AND U.S. GAAP
    10. 9. SUMMARY
    11. PRACTICE PROBLEMS
  19. CHAPTER 13 - LONG-TERM LIABILITIES AND LEASES
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. BONDS PAYABLE
    4. 3. DEBT WITH EQUITY FEATURES
    5. 4. LEASES
    6. 5. OTHER TYPES OF OFF-BALANCE-SHEET FINANCING
    7. 6. SUMMARY
    8. PRACTICE PROBLEMS
  20. CHAPTER 14 - EMPLOYEE COMPENSATION: POSTRETIREMENT AND SHARE-BASED
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
    4. 3. SHARE-BASED COMPENSATION
    5. 4. SUMMARY
    6. PRACTICE PROBLEMS
  21. CHAPTER 15 - INTERCORPORATE INVESTMENTS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. BASIC CORPORATE INVESTMENT CATEGORIES
    4. 3. MINORITY PASSIVE INVESTMENTS
    5. 4. MINORITY ACTIVE INVESTMENTS
    6. 5. JOINT VENTURES
    7. 6. CONTROLLING INTEREST INVESTMENTS
    8. 7. VARIABLE INTEREST AND SPECIAL PURPOSE ENTITIES
    9. 8. SUMMARY
    10. PRACTICE PROBLEMS
  22. CHAPTER 16 - MULTINATIONAL OPERATIONS
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. FOREIGN CURRENCY TRANSACTIONS
    4. 3. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS
    5. 4. SUMMARY
    6. PRACTICE PROBLEMS
  23. CHAPTER 17 - EVALUATING FINANCIAL REPORTING QUALITY
    1. LEARNING OUTCOMES
    2. 1. INTRODUCTION
    3. 2. DISCRETION IN ACCOUNTING SYSTEMS
    4. 3. FINANCIAL REPORTING QUALITY: DEFINITIONS, ISSUES, AND AGGREGATE MEASURES
    5. 4. A FRAMEWORK FOR IDENTIFYING LOW-QUALITY FINANCIAL REPORTING
    6. 5. THE IMPLICATIONS OF FAIR VALUE REPORTING FOR FINANCIAL REPORTING QUALITY: A BRIEF DISCUSSION
    7. 6. SUMMARY
    8. PRACTICE PROBLEMS
  24. GLOSSARY
  25. REFERENCES
  26. ABOUT THE AUTHORS
  27. ABOUT THE CFA PROGRAM
  28. INDEX