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International Financial Statement Analysis, 2nd Edition

Book Description

Up-to-date information on using financial statement analysis to successfully assess company performance, from the seasoned experts at the CFA Institute

Designed to help investment professionals and students effectively evaluate financial statements in today's international and volatile markets, amid an uncertain global economic climate, International Financial Statement Analysis, Second Edition compiles unparalleled wisdom from the CFA in one comprehensive volume.

Written by a distinguished team of authors and experienced contributors, the book provides complete coverage of the key financial field of statement analysis. Fully updated with new standards and methods for a post crisis world, this Second Edition covers the mechanics of the accounting process; the foundation for financial reporting; the differences and similarities in income statements, balance sheets, and cash flow statements around the world; examines the implications for securities valuation of any financial statement element or transaction, and shows how different financial statement analysis techniques can provide valuable clues into a company's operations and risk characteristics.

  • Financial statement analysis allows for realistic valuations of investment, lending, or merger and acquisition opportunities

  • Essential reading for financial analysts, investment analysts, portfolio managers, asset allocators, graduate students, and others interested in this important field of finance

  • Includes key coverage of income tax accounting and reporting, the difficulty of measuring the value of employee compensation, and the impact of foreign exchange rates on the financial statements of multinational corporations

Financial statement analysis gives investment professionals important insights into the true financial condition of a company, and International Financial Statement Analysis, Second Edition puts the full knowledge of the CFA at your fingertips.

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Foreword
  6. Preface
  7. Acknowledgments
  8. About the CFA Institute Investment Series
  9. 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. Problems
  10. 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. Appendix 2A: A Debit/Credit Accounting System
    11. Problems
  11. Chapter 3: Financial Reporting Standards
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. The Objective of Financial Reporting
    4. 3. Standard-Setting Bodies and Regulatory Authorities
    5. 4. Convergence of Global Financial Reporting Standards
    6. 5. The International Financial Reporting Standards Framework
    7. 6. Effective Financial Reporting
    8. 7. Comparison of IFRS with Alternative Reporting Systems
    9. 8. Monitoring Developments in Financial Reporting Standards
    10. 9. Summary
    11. Problems
  12. Chapter 4: Understanding Income Statements
    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. Problems
  13. Chapter 5: Understanding Balance Sheets
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Components and Format of the Balance Sheet
    4. 3. Current Assets and Current Liabilities
    5. 4. Noncurrent Assets
    6. 5. Noncurrent Liabilities
    7. 6. Equity
    8. 7. Analysis of the Balance Sheet
    9. 8. Summary
    10. Problems
  14. Chapter 6: Understanding Cash Flow Statements
    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. Problems
  15. Chapter 7: Financial Analysis Techniques
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. The Financial Analysis Process
    4. 3. Analytical 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. Problems
  16. Chapter 8: 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. Problems
  17. Chapter 9: Inventories
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Cost of Inventories
    4. 3. Inventory Valuation Methods
    5. 4. The Lifo Method
    6. 5. Inventory Method Changes
    7. 6. Inventory Adjustments
    8. 7. Evaluation of Inventory Management
    9. 8. Summary
    10. Problems
  18. Chapter 10: Long-Lived Assets
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Acquisition of Long-Lived Assets
    4. 3. Depreciation and Amortization of Long-Lived Assets
    5. 4. The Revaluation Model
    6. 5. Impairment of Assets
    7. 6. Derecognition
    8. 7. Presentation and Disclosures
    9. 8. Investment Property
    10. 9. Leasing
    11. 10. Summary
    12. Problems
  19. Chapter 11: 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. Comparison of IFRS and U.S. GAAP
    10. 9. Summary
    11. Problems
  20. Chapter 12: Noncurrent (Long-Term) Liabilities
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Bonds Payable
    4. 3. Leases
    5. 4. Introduction to Pensions and Other Postemployment Benefits
    6. 5. Evaluating Solvency: Leverage and Coverage Ratios
    7. 6. Summary
    8. Problems
  21. Chapter 13: Employee Compensation: Postemployment and Share-Based
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Pensions and Other Postemployment Benefits
    4. 3. Share-Based Compensation
    5. 4. Summary
    6. Problems
  22. Chapter 14: Intercorporate Investments
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Basic Corporate Investment Categories
    4. 3. Investments in Financial Assets
    5. 4. Investments in Associates
    6. 5. Joint Ventures
    7. 6. Business Combinations
    8. 7. Variable Interest and Special Purpose Entities
    9. 8. Summary
    10. Problems
  23. Chapter 15: 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. Problems
  24. Chapter 16: 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. Problems
  25. Chapter 17: Integration of Financial Statement Analysis Techniques
    1. Learning Outcomes
    2. 1. Introduction
    3. 2. Case Study 1: Long-Term Equity Investment
    4. 3. Case Study 2: Off-Balance Sheet Leverage From Operating Leases
    5. 4. Case Study 3: Anticipating Effects of Changes in Accounting Standards
    6. 5. Summary
    7. Problems
  26. Glossary
  27. References
  28. About the Authors
  29. About the CFA Program
  30. Index