Valuation Techniques: Discounted Cash Flow, Earnings Quality, Measures of Value Added, and Real Options

APPENDIX 19A: VARIABLE DEFINITIONS

The following definitions are those of I/B/E/S. Table 19A.1 provides the definitions of earnings and operating cash flows used by each of the 10 countries in the study.

TABLE 19A.1 Variations among Countries in Definitions of Value Drivers

Country	Earnings	Operating Cash Flows
Australia	Normal	Normal
Canada	Normal	Normal
France	Before preferred dividends	Normal
Germany	After adjustments by Deutsche Vereinigung fur Finanzanalyse und Asset Management	Net income + Depreciation on fixed assets − Additions to fixed assets ± Change in pension and other long-term provisions ± Change in special items with reserve character ± Other expenses and income of material significance not involving payments ± Adjustments of exceptional expenses/income of material significance involving payments
Hong Kong	Normal	Normal
Japan	Including XI, less dividends	Net income + Depreciation and amortization
South Africa	Normal	Normal
Taiwan	Including XI	Net change in cash before debts
United Kingdom	Normal	Normal
United States	Normal	Normal

Notes: Earnings and operating cash flows are reported per share by dividing the company-level numbers by the weighted average number of shares outstanding during the period. “Normal” means the definition is the same as the I/B/E/S definition. XI = extraordinary items.

Earnings Per Share (EPS)

A corporation’s net income from continuing operations (i.e., income after backing out discontinued operations, extraordinary ...