andAnalysis(財(cái)務(wù)報(bào)表分析,臺(tái)灣中興大學(xué))

2CHAPTERFinancialReporting

andAnalysisMcGraw-Hill/Irwin?2004TheMcGraw-HillCompanies,Inc.,AllRightsReserved.1FinancialReportingEnvironmentRegulators

FASBAICPAIndustryPracticesGAAPEnforcementandMonitoringMechanismsSECCorporateGovernanceManagersAuditorsStatutoryFinancialReports(FinancialStatements)AlternativeInformationSourcesEconomyandIndustryInformationVoluntaryDisclosure

UsersAnalystsInvestorsandCreditorsOtherUsersLitigation2Form10-K(AnnualReport)10-Q(QuarterlyReport)OtherSECFilings14-A(ProxyStatement/Prospectus)StatutoryFinancialReports8-K(CurrentReport)20-F(RegistrationStatement/AnnualReport[Foreign])3EarningsAnnouncementsKeysummarymeasures(pre-audit)OftenonetosixweeklagInformativetomarketLackssupportingfinancialdetails4EnvironmentalFactorsGAAPGenerallyAcceptedAccountingPrinciplesLevelI (Mostauthoritative)

LevelII

LevelIII

LevelIV (Leastauthoritative)

FASBStandardsandInterpretationsAPBOpinionsAICPA(CAP)AccountingResearchBulletinsFASBTechnicalBulletinsAICPAIndustryAudit&AccountingGuidelinesAICPAStatementofPositionAICPAPracticeBulletinsFASBEmergingIssuesTaskForceFASBImplementationGuidesAICPAInterpretationsRecognizedandWidelyUsedIndustryPractices5EnvironmentalFactorsFinancialAccountingStandardsBoardGenerallyAcceptedAccountingPrinciplesProvideinputtoHelpset

SecuritiesandExchangeCommissionUnionsInvestorsAccountantsPoliticiansLendersOthersAICPA6EnvironmentalFactorsSecuritiesandExchangeCommission(SEC)Independent,quasi-judicialgovernmentagencyAdministersecuritiesregulations&disclosuresCanmodify&setGAAP,ifnecessaryRarelydirectlychallengesFASBMajorplayeringlobalaccounting7EnvironmentalFactorsInternationalAccountingStandards(IAS)SetbyInternationalAccountingStandardsBoardNotcurrentlyacceptedinU.S.SECunderpressuretoacceptIAS8EnvironmentalFactorsManagersofCompanies

SetbyInternationalAccountingStandardsBoard

NotcurrentlyacceptedinU.S.

SECunderpressuretoacceptIASMainresponsibilityforfair&accuratereportsAppliesaccountingtoreflectbusinessactivitiesManagerialdiscretionisnecessaryinaccountingMajorlobbyistonGAAP9EnvironmentalFactorsAuditing

SetbyInternationalAccountingStandardsBoard

NotcurrentlyacceptedinU.S.

SECunderpressuretoacceptIASSECrequiresAuditReportAuditopinioncanbe: -clean(fairlypresented) -qualified(exceptfor) -disclaimer(noopinion)CheckAuditorquality&independenceAuditors10EnvironmentalFactorsCorporateGovernance

SetbyInternationalAccountingStandardsBoard

NotcurrentlyacceptedinU.S.

SECunderpressuretoacceptIASBoardofdirectorsoversightAuditcommitteeoftheboard-overseeaccountingprocess -overseeinternalcontrol -overseainternal/externalauditInternalAuditor11EnvironmentalFactorsInternalUsersExternalUsersManagersOfficersInternalAuditorsSalesManagersBudgetOfficersControllerLendersShareholdersGovernmentsLaborUnionsExternalAuditorsCustomers12EnvironmentalFactorsCreditorsEquityInvestorsActive&SpeculativeInvestorsrelyonfinancialreportsSolvency&Liquidityanalysisreliesonfinancialreports13EnvironmentalFactorsVoluntaryDisclosureEconomic,Industry&CompanyNewsImpactscurrent&futurefinancialconditionandperformanceInformationIntermediariesIndustrydevotedtocollecting,processing,interpreting&disseminatingcompanyinformationIncludesanalysts,advisers,debtraters,buy-andsell-sideanalysts,andforecastersMajordeterminantofGAAPManyfactorsencouragevoluntarydisclosurebymanagers14FinancialAccountingStewardshipSafeguardassetsIncreaseequityvalueProtectcreditorsAccountability&PerformanceMeasurementInformationPerspectiveAmount …ofTiming prospectiveUncertaintynetcash inflowsPredictability&DecisionUsefulnessObjectivesHistoricalEmphasis(butstillimportant)ModernEmphasis15FinancialAccountingHierarchyofAccountingQualitiesConstraintsUser-specificqualities

PrimaryqualitiesIngredientsofprimaryqualitiesUnderstandabilityRelevanceReliabilityFeedbackvaluePredictivevalueComparabilityandconsistencyNeutralityVerifiabilitySecondaryqualitiesBenefits>CostsMaterialityUsersofaccountinginformation

DecisionmakersandtheircharacteristicsDecisionusefulnessRepresentationalfaithfulnessTimeliness16FinancialAccountingDoubleEntry-dualityfromaccountingequation,A=L+EHistoricalCost-fair&objectivevaluesfromarm’s-lengthtransactionsAccrualAccounting-recognizerevenueswhenearned,expenseswhenincurredFullDisclosure-measureand/ordisclosematerialeventsandtransactionsMateriality-thresholdwheninformationimpactsdecisionmakingConservatism-reportingordisclosing theleastoptimisticinformation aboutuncertaineventsandtransactionsImportantAccountingPrinciplesFASB17FinancialAccountingRelevanceofAccountingNumbersRelationbetweenAccountingNumbersandStockPrices

18FinancialAccountingTimeliness-periodicdisclosure,not real-timebasisFrequency-quarterlyandannuallyForwardLooking-limitedprospective informationLimitationsofAccountingNumbers19Accruals--TheCornerstoneNetIncome=AccrualsOperatingCashFlow

+20RevenueRecognition–recognizerevenueswhen (1)Earned (2)RealizedorRealizableExpenseMatching–matchwithcorrespondingrevenues -Productcosts -PeriodcostsAccruals--TheCornerstoneFoundationsofAccrualAccounting21

Operatingcashflow(OCF)

-/+ Cashinvestment&divestmentinoperatingassets= Freecashflow(FCF)+/- Financingcashflows(includinginvestment&

divestmentinfinancingassets)= Netcashflow(NCF)Accruals--TheCornerstoneRelationbetweenCashFlowsandAccruals22Short-TermAccruals:Yieldcurrentassetsandcurrent liabilities(alsocalledworkingcapitalaccruals)Long-TermAccruals:Yieldnon-currentassetsandnon-currentliabilities(arisemainlyfromcapitalization)Accruals--TheCornerstoneShort-TermandLong-TermAccrualsNote:Analysisresearchsuggestsshort-termaccrualsaremoreusefulincompanyvaluation23Accruals--TheCornerstoneRelevanceofCashFlowsandIncomeoveraCompany’sLifeCycle+IncomeInvestingcashflowFreecashflowFinancingcashflowOperatingcashflowDeclineGrowthMaturityInception24Accruals--TheCornerstoneComparisonofStockPrice,NetIncome,andFreeCashFlowsWal-Mart

StockpriceNetincomeFreecashflowKmart

StockpriceNetincome4.22

5.338.25

13.47

16.28

13.25

11.44

10.19

11.87

19.91

Fiscalyear19891990199119921993199419951996199719980.18

0.240.28

0.35

0.44

0.51

0.58

0.60

0.67

0.780.04

(0.01)(0.05)

(0.17)(0.48)

(0.50)

(0.19)

(0.21)

0.84

0.60

18.9416.6215.5024.5023.25

19.63

13.635.8811.13

11.00

1.76

(2.26)0.20(0.47)(2.15)1.292.710.480.611.35Freecashflow

2.000.811.892.022.07

(2.13)

0.64

(1.24)

(0.45)0.51

25Accruals--TheCornerstoneRelationbetweenStockPricesandVariousIncomeandCashFlowMeasuresforaLargeSampleofCompaniesNIBX=NetIncomebeforeExtraordinaryItemsandDiscontinuedOperations;NI=NetIncome;OCF=OperatingCashFlow;FCF=FreeCashFlows;NCF=NetCashFlow(ChangeinCash).26Accruals--TheCornerstoneRelationbetweenStockReturnsandbothIncomeandOperatingCashFlowsforDifferentHorizonsofaLargeSampleofCompaniesSource:Dechow,P.27Accruals--TheCornerstoneAccrualsandCashFlows---Myths.Myth:Sincecompanyvaluedependsonfuturecashflows, onlycurrentcashflowsarerelevantforvaluation.Myth:Companyvalueequalsdiscountedfuturecashflows.Myth:Allcashflowsarevaluerelevant.Myth:Allaccrualsaccountingadjustmentsarevalue irrelevant.Myth:Cashflowscannotbemanipulated.Myth:Allincomeismanipulated.Myth:Itisimpossibletoconsistently manageincomeupwardsinlongrun.Myth:Accountingrulesareirrelevant forvaluation.28Accruals--TheCornerstoneAccrualsandCashFlows---Truths.Truth:Accrualaccounting(income)ismore relevantthancashflow.Truth:Cashflowsaremorereliablethan accruals.Truth:Accrualaccountingnumbersaresubject toaccountingdistortions.Truth:Companyvaluecanbe determinedbyusing accrualaccounting numbers.29AccountingAnalysisDemandforAccountingAnalysisAdjustforaccountingdistortionssofinancialreportsbetterreflecteconomicrealityAdjustgeneral-purposefinancialstatementstomeetspecificanalysisobjectivesofaparticularuser30AccountingAnalysisSourcesofAccountingDistortionsAccountingStandards–attributedto(1)politicalprocessofstandard-setting,(2)accountingprinciplesandassumptions,and(3)conservatismEstimationErrors–attributedtoestimationerrorsinherentinaccrualaccountingReliabilityvsRelevance–attributedtoover-emphasisonreliabilityatthelossofrelevanceEarningsManagement–attributedtowindow-dressingoffinancialstatementsby managerstoachievepersonalbenefits31AccountingAnalysisSourcesofAnalysisObjectivesComparativesAnalysis–demandforfinancialcomparisons acrosscompaniesand/oracross timeIncomeMeasurement--demandfor(1)equitywealth changesand(2)measureof earningpower.Thesecorrespond totwoalternativeincomeconcepts (1)EconomicIncome(or empirically,economicprofit) (2)PermanentIncome(or empirically,sustainableprofit)Chapter6discussesthesemeasuresindetail32AccountingAnalysisEarningsManagement–FrequentSourceofDistortionThreecommonstrategies:IncreasingIncome–managersadjustaccruals toincreasereported incomeBigBath –managersrecordhuge write-offsinoneperiodto relieveotherperiodsof expensesIncomeSmoothing–managersdecreaseor increasereportedincome toreduceitsvolatility33AccountingAnalysisEarningsManagement–MotivationsContractingIncentives--managersadjustnumbersusedincontractsthataffecttheirwealth(e.g.,compensationcontracts)StockPrices–managersadjustnumberstoinfluencestockpricesforpersonalbenefits(e.g.,mergers,optionorstockoffering)Governme