Implications for Financial Analysis of Differing Financial Reporting Systems
The recent adoption of IFRS in many countries, especially in the EU, has advanced the objective of achieving global convergence of financial reporting standards. There are, however, still significant differences remaining in global financial reporting, most noticeably between IFRS and…
Company Disclosures of Significant Accounting Policies
[vsw id=”HEL3pNskRoQ” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Disclosures in the notes to a company’s financial statements and accompanying discussion provide a good source for obtaining information on the possible effect that financial reporting standards may have on the company’s financial statements….
Revenue Recognition
Accounting Standards Codification (ASC) 606 is the new revenue recognition standard affecting all entities getting into contracts with customers to transfer goods or services. These entities include the public, private, and non-profit entities and should be ASC 606 compliant. ASC…
Expense Recognition
The IASB Conceptual Framework describes expenses as “decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions…
A Spectrum for Assessing Financial Reporting Quality
When financial reporting and earnings quality are combined, the overall quality of financial reports from a user’s perspective may be viewed as spanning a continuum from the highest to the lowest point. Evaluate financial reporting quality with CFA-style practice questions…
Non-recurring Items
When assessing a company’s possible future performance, it is advisable to separate recurring items from non-recurring items. Recurring items are items of income and expense that are likely to continue in the future, while non-recurring items are those which are…
Quality of Financial Reports and Earnings
Financial reporting quality relates to the quality of the information that is contained in financial reports, including note disclosures. High-quality reporting provides relevant, decision-useful information, which objectively represents the economic reality of a company’s activities during the reporting period. Further,…
Operating versus Non-operating Items
When assessing a company’s current or potential future financial performance, it is important to consider the effects of both operating and non-operating components of the income statement. For example, a company that may appear to be profitable based on the…
Calculation of Earnings per Share
Both IFRS and US GAAP require a company to present its earnings per share (EPS) on the face of the income statement for net profit or loss (net income) and profit or loss (income) from continuing operations. The calculation of…
Dilutive Securities and Anti-dilutive Securities
Dilutive securities and anti-dilutive securities can impact the calculation of earnings per share (EPS) in opposite ways. It is therefore very important to ascertain whether the inclusion of a financial instrument in the EPS calculation has dilutive or anti-dilutive properties….
