International Financial Statement Analysis Workbook

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. INTERNATIONAL FINANCIAL STATEMENT ANALYSIS......Page 1 CONTENTS......Page 7 FOREWORD......Page 19 PREFACE......Page 21 ACKNOWLEDGMENTS......Page 25 HISTORY......Page 27 BENEFITS......Page 28 CONVENTIONAL WISDOM......Page 29 THE TEXTS......Page 30 LEARNING OUTCOMES......Page 33 2. SCOPE OF FINANCIAL STATEMENT ANALYSIS......Page 34 3. MAJOR FINANCIAL STATEMENTS AND OTHER INFORMATION SOURCES......Page 37 4. FINANCIAL STATEMENT ANALYSIS FRAMEWORK......Page 50 5. SUMMARY......Page 54 PRACTICE PROBLEMS......Page 55 LEARNING OUTCOMES......Page 57 2. THE CLASSIFICATION OF BUSINESS ACTIVITIES......Page 58 3. ACCOUNTS AND FINANCIAL STATEMENTS......Page 59 4. THE ACCOUNTING PROCESS......Page 68 5. ACCRUALS AND VALUATION ADJUSTMENTS......Page 84 6. ACCOUNTING SYSTEMS......Page 87 7. USING FINANCIAL STATEMENTS IN SECURITY ANALYSIS......Page 89 PRACTICE PROBLEMS......Page 91 APPENDIX 2A: A DEBIT/CREDIT ACCOUNTING SYSTEM......Page 94 LEARNING OUTCOMES......Page 111 2. THE OBJECTIVE OF FINANCIAL REPORTING......Page 112 3. FINANCIAL REPORTING STANDARD-SETTING BODIES AND REGULATORY AUTHORITIES......Page 114 4. CONVERGENCE OF GLOBAL FINANCIAL REPORTING STANDARDS......Page 119 5. THE INTERNATIONAL FINANCIAL REPORTING STANDARDS FRAMEWORK......Page 121 6. COMPARISON OF IFRS WITH ALTERNATIVE REPORTING SYSTEMS......Page 130 7. EFFECTIVE FINANCIAL REPORTING......Page 134 8. MONITORING DEVELOPMENTS IN FINANCIAL REPORTING STANDARDS......Page 136 9. SUMMARY......Page 141 PRACTICE PROBLEMS......Page 142 LEARNING OUTCOMES......Page 145 2. COMPONENTS AND FORMAT OF THE INCOME STATEMENT......Page 146 3. REVENUE RECOGNITION......Page 150 4. EXPENSE RECOGNITION......Page 161 5. NONRECURRING ITEMS AND NONOPERATING ITEMS......Page 171 6. EARNINGS PER SHARE......Page 176 7. ANALYSIS OF THE INCOME STATEMENT......Page 184 8. COMPREHENSIVE INCOME......Page 189 9. SUMMARY......Page 192 PRACTICE PROBLEMS......Page 193 LEARNING OUTCOMES......Page 197 2. COMPONENTS AND FORMAT OF THE BALANCE SHEET......Page 198 3. MEASUREMENT BASES OF ASSETS AND LIABILITIES......Page 209 4. EQUITY......Page 226 5. USES AND ANALYSIS OF THE BALANCE SHEET......Page 232 6. SUMMARY......Page 242 PRACTICE PROBLEMS......Page 243 LEARNING OUTCOMES......Page 247 1. INTRODUCTION......Page 248 2. COMPONENTS AND FORMAT OF THE CASH FLOW STATEMENT......Page 249 3. THE CASH FLOW STATEMENT: LINKAGES AND PREPARATION......Page 260 4. CASH FLOW STATEMENT ANALYSIS......Page 275 5. SUMMARY......Page 285 PRACTICE PROBLEMS......Page 286 LEARNING OUTCOMES......Page 291 1. INTRODUCTION......Page 292 2. THE FINANCIAL ANALYSIS PROCESS......Page 293 3. ANALYSIS TOOLS AND TECHNIQUES......Page 296 4. COMMON RATIOS USED IN FINANCIAL ANALYSIS......Page 308 5. EQUITY ANALYSIS......Page 334 6. CREDIT ANALYSIS......Page 340 7. BUSINESS AND GEOGRAPHIC SEGMENTS......Page 343 9. SUMMARY......Page 346 PRACTICE PROBLEMS......Page 347 LEARNING OUTCOMES......Page 355 1. INTRODUCTION......Page 356 2. THE IFRS FRAMEWORK......Page 357 3. THE BALANCE SHEET......Page 358 4. THE INCOME STATEMENT......Page 368 5. THE CASH FLOW STATEMENT......Page 371 6. STANDARD SETTERS’ AGENDA FOR CONVERGENCE......Page 372 7. EFFECT OF DIFFERENCES BETWEEN ACCOUNTING STANDARDS......Page 373 8. SUMMARY......Page 376 PRACTICE PROBLEMS......Page 377 LEARNING OUTCOMES......Page 381 1. INTRODUCTION......Page 382 2. APPLICATION: EVALUATING PAST FINANCIAL PERFORMANCE......Page 383 3. APPLICATION: PROJECTING FUTURE FINANCIAL PERFORMANCE......Page 388 4. APPLICATION: ASSESSING CREDIT RISK......Page 396 5. APPLICATION: SCREENING FOR POTENTIAL EQUITY INVESTMENTS......Page 399 6. ANALYST ADJUSTMENTS TO REPORTED FINANCIALS......Page 403 7. SUMMARY......Page 417 PRACTICE PROBLEMS......Page 418 LEARNING OUTCOMES......Page 421 2. INVENTORY COST AND INVENTORY ACCOUNTING METHODS......Page 422 3. FINANCIAL ANALYSIS OF INVENTORIES......Page 427 4. LIFO ACCOUNTING METHOD UNDER U.S. GAAP......Page 435 5. EFFECTS OF INVENTORY METHOD CHOICE......Page 445 6. SUMMARY......Page 447 PRACTICE PROBLEMS......Page 448 LEARNING OUTCOMES......Page 451 2. ACCOUNTING FOR THE ACQUISITION OF LONG-LIVED TANGIBLE ASSETS......Page 452 3. ACCOUNTING FOR THE ACQUISITION OF LONG-LIVED INTANGIBLE ASSETS......Page 460 4. DEPRECIATING LONG-LIVED TANGIBLE ASSETS......Page 467 6. ASSET RETIREMENT OBLIGATIONS......Page 476 7. DISPOSAL OF LONG-LIVED OPERATING ASSETS......Page 481 8. IMPAIRMENT OF LONG-LIVED ASSETS......Page 488 9. REVALUATION OF LONG-LIVED ASSETS......Page 493 10. SUMMARY......Page 496 PRACTICE PROBLEMS......Page 497 LEARNING OUTCOMES......Page 501 2. DIFFERENCES BETWEEN ACCOUNTING PROFIT AND TAXABLE INCOME......Page 502 3. DETERMINING THE TAX BASE OF ASSETS AND LIABILITIES......Page 508 4. TEMPORARY AND PERMANENT DIFFERENCES BETWEEN TAXABLE AND ACCOUNTING PROFIT......Page 513 6. RECOGNITION AND MEASUREMENT OF CURRENT AND DEFERRED TAX......Page 518 7. PRESENTATION AND DISCLOSURE......Page 522 8. COMPARISION OF IFRS AND U.S. GAAP......Page 528 9. SUMMARY......Page 531 PRACTICE PROBLEMS......Page 532 LEARNING OUTCOMES......Page 537 2. BONDS PAYABLE......Page 538 3. DEBT WITH EQUITY FEATURES......Page 551 4. LEASES......Page 559 5. OTHER TYPES OF OFF-BALANCE-SHEET FINANCING......Page 577 6. SUMMARY......Page 581 PRACTICE PROBLEMS......Page 582 LEARNING OUTCOMES......Page 587 2. PENSIONS AND OTHER POSTRETIREMENT BENEFITS......Page 588 3. SHARE-BASED COMPENSATION......Page 621 4. SUMMARY......Page 627 PRACTICE PROBLEMS......Page 628 1. INTRODUCTION......Page 637 2. BASIC CORPORATE INVESTMENT CATEGORIES......Page 638 3. MINORITY PASSIVE INVESTMENTS......Page 640 4. MINORITY ACTIVE INVESTMENTS......Page 644 5. JOINT VENTURES......Page 654 6. CONTROLLING INTEREST INVESTMENTS......Page 656 7. VARIABLE INTEREST AND SPECIAL PURPOSE ENTITIES......Page 674 8. SUMMARY......Page 680 PRACTICE PROBLEMS......Page 681 1. INTRODUCTION......Page 689 2. FOREIGN CURRENCY TRANSACTIONS......Page 690 3. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS......Page 703 4. SUMMARY......Page 745 PRACTICE PROBLEMS......Page 747 LEARNING OUTCOMES......Page 755 1. INTRODUCTION......Page 756 2. DISCRETION IN ACCOUNTING SYSTEMS......Page 757 3. FINANCIAL REPORTING QUALITY: DEFINITIONS, ISSUES, AND AGGREGATE MEASURES......Page 765 4. A FRAMEWORK FOR IDENTIFYING LOW-QUALITY FINANCIAL REPORTING......Page 782 6. SUMMARY......Page 814 PRACTICE PROBLEMS......Page 815 GLOSSARY......Page 821 REFERENCES......Page 835 ABOUT THE AUTHORS......Page 839 ABOUT THE CFA PROGRAM......Page 843 "The process of financial statement analysis allows you to gain important insights into the true financial condition of a company. With it, realistic valuations can be made for investment, lending, or merger and acquisition purposes. While this discipline has increased in complexity - especially on an international level - there are ways to deal with the practical challenges you'll face. As part of the CFA Institute Investment Series, International Financial Statement Analysis has been designed to help you effectively evaluate financial statements in today's volatile markets and uncertain global economy." "With International Financial Statement Analysis, the distinguished team of Thomas Robinson, Hennie van Greuning, Elaine Henry, and Michael Broihahn - together with a number of experienced contributors - provides you with complete coverage of the most important issues in this field." "Written with both the established and aspiring financial professional in mind, this book will help you understand the mechanics of the accountingprocess, 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. 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." "Along the way, you'll also become familiar with many other essential aspects of this discipline, including the importance 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 a multinational corporation." "And to enhance your understanding of the tools and techniques presented here, don't forget to pick up the International Financial Statement Analysis Workbook. This companion guide contains carefully constructed problems with detailed solutions as well as concise learning outcome statements and summary chapter overviews." "Straightforward and accessible, International Financial Statement Analysis provides you with the continuity of topic coverage that is so critical to the learning process. Filled with in-depth insights and expert advice, this practical guide offers a detailed look at how financial statement analysis can be understood in a global context and applied around the world."--Jacket To enhance your understanding of the tools and techniques presented in International Financial Statement Analysis , pick up the International Financial Statement Analysis Workbook . This companion study guide contains carefully constructed problems with detailed solutions as well as concise learning outcome statements and summary chapter overviews. With this Workbook , you can test your understanding of the many issues associated with this discipline, before putting them to use in real-world situations. If you intend on acquiring a practical mastery of international financial statement analysis, this informative guide can help you succeed. Professional quality information on international financial statement analysis. International Financial Statement Analysis provides an in-depth understanding of the discipline. It helps readers understand the mechanics of the accounting process; comprehend the differences and similarities in income statements, balance sheets, and cash flow statements; assess the implications for securities valuation of any financial statement element or transaction; and become familiar with different financial analysis techniques that provide valuable insight into a company's operations, risk characteristics This is the Workbook accompanying IFSA, the complete guide to understanding and successfully utilizing financial statements. The workbook contains learning outcomes, chapter summaries, practice problems, and solutions to help readers apply the extensive knowledge gained from reading IFSA