The Financial Numbers Game Detecting Creative Accounting Practices

by Mulford, Charles W.; Comiskey, Eugene E.

• ISBN13: 9780471770732
• ISBN10: 0471770736
• Edition: 1st
• Format: Paperback
• Copyright: 2005-09-30
• Publisher: Wiley

Summary

"After reading The Financial Numbers Game, I feel as though Ive taken a masters level course in financial statement analysis. Mulford and Comiskeys latest book should be required reading for anyone who is serious about fundamentally analyzing stocks." Harry Domash, San Francisco Chronicle investing columnist and investment newsletter publisher

Author Biography

Charles W. Mulford is the Invesco Chair and Professor of Accounting and Eugene E. Comiskey is the Callaway Chair and Professor of Accounting in the DuPree College of Management at the Georgia Institute of Technology in Atlanta. Both professors have doctorates in accounting and are professionally qualified as certified public accountants. In addition to their work at Georgia Tech, they actively consult with lenders at commercial banks in the United States and abroad. Professors Mulford and Comiskey have published articles on financial reporting and analysis issues in leading academic journals in the accounting and finance fields as well as in such widely read professional journals as the Commercial Lending Review and the Financial Analysts’ Journal. This is the authors’ third book. Their first, Financial Warnings, published in 1996, identifies the warning signs of future corporate earnings difficulties. Their second, Guide to Financial Reporting and Analysis, seeks to simplify the complexities of current-day generally accepted accounting principles as an aid to practicing financial analysts and other users of financial statements.

Table of Contents

Financial Numbers Game	1	(18)
Rewards of the Game	2	(6)
Classifying Creative Accounting Practices	8	(5)
Plan of This Book	13	(1)
Summary	14	(1)
Glossary	15	(1)
Notes	16	(3)
How the Game Is Played	19	(38)
Accounting Policy Choice and Application	19	(20)
Fraudulent Financial Reporting	39	(5)
Cleaning Up after the Game	44	(5)
Clarifying Terminology	49	(1)
Summary	50	(1)
Glossary	50	(2)
Notes	52	(5)
Earnings Management: A Closer Look	57	(36)
What Is Earnings Management?	58	(2)
Incentives and Conditions for Earnings Management	60	(2)
Earnings Management Techniques	62	(6)
Evidence of Earnings Management	68	(6)
Effectiveness of Earnings Management	74	(8)
Is Earnings Management Good or Bad?	82	(2)
Summary	84	(2)
Glossary	86	(2)
Notes	88	(5)
The SEC Responds	93	(34)
The Chairman's Speech	93	(3)
The Action Plan	96	(3)
Subsequent Developments	99	(9)
Enforcing the Securities Laws	108	(12)
Summary	120	(2)
Glossary	122	(1)
Notes	123	(4)
Financial Professionals Speak Out	127	(32)
Survey of Financial Professionals	129	(4)
Survey Results	133	(23)
Summary	156	(1)
Glossary	157	(1)
Notes	158	(1)
Recognizing Premature or Fictitious Revenue	159	(42)
Is It Premature or Fictitious Revenue?	160	(5)
When Should Revenue Be Recognized?	165	(20)
Detecting Premature or Fictitious Revenue	185	(6)
Checklist to Detect Premature or Fictitious Revenue	191	(2)
Summary	193	(1)
Glossary	194	(2)
Notes	196	(5)
Aggressive Capitalization and Extended Amortization Policies	201	(36)
Cost Capitalization	202	(12)
Detecting Aggressive Cost Capitalization Policies	214	(6)
Amortizing Capitalized Costs	220	(6)
Detecting Extended Amortization Periods	226	(3)
Checklist to Detect Aggressive Capitalization and Extended Amortization Policies	229	(2)
Summary	231	(1)
Glossary	231	(2)
Notes	233	(4)
Misreported Assets and Liabilities	237	(42)
Link with Reported Earnings	238	(1)
Boosting Shareholders' Equity	239	(1)
Overvalued Assets	240	(19)
Undervalued Liabilities	259	(9)
Checklist to Detect Misreported Assets and Liabilities	268	(3)
Summary	271	(1)
Glossary	272	(3)
Notes	275	(4)
Getting Creative with the Income Statement: Classification and Disclosure	279	(38)
Current Income Statement Requirements and Practices	280	(12)
Reporting Comprehensive Income	292	(3)
Creative Income Statement Classifications	295	(9)
Creativity with Other Aspects of the Income Statement	304	(7)
Summary	311	(1)
Glossary	312	(1)
Notes	313	(4)
Getting Creative with the Income Statement: Pro-Forma Measures of Earnings	317	(28)
Recasting the Bottom Line: Pro-Forma Earnings Measures	318	(21)
Summary	339	(1)
Glossary	340	(1)
Notes	341	(4)
Problems with Cash Flow Reporting	345	(34)
Reporting Cash Flow	347	(7)
Problems with Reported Operating Cash Flow	354	(16)
Using Operating Cash Flow to Detect Creative Accounting Practices	370	(3)
Checklist for Using Operating Cash Flow to Detect Creative Accounting Practices	373	(1)
Summary	373	(2)
Glossary	375	(2)
Notes	377	(2)
Subject Index	379	(12)
Company Index	391