International Financial Statement Analysis (CFA Institute Investment Series)

by Robinson, Thomas R.; Henry, Elaine; Pirie, Wendy L.; Broihahn, Michael A.; Cope, Anthony T.

• ISBN13: 9780470916629
• ISBN10: 0470916621
• Edition: 2nd
• Format: Hardcover
• Copyright: 2012-05-01
• Publisher: Wiley

Summary

This book is designed to help investment professionals and students effectively evaluate financial statements in today's international and volatile markets, amid an uncertain global economic climate. The distinguished team of authors, along with experienced contributors, provides complete coverage to one of the most important issues in the field. International Financial Statement Analysis, 2nd edition, fully updated with new standards and methods for a post crisis world, covers the mechanics of the accounting process, which is the foundation for financial reporting; the differences and similarities in income statements, balance sheets, and cash flow statements around the world, examines the implications for securities valuation of any financial statement element or transaction, and shows how different financial statement analysis techniques can provide valuable clues into a company's operations and risk characteristics. The book also includes coverage 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 multinational corporations.

Author Biography

Thomas R. Robinson, CFA, is Managing Director of the Education Division of CFA Institute where he leads and develops the teams responsible for producing and delivering educational content and examinations to candidates, members, and other investment professionals encompassing the CFA Program, CIPM Program, Lifelong Learning, Private Wealth, Publications, and Conferences.

Elaine Henry, CFA, is an Assistant Professor of Accounting at the University of Miami where she teaches courses in accounting, financial statement analysis, and valuation. After working in corporate finance at Lehman Brothers, strategy consulting at McKinsey & Company, and corporate banking at Citibank, she obtained a PhD from Rutgers University where she majored in accounting and minored in finance.

Wendy L. Pirie, CFA, is Director, Curriculum Projects, in the Education Division of CFA Institute. Prior to joining CFA Institute in 2008, she taught finance, accounting, statistics, taxation, business law, and marketing for over twenty years at both large and small public and private universities, religious colleges, and military academies. Her work has been published in the Journal of Financial Research and the Journal of Economics and Finance. She holds a PhD from Queen's University in Kingston, Ontario, and MBAs from the University of Toronto and the University of Calgary. Pirie is also coauthor of Investments: Principles of Portfolio and Equity Analysis (Wiley).

Michael A. Broihahn, CFA, is an Associate Professor of Accounting and the Director of Graduate Programs at Barry University in Miami, Florida. His teaching and research interests encompass financial accounting, auditing, and professional ethics. He currently serves CFA Institute in a number of different capacities.

Table of Contents

Foreword

Preface

Acknowledgments

Introduction

Financial Statement Analysis: An Introduction

Learning Outcomes

Introduction

Scope of Financial Statement Analysis

Major Financial Statements and Other Information Sources

Financial Statement Analysis Framework

Summary

Problems

Financial Reporting Mechanics

Learning Outcomes

Introduction

The Classification of Business Activities

Accounts and Financial Statements

The Accounting Process

Accruals and Valuation Adjustments

Accounting Systems

Using Financial Statements in Security Analysis

Summary

A Debit/Credit Accounting System

Problems

Financial Reporting Standards

Learning Outcomes

Introduction

The Objective of Financial Reporting

Standard-Setting Bodies and Regulatory Authorities

Convergence of Global Financial Reporting Standards

The International Financial Reporting Standards Framework

Effective Financial Reporting

Comparison of IFRS with Alternative Reporting Systems

Monitoring Developments in Financial Reporting Standards

Summary

Problems

Understanding Income Statements

Learning Outcomes

Introduction

Components and Format of the Income Statement

Revenue Recognition

Expense Recognition

Non-Recurring Items and Non-Operating Items

Earnings per Share

Analysis of the Income Statement

Comprehensive Income

Summary

Problems

Understanding Balance Sheets

Learning Outcomes

Introduction

Components and Format of the Balance Sheet

Current Assets and Current Liabilities

Non-Current Assets

Non-Current Liabilities

Equity

Analysis of the Balance Sheet

Summary

Problems

Understanding Cash Flow Statements

Learning Outcomes

Introduction

Components and Format of the Cash Flow Statement

The Cash Flow Statement: Linkages and Preparation

Cash Flow Statement Analysis

Summary

References

Problems

Financial Analysis Techniques

Learning Outcomes

Introduction

The Financial Analysis Process

Analytical Tools and Techniques

Common Ratios Used in Financial Analysis

Equity Analysis

Credit Analysis

Business and Geographic Segments

Model Building and Forecasting

Summary

References

Problems

Financial Statement Analysis: Applications

Learning Outcomes

Introduction

Application: Evaluating Past Financial Performance

Application: Projecting Future Financial Performance

Application: Assessing Credit Risk

Application: Screening for Potential Equity Investments

Analyst Adjustments to Reported Financials

Summary

References

Problems

Inventories

Learning Outcomes

Introduction

Cost of Inventories

Inventory Valuation Methods

The LIFO Method

Inventory Method Changes

Inventory Adjustments

Evaluation of Inventory Management

Summary

Problems

Long-Lived Assets

Learning Outcomes

Introduction

Acquisition of Long-Lived Assets

Depreciation and Amortisation of Long-Lived Assets

The Revaluation Model

Impairment of Assets

Derecognition

Presentation and Disclosures

Investment Property

Leasing

Summary

Problems

Income Taxes

Learning Outcomes

Introduction

Differences between Accounting Profit and Taxable Income

Determining the Tax Base of Assets and Liabilities

Temporary and Permanent Differences between Taxable and Accounting Profit

Unused Tax Losses and Tax Credits

Recognition and Measurement of Current and Deferred Tax

Presentation and Disclosure

Comparison of IFRS and U.S. GAAP

Summary

Problems

Non-Current (Long-Term) Liabilities

Learning Outcomes

Introduction

Bonds Payable

Leases

Introduction to Pensions and Other Post-Employment Benefits

Evaluating Solvency: Leverage and Coverage Ratios

Summary

Problems

Employee Compensation: Post-Employment and Share-Based

Learning Outcomes

Introduction

Pensions and Other Post-Employment Benefits

Share-Based Compensation

Summary

References

Problems

Intercorporate Investments

Learning Outcomes

Introduction

Basic Corporate Investment Categories

Investments in Financial Assets

Investments in Associates

Joint Ventures

Business Combinations

Variable Interest and Special Purpose Entities

Summary

Problems

Multinational Operations

Learning Outcomes

Introduction

Foreign Currency Transactions

Translation of Foreign Currency Financial Statements

Summary

Problems

Evaluating Financial Reporting Quality

Learning Outcomes

Introduction

Discretion in Accounting Systems

Financial Reporting Quality: Definitions, Issues, and Aggregate Measures

A Framework for Identifying Low-Quality Financial Reporting

The Implications of Fair Value Reporting for Financial Reporting Quality: A Brief Discussion

Summary

Problems

Integration of Financial Statement Analysis Techniques

Learning Outcomes

Introduction

Case Study 1: Long-term equity investment

Case Study 2: Off-Balance Sheet Leverage From Operating Leases

Case Study 3: Anticipating Effects Of Changes in Accounting Standards

Conclusion

Problems

Glossary

References

About the Authors

About the CFA Program

Index

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