Quality Financial Reporting

by Miller, Paul B.

• ISBN13: 9780071387422
• ISBN10: 0071387420
• Edition: 1st
• Format: Hardcover
• Copyright: 2002-07-30
• Publisher: McGraw-Hill

Summary

A no-holds-barred look at the shortcomings in today's financial reporting standards­­with a prescriptive program for change Financial reports today have become hopelessly complex, and impossible for investors and other capital markets professionals to understand. This hurts everyone involved. Quality Financial Reporting outlines the rules for QFR, a financial reporting revolutionin which essential figures are reported clearly, truthfully, and in a language that everyone can understand. Quality Financial Reporting is groundbreaking in its theory, comprehensive in its presentation, and destined to become required reading for accountants and investors alike. A long-overdue recipe for change, it provides readers with: Strategies and techniques for adopting a QFR standard Relevant empirical research that supports QFR End-of-chapter evaluation checklists and questions "Accounting is the language of business. In recent years, too often language has been distorted to the point of becoming unintelligible. This book is a step toward restoring its usefulness." ­­Warren Buffet Paul B. W. Miller is a professor of accounting at the University of Colorado at Colorado Springs. Paul R. Bahnson is an associate professor of accounting at Boise State University.

Table of Contents

Pre-Test	xiii
Prologue	xvii
SECTION I FOUR AXIOMS AND SEVEN DEADLY SINS
Foundation for a Revolution	3	(10)
The Quality Financial Reporting Revolution	4	(2)
The Four Axioms	6	(1)
A Different Slant	7	(1)
Using the Axioms to Define Financial Reporting Strategies	8	(3)
Summary	11	(2)
The Seven Deadly Sins of Financial Reporting	13	(18)
A Brief Background	14	(3)
Underestimating the Capital Markets	17	(1)
Obfuscating	18	(1)
Hyping and Spinning	19	(1)
Smoothing	20	(1)
Minimum Reporting	21	(2)
Minimum Auditing	23	(1)
Preparation Cost Myopia	24	(2)
Summary of the Sins	26	(1)
It Isn't the Ethics as Much as the Economics	26	(5)
SECTION II GAAP AREN'T GOOD ENOUGH
Financial Reporting in the U.S. and Elsewhere	31	(12)
A Brief History	31	(4)
Where Does the Information Go, and How Is It Used?	35	(4)
What Does This Model Mean for QFR?	39	(1)
The U.S. System-As Good as It Gets?	40	(3)
Why GAAP Aren't Good Enough	43	(17)
The GAAP Due Process	44	(4)
Understanding What GAAP Can and Cannot Do	48	(1)
Summing Up	49	(2)
Proof in the Pudding	51	(6)
What's the Point?	57	(3)
PEAP, WYWAP, and POOP	60	(23)
What Should Financial Reporting Accomplish?	63	(2)
What Should Financial Statements Contain?	65	(2)
How GAAP Aren't Good Enough	67	(11)
Almost the Final Word	78	(1)
An Ethical Insight	78	(5)
SECTION III BUILDING CONFIDENCE IN QUALITY FINANCIAL REPORTING
The QFR Strategy for Overcoming the Old Obstacles	83	(15)
The Basic Situation	83	(4)
Three Places to Start	87	(2)
What About GAAP?	89	(2)
A New Strategy	91	(1)
Why QFR Makes More Sense than the Status Quo	92	(1)
The Wrong Role for Regulators	93	(1)
Some Thoughts on Regulation and Deregulation	94	(2)
A Closing International Thought	96	(2)
Financial Analysts Speak Their Minds	98	(20)
The AIMR Monograph	98	(1)
The Capital Markets Are Markets	99	(4)
The Four Axioms	103	(1)
The Seven Deadly Sins of Financial Reporting	104	(6)
GAAP Aren't Good Enough	110	(5)
Timeliness	115	(1)
Summary	116	(2)
The Weight of the Evidence	118	(20)
Survey-Based Studies	119	(8)
Notable Experts	127	(10)
Summary	137	(1)
Academic Research---The Empiricists Strike Back	138	(17)
Empiricism	138	(2)
Methodology	140	(2)
Information Quality and Its Results	142	(1)
Research on Information Quality	143	(1)
Welker	144	(2)
Land and Lundholm	146	(1)
Botosan	147	(1)
Sengupta	148	(2)
Healy, Hutton, and Palepu	150	(1)
Lang and Lundholm, the Sequel	151	(1)
Barth, Hall, Kurtzman, Wei, and Yago	152	(2)
Summary	154	(1)
State Your Objections!	155	(22)
``You Can't Make Me!''	156	(1)
``That's Proprietary Information.''	156	(2)
``The Markets Aren't That Efficient.''	158	(2)
``It's Too Expensive.''	160	(3)
``No One Else Is Doing It.''	163	(2)
``I Don't Have the Information Handy.''	165	(1)
``I Might Get Sued.''	166	(2)
``But What if I Have to Report Bad News?''	168	(2)
``It'll Make Us Look Volatile.''	170	(1)
``The Users Won't Understand.''	171	(1)
``That's Disclosure Overload.''	172	(1)
One More Time	172	(5)
SECTION IV HOW CLOSE ARE YOU TO QFR?
It's Time for an Attitude Check	177	(15)
This Is a Test	177	(12)
How Did You Do?	189	(3)
It's Time to Check Your Choices	192	(14)
Another Test	192	(11)
The Big Picture	203	(3)
How Are Things Between You and Your Auditor?	206	(17)
The Final Test	207	(11)
The Big Big Picture	218	(5)
SECTION V GETTING STARTED
Filling in the GAAP Gaps	223	(12)
Filling in the GAAP	224	(3)
Enhanced GAAP Financial Statements	227	(1)
Supplemental Disclosures	228	(3)
Auditor Involvement	231	(1)
Reporting Frequency	232	(2)
Summary	234	(1)
Reporting Market Values	235	(19)
The Old Issue	235	(2)
Some History	237	(2)
Is There a Demand for Market Value Information?	239	(1)
The Users Speak	240	(2)
Reliability	242	(2)
An In-Process Summary	244	(1)
Comparability	244	(1)
Inflation and Measurement	245	(1)
The Realization Issue	246	(3)
Making the Move to Market Values	249	(2)
One More Time, the Users Speak	251	(3)
How to Do QFR---Part I	254	(17)
Cost Accounting	255	(1)
Inventory Flows	256	(2)
Investments	258	(2)
Leases	260	(1)
Property, Plant, and Equipment	261	(2)
Intangible Assets	263	(2)
Business Combinations	265	(1)
Receivables and Payables	266	(5)
How to Do QFR---Part II	271	(22)
Cash Flows	271	(4)
Pensions and Other Benefits	275	(5)
Stock Options	280	(3)
Earnings per Share	283	(2)
Reporting Frequency	285	(2)
Other Points	287	(1)
In Closing	288	(5)
SECTION VI FINISHING UP
QFR and Standard Setting	293	(10)
Oil and Water?	293	(2)
A Whole New Motivation for Standard Setters	295	(1)
A Whole New Search	296	(1)
A Whole New Political System	297	(2)
A Whole New Kind of Output	299	(2)
A Whole New Kind of Agency	301	(1)
Conclusion	302	(1)
How Not to Do QFR---The Enron Case Study	303	(24)
What Happened at Enron?	304	(5)
Enron and the Seven Deadly Sins of Financial Reporting	309	(11)
The Questionnaires	320	(2)
Some Closing Thoughts	322	(5)
Post-Test	327	(4)
Index	331