Asian Financial Statement Analysis E-Book

ChinHwee Tan

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Finance Editions
• Sprache: Englisch

Seitenzahl: 325

Veröffentlichungsjahr: 2014

Beschreibung

Gain a deeper understanding of Asian financial reporting and how to detect irregularities The Asian region, and particularly China, is becoming a hotbed of investment activity. There have been quite a few accounting scandals in Asia in the recent years - now rivaling those we have seen in the Americas and Europe. Assessing potential or active overseas investments requires reliance on financial statements, the full parameters of which may vary from region to region. To effectively analyze statements, it is necessary to first understand the framework underlying these financial statements and then lay out a protocol for detecting irregularities. It's impossible to create and implement a practical plan without a deeper knowledge of the various factors at play. Asian Statement Analysis: Detecting Financial Irregularities provides a framework for analysis that makes irregularities stand out. Authors Chin Hwee Tan and Thomas R. Robinson discuss international financial reporting standards, including characteristics particular to the Asian region. Tan and Robinson's combined background in academia and Asian finance give them a multi-modal perspective and position them as top authorities on the topic. In the book, they address issues such as: * Detection of irregularities independent of particular accounting rules * The most common irregularities in the Asian market * Similarities and differences between U.S. and Asian accounting techniques * An overarching framework for irregularity detection The book uses real-world examples to illustrate the concepts presented, with the focus on Asian companies. As the first ever in-depth study on manipulation and irregularities in the Asian market, Asian Financial Statement Analysis: Detecting Financial Irregularities is uniquely positioned to be a valuable resource in the move toward the next phase of global reporting standards.

Leseprobe

Contents

Foreword

Genesis of This Book

Acknowledgments

Introduction

Chapter 1: A Framework for Evaluating Financial Irregularities

Articulation of Financial Statements

Accruals and Deferrals

Typical Accounting Games

Parting Comments

Note

References

Chapter 2: Detecting Overstated Earnings

Aggressive Revenue Recognition

Understatement or Deferral of Expenses

Classification of Non-Operating Income

Classification of Non-Operating Expenses

Parting Comments

Case Studies

References

Chapter 3: Detecting Overstated Financial Position

Excluding Both Assets and Liabilities

Other Off-Balance-Sheet Financing/Liabilities

Overstating Assets

Parting Comments

Case Studies

Notes

References

Chapter 4: Detecting Earnings Management

Accruals and Deferrals Revisited

Accounts Receivable (Accrued Revenue) and the Allowance for Doubtful Accounts

Deferred (Unearned) Revenue

Accrued and Deferred (Prepaid) Expenses

Deferred Taxes

Contingencies and Reserves

Parting Comments

Case Studies

References

Chapter 5: Detecting Overstated Operating Cash Flows

Understanding the Cash Flow Statement

Using Cash Flow to Assess the Quality of Earnings

Cash Flow Games

Parting Comments

Case Studies

References

Chapter 6: Evaluating Corporate Governance and Related-Party Issues

Board Governance and Independent Directors

Shareowner Rights

Interlocking Ownership or Directorships

Related-Party Transactions

Excessive Compensation

Personal Use or Expropriation of Assets

Lack of Transparency

Auditor Issues

Parting Comments

Case Studies

Note

References

Chapter 7: Summary and Guidance

Putting It All Together

A Recipe for Detecting Cooked Books

Parting Comments

Case Studies

References

About the Authors

Index

End User License Agreement

List of Exhibits

EXHIBIT I.1 Chinese Stock Market Returns Have Lagged Behind GDP Growth

EXHIBIT 1.1 The Accounting Equation for Financial Statements

EXHIBIT 1.2 Balance Sheet (top), Income Statement (middle), and Cash Flow Statement (bottom)

EXHIBIT 1.3 Increase in Revenue

EXHIBIT 1.4 Balance Sheet Impact

EXHIBIT 1.5 Common Accruals and Deferrals

EXHIBIT 1.6 Categories for Accounting Scandals

EXHIBIT 1.7 Overstating Revenues or Gains

EXHIBIT 1.8 Understating Expenses or Losses

EXHIBIT 1.9 Potential Balance Sheet Impacts

EXHIBIT 1.10 Moving Gains “Up” the Income Statement

EXHIBIT 1.11 Moving Expenses “Down” the Income Statement

EXHIBIT 1.12 Overstating Financial Position on the Balance Sheet

EXHIBIT 2.1 Income Statement Games

EXHIBIT 2.2 Income Statement Impact of Increased Revenue

EXHIBIT 2.3 Balance Sheet Impact of Increased Revenue

EXHIBIT 2.4 Impact of Overstating Earnings on Balance Sheet

EXHIBIT 2.5 Understating Expenses or Losses on the Income Statement

EXHIBIT 2.6 Shifting Gains on the Income Statement

EXHIBIT 2.7 Shifting Expenses on the Income Statement

EXHIBIT 2.8 Checklist of Warning Signs and Analysis Techniques

EXHIBIT 3.1 The Balance Sheet Accounting Equation

EXHIBIT 3.2 Common Balance Sheet Accounting Games

EXHIBIT 3.3 Balance Sheet Impact

EXHIBIT 3.4 International Financial Reporting Standards Treatment of Assets

EXHIBIT 3.5 Checklist of Warning Signs and Analysis Techniques for Overstating Financial Position

EXHIBIT 4.1 Common Accruals and Deferrals

EXHIBIT 4.2 APAI, Inc. Balance Sheet July 2013

EXHIBIT 4.3 APAI Taxable Income and Taxes Payable

EXHIBIT 4.4 APAI Reported Financial Statements

EXHIBIT 4.5 Checklist of Warning Signs and Analysis Techniques for Earnings Management

EXHIBIT 5.1 Hypothetical Company Cash Flow Statement for the Month Ended 31 January 2013

EXHIBIT 5.2 Hypothetical Company Cash Flow Statement for the Month Ended 31 January 2013

EXHIBIT 5.3 Cash Flow Warning Signs

EXHIBIT 6.1 Checklist of Warning Signs and Analysis Techniques

EXHIBIT 7.1 Articulation of Financial Statements

EXHIBIT 7.2 Master Checklist of Warning Signs and Analysis Techniques

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Guide

Cover

Table of Contents

Begin Reading

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ASIAN FINANCIAL STATEMENT ANALYSIS

Detecting Financial Irregularities

ChinHwee Tan, CFA, CPA

Thomas R. Robinson, CFA, CPA

Cover image: (top) © iStockphoto.com/loveguli (bottom) © iStockphoto.com/IS_ImageSource

Cover design: Wiley

Copyright © 2014 by CFA Institute. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN 978-1-118-48652-8 (Hardcover)

ISBN 978-1-118-54259-0 (ePDF)

ISBN 978-1-118-48665-8 (ePub)

ChinHwee Tan

To my wife and fellow Chartered Accountant, Michelle Lee—for your constant urging during our university days to study accounting harder, without which this book would never have been written. Thank you for being a good wife and mother to our three lovely children, Brian, Kylie, and Sarah; may they learn the importance of integrity and the dangers of cutting corners from this book.

To my parents, for exposing their children to education in the broadest sense. Your holistic parenting in spite of our financial limitations imbued us with the confidence and abilities to pursue our dreams, be they in the arts or finance.

To my business partner, Girish Kumar, and my colleagues at Apollo Global Management, for their support, and more importantly, our friendship.

Finally, to the many humbling experiences throughout my career, including my first credit default during the Asian Financial Crisis in 1998. Thank you for the perceptiveness and appreciation that learning is a lifelong endeavor.

Thomas R. Robinson

To my wife, Linda, and my late father, Clarence E. Robinson.

To the accounting faculty at Case Western Reserve University that shaped my early thinking on accounting and the importance of high ethical conduct, including but not limited to Gary Previts, Rob Kauer, Tom Sturgis, and Larry Phillips.

To my former colleagues at Deloitte and University of Miami who helped further refine and shape my thinking on the topics in this book, particularly Paul Munter, Kay Tatum, Oscar Holzmann, and Elaine Henry.

Last but not least, to the authors of books required in the CFA curriculum that demonstrated how to practically apply accounting knowledge in evaluating financial statements, including Gerald White, Tony Sohndi, and Howard Schilit.

FOREWORD

Asian Financial Statement Analysis is an important work and a welcome addition to the discipline of forensic accounting and detection of accounting anomalies in financial reports. Tan and Robinson’s major contribution is to show, through recent actual vignettes, how the tricks are played out in Asian companies. Unlike many companies based in the West with a longer tradition (and rules) concerning strong corporate governance, Tan and Robinson show that investors must be even more vigilant in performing due diligence on Asian companies that unfortunately often engage in non-arm’s-length transactions.

The book is written clearly for a non-technical audience, providing (1) user-friendly checklists to be adopted by any securities analyst; (2) lessons to be learned by studying the frauds at Satyam, Sino-Forest, and Olympus, among others; and (3) reviews at the end of each chapter that highlight key lessons learned.

Analysts, auditors, and other stakeholders also benefit by learning lessons from colossal financial reporting failures at companies. Tan and Robinson have provided readers a great service by studying debacles at the often less-studied Asian companies and writing this book, which shares the lessons from such debacles.

Dr. Howard M. Schilit

CEO of Schilit Forensics, LLC

Author of Financial Shenanigans: How to Detect

Accounting Gimmicks & Fraud in Financial Reports