ACTG 3000 Chapter Notes - Chapter 4: Tax, Deferred Tax, Finance Lease
Document Summary
Accounting analysis requires analysts to adjust a firms accounting #"s using cash flow info and info from the notes to undo any accounting distortions. Once statements are standardized, analyst is ready to identify any distortions. Primary focus should be on accounting estimates and methods firm uses to measure key success factors and risk. Must assess whether they reflect legitimate business differences and require no adjustment. Balance sheet approach: used to identify whether there have been any distortions to assets, liabilities, or shareholder"s equity. Once misstatements identified, analyst can make adjustments. Ensures most recent financial ratios reflect firms performance. Ensure forecasted results based on accurate financial data. May have to make approximate adjustments to financial statements. Firms don"t provide all necessary info to undo distortions. Assets defined as resources firms owns or controls that: Can be measured with a reasonable degree of certainty. Distortions in asset values generally arise because there is ambiguity about whether: