Corporate Finance, 6th Edition

Chapter 7HOW TO COPE WITH THE MOST COMPLEX POINTS IN FINANCIAL ACCOUNTS

Everything you always wanted to know but never dared to ask!

This chapter is rather different from the others. It is not intended to be read from start to finish, but consulted from time to time, whenever readers experience problems interpreting, analysing or processing a particular accounting item.

Each of these complex points will be analysed from these angles:

• from an economic standpoint so that readers gain a thorough understanding of its real substance;
• from an accounting standpoint to help readers understand the accounting treatment applied and how this treatment affects the published accounts;
• from a financial standpoint to draw a conclusion as to how best to deal with this problem.

Our experience tells us that this is the best way of getting to grips with and solving problems. The key point to understand in this chapter is the method we use to deal with complex issues, since we cannot look at every single point here. When faced with a different problem, readers will have to come up with their own solutions using our methodology – unless they contact us through the vernimmen.com website.

The following bullet list shows, in alphabetical order, the main line items and principal problems that readers are likely to face:

accruals cash assets construction contracts convertible bonds or loans currency translation adjustments deferred tax assets and liabilities dilution profits or losses financial ...