Equity Asset Valuation, Second Edition

1

Derived as V_E - P = V_E - P+ V - V = (V - P) + (V_E - V).

2

Accounting standards provide specific definitions of fair value. As of late 2008, the International Accounting Standards Board (IASB) is seeking to develop a single International Financial Reporting Standard on fair value measurement (see www.iasb.org for more information). The IASB is explicitly considering in its work the requirements of Statement of Financial Accounting Standards (SFAS) 157, which states (paragraph 5): “Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

3

In this book, the shares of real companies are identified by an abbreviation for the stock exchange or electronic marketplace where the shares of the company are traded, followed by a ticker symbol or formal acronym for the shares. For example, NASDAQ-GS stands for “Nasdaq Global Select Market,” and INTC is the ticker symbol for Intel Corporation on the NASDAQ-GS. (Many stocks are traded on a number of exchanges worldwide, and some stocks may have more than one formal acronym; we usually state just one marketplace and one ticker symbol.)

4

There may be special filings, for example Form 8-K in the United States, associated with public disclosure of material corporate events.

5

The discussion in this example is indebted to Moody’s Investors Service (2000).

6

A related but distinct concept is top-down investing versus bottom-up ...