International Financial Statement Analysis, 3rd Edition

FOREWORD

The stated objective of the International Accounting Standards Board (IASB) is to produce accounting standards that are principle-based, internally consistent, and internationally converged. The resulting financial statements should provide a framework that gives capital market participants the tools to make rational and intelligent decisions. The role of the analyst as an interpreter of the numbers that appear in the financial statements is critical in this process.

Making valuation estimates and the accompanying decisions in an international context is, in principle, no different from a purely domestic one. In both cases, the financial reporting model is the primary source of the information required. Recommendations and decisions have to be made based on careful analysis. The learning outcomes and techniques described in this volume are designed to enable the analyst to do just that.

Collecting and analyzing data is the core analytical function, but communication is also critical. The best and most rigorous analysis has to be supplemented by an understanding of how investment decisions are made, or it will fail its purpose. It must be communicated to the intended recipient in a way that explains the logic behind the valuation estimate or recommendation and promotes understanding and action. Communication skills, in addition to analytical methods, are discussed in the readings.

The readings also point to the necessity of exercising judgment as part of the analytical ...