Key Management Ratios, 4th Edition

Appendix 1

Special items

Introduction

Values taken from company accounts are used to analyze business performance. For the vast bulk of these values there are no quibbles about their accuracy or realism. However, there are some items that are subject to a number of different interpretations. Whether one interpretation is preferred over another will affect the results of the analysis. A multitude of rules laid down by the accounting bodies, the statutory authorities, the Stock Exchange and others have a bearing in these interpretations. Some understanding of the more important of these rules provides a useful background to analysis.

The principle underlying the rules may be even more important. The overriding principle is the ‘true and fair ...