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Profits You Can Trust gives managers, directors, lenders, audit partners and analysts a clear framework to demystify global financial reporting in a market fraught with danger. Filled with provocative and enlightening examples, it offers a fresh perspective and clear guidance for everyone involved with financial reporting strategy and communication, as well as specific and easily understood questions that must be asked to avoid accounting landmines that can destroy even the most successful business. The authors begin with an overview of the challenges of financial literacy for business decision-makers operating in both U.S. and global environments, the reasons decision-makers tacitly "conspire" to inflate stated revenues and reduce stated costs, and how "small" lies inevitably lead to bigger ones. Next, using easy-to-understand examples, they discuss six key accounting minefields in detail. These include revenue recognition; provision for uncertain future costs; asset values; risk management and the use of derivatives; related party transactions; and performance benchmarking. Finally, they turn to the key questions and lessons arising from recent financial scandals, including accounting firm conflict of interest; why Generally Accepted Accounting Practices aren't always sufficient; assessing mergers, acquisitions, and restructuring reserves; and the appropriate role of non-financial measurements such as balanced scorecards.
1. Profits You Can Trustand the Profits You Can't.
2. Revenue Recognition: What Is a Sale, and When Do You Book It?
3. Hidden Charges: What to Do When Revenue Games Don't Work.
4. Sins of Omission: What Corporations Don't Say When They Talk About Risk.
5. Goodwill Hunting: How to Tell Hard Assets from Hot Air.
6. The Circle Game: Ripping Off Shareholders with Related Party Transactions.
7. The Mismeasure of Business: Performance Comparisons and Benchmarks.
8. If You Don't Like the Numbers, Make Up Some New Ones: EBITDA, Pro Forma Earnings, and Stupid Cash Tricks.
9. Fair Value: Toward Trustworthy Corporate Reporting.