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The Information Content of Accounting Reports

The Information Content of Accounting Reports
Author: Jonathan F. Ross
Publisher:
Total Pages: 54
Release: 2013
Genre:
ISBN:
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Is it possible to quantify the information content of financial statements? If possible, then how? This study examines accounting as a classical communication system with the purpose of providing a framework with which to approach these fundamentally important questions. Information theory was established in the early-mid 20th century to describe the properties of classical communication systems. Applying concepts from this theory to an accounting context provides insight into the questions asked above. Specifically, a measure of the information content of a message in general and the financial statements in particular is developed from information theory concepts which originated with Claude Shannon -- the father of modern information theory -- in the 1940's. The measure is able to extract information contained in the financial statement numbers to predict firm performance despite the fact the numbers themselves do not easily admit insight. Thus, there seems to be "hidden'' information in the numbers that the measure captures which, in hindsight, helps predict firm price movements. Specifically, as a validity check, I provide evidence that the measure alone explains 10% of the variation in returns for a cross-section of firms.

The End of Accounting and the Path Forward for Investors and Managers

The End of Accounting and the Path Forward for Investors and Managers
Author: Baruch Lev
Publisher: John Wiley & Sons
Total Pages: 268
Release: 2016-06-14
Genre: Business & Economics
ISBN: 1119191084
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An innovative new valuation framework with truly useful economic indicators The End of Accounting and the Path Forward for Investors and Managers shows how the ubiquitous financial reports have become useless in capital market decisions and lays out an actionable alternative. Based on a comprehensive, large-sample empirical analysis, this book reports financial documents' continuous deterioration in relevance to investors' decisions. An enlightening discussion details the reasons why accounting is losing relevance in today's market, backed by numerous examples with real-world impact. Beyond simply identifying the problem, this report offers a solution—the Value Creation Report—and demonstrates its utility in key industries. New indicators focus on strategy and execution to identify and evaluate a company's true value-creating resources for a more up-to-date approach to critical investment decision-making. While entire industries have come to rely on financial reports for vital information, these documents are flawed and insufficient when it comes to the way investors and lenders work in the current economic climate. This book demonstrates an alternative, giving you a new framework for more informed decision making. Discover a new, comprehensive system of economic indicators Focus on strategic, value-creating resources in company valuation Learn how traditional financial documents are quickly losing their utility Find a path forward with actionable, up-to-date information Major corporate decisions, such as restructuring and M&A, are predicated on financial indicators of profitability and asset/liabilities values. These documents move mountains, so what happens if they're based on faulty indicators that fail to show the true value of the company? The End of Accounting and the Path Forward for Investors and Managers shows you the reality and offers a new blueprint for more accurate valuation.

Accounting Theory

Accounting Theory
Author: John Asmus Christensen
Publisher: Irwin/McGraw-Hill
Total Pages: 488
Release: 2003
Genre: Accounting
ISBN:
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This text covers both financial and managerial accounting theory with a strong emphasis on accounting information systems. It examines the challenges faced by accounting information users and preparers, and the role accounting information systems play.

Principles of Accounting Volume 1 - Financial Accounting

Principles of Accounting Volume 1 - Financial Accounting
Author: Mitchell Franklin
Publisher:
Total Pages: 1056
Release: 2019-04-11
Genre:
ISBN: 9781680922912
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The text and images in this book are in grayscale. A hardback color version is available. Search for ISBN 9781680922929. Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today's college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the "why" as well as the "how" aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

Decision-useful financial reports in efficient securities markets

Decision-useful financial reports in efficient securities markets
Author: Dennis Teichmann
Publisher: GRIN Verlag
Total Pages: 25
Release: 2005-03-08
Genre: Business & Economics
ISBN: 3638355756
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Seminar paper from the year 2002 in the subject Business economics - Controlling, grade: 1,0, University of Hannover (Lehrstuhl für Controlling), course: Seminar zur "Financial Accounting Theory", language: English, abstract: This paper studies the decision-usefulness of accounting information and the implications of financial reports, especially against the background of efficient securities markets. The decision-usefulness of financial statements gained in importance in the literature of accounting research due to the decline in helpfulness for decision taking of traditional financial statements like earnings, cash flows and stock returns.1 This deterioration is accompanied by a deficit of future-oriented indicators, in particular intangible assets, which are not integrated in the actual financial reporting requirements.2 These outstanding problems lead to incompleteness of capital markets, which are tried to be solved by different mechanisms, e.g. penalties, incentives and voluntary disclosure, to attain to efficient securities markets, the social advantageous solution.3 Section 2 describes the requirements of efficient securities markets, its various forms and the origin of inefficient working securities markets. Chapter 3 illustrates the usefulness of financial statements for different constituencies, especially for investors and management, and the legal standards for mandatory disclosure. Division 4 expresses the information dilemma and presents diverse solutions for an approximation to social optimal allocations, i.e. allocations that diminish securities markets inefficiencies. Chapter 5 gives a short summary of this paper. 1 See LEV / ZAROWIN (Boundaries of Financial Reporting 1999), pp. 354 – 362. 2 See GÜNTHER / BEYER (Value Based Reporting 2001), pp. 1627 – 1629. 3 See SCOTT (Financial Accounting Theory 1997), pp. 81 – 82.

The Comprehensive Guide on How to Read a Financial Report, + Website

The Comprehensive Guide on How to Read a Financial Report, + Website
Author: John A. Tracy
Publisher: John Wiley & Sons
Total Pages: 356
Release: 2014-01-28
Genre: Business & Economics
ISBN: 1118735714
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A comprehensive guide to reading and understanding financial reports Financial reports provide vital information to investors, lenders, and managers. Yet, the financial statements in a financial report seem to be written in a foreign language that only accountants can understand. This comprehensive version of How to Read a Financial Report breaks through that language barrier, clears away the fog, and offers a plain-English user's guide to financial reports. The book features new information on the move toward separate financial and accounting reporting standards for private companies, the emergence of websites offering financial information, pending changes in the auditor's report language and what this means to investors, and requirements for XBRL tagging in reporting to the SEC, among other topics. Makes it easy to understand what financial reports really say Updated to include the latest information financial reporting standards and regulatory changes Written by an author team with a combined 50-plus years of experience in financial accounting This comprehensive edition includes an ancillary website containing valuable additional resources With this comprehensive version of How to Read a Financial Report, investors will find everything they need to fully understand the profit, cash flow, and financial condition of any business.

How to Read a Financial Report

How to Read a Financial Report
Author: John A. Tracy
Publisher: John Wiley & Sons
Total Pages: 138
Release: 2020-01-30
Genre: Business & Economics
ISBN: 1119606489
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The updated new edition of the comprehensive guide to reading and understanding financial reports Financial reports are used to provide a range of vital information, including an organization’s cash flow, financial condition, and profit performance (aka The Big Three Financial Statements). Financial statements are often complex and extremely difficult to understand for anyone other than accounting and finance professionals. How to Read a Financial Report enablesinvestors, lenders, business leaders, analysts, and managers to read, analyze, and interpret financial accounting reports. Designed specifically for non-specialists, this reader-friendly resource covers the fundamentals of financial reporting in jargon-free English. Topics such as sales revenue & recognition, costs of goods sold, sources & uses of capital/cash, non-cash expenses (e.g., depreciation expense), income tax obligations, understanding profits & financial stability, and financial statement ratios & analysis are covered throughout the book. Now in its ninth edition, this bestselling guide has been thoroughly revised to reflect changes in accounting and financial reporting rules, current practices, and recent trends. New and expanded content explains managing cash flow, illustrates the deceitful misrepresentation of profits in some financial reports (aka Financial Engineering), and more. Further, end-of-chapter activities help readers learn the intricacies of the balance sheet and cash flow statement, while updated sections address shifts in regulatory standards. Written by two highly experienced experts in financial accounting, this resource: Enables readers to cut through the noise and focus on what financial reports and financial statements are really saying about a company Clarifies commonly misunderstood aspects of financial reporting and how companies can “financially engineer” operating results Offers comprehensive, step-by-step guidance on analyzing financial reports Provides numerous examples and explanations of various types of financial reports and analysis tools