ABC: The Next Generation

Many companies that look into changing their costing systems find that they are making mistakes, both large and small, that stem from the systemic failure of their cost-accounting systems to deliver actionable economic intelligence that they can use to optimize production, planning, and sales incentive systems (to name three of the most important areas for improvement). If your company makes anything, and particularly if you … [ Read more ]

Building a Better Income Statement

If neither companies nor investors find GAAP reported earnings useful, it’s clearly time for a new approach.

“Fidel,” Sam Mendes, and Phil Jackson

There are many things you can do to avoid failing as a manager. You can set clear expectations. You can highlight the underlying purpose of people’s work. You can correct people when they do something wrong. And you can praise people when they do something right. If you do all these things often and well, you will not fail as a manager.

However, neither will you … [ Read more ]

Of CEOs and Accounting

It’s not that big of a stretch to say that many CEOs – too many, perhaps – would rather learn how to hit a three wood than move up the knowledge curve on accounting. But just like you can’t ask your caddy or anyone else to hit a three wood for you, you cannot – or at least should not – ask your CFO to … [ Read more ]

12 Ways Your Financial Statements Tell Lenders the Wrong Story

Your financial statements may not make the bestseller list, but they do tell an intriguing story—at least to a banker. Unfortunately, the tale they tell may be misleading. Since finance is no place for fiction, you need to make sure your statements tell the truth, the whole truth, and nothing but the truth.

To do that, the first thing you need to know is that … [ Read more ]

Want to Really Know How a Stock is Doing? Don’t Just Look at the Company’s Bottom Line

Skittish investors will not be surprised to learn that the bottom line of a company’s income statement fails to tell the whole story. New research by Jan Barton, an associate professor of accounting at Emory University’s Goizueta Business School, suggests that subtotals near the center of the income statement, such as operating income, have a much stronger association with contemporaneous stock returns than do the … [ Read more ]

The Real Value of Intangibles

There is no accepted standard for appraising the worth of nonphysical assets like brands, human capital, and managerial expertise. Yet these are the essence of 21st-century business.

Fair-Value Revolution

Historical cost accounting is fading as Corporate America marches into a new era.

Are ‘Mark-to-market’ Accounting Rules on the Mark?

Mark-to-market accounting rules require toxic assets to be carried on companies’ books at fire-sale prices, based on recent trades of similar assets for far less than they would command in normal times. Many big banks say the crisis has been made worse by these rules. Not everyone agrees.

A New Vision for Accounting

Robert Herz and FASB are preparing a radical new format for financial statements.

Financial Reporting Should Include Customer Equity

The basic financial statements – P&Ls and balance sheets – are not enough to help investors clearly understand a company’s capability to generate value. The paper “Customer Equity: An Integral Part of Financial Reporting” recommends that companies start reporting “forward-looking customer metrics” by providing the value of their customer base and how it changes over time. This is especially important for companies whose customers are … [ Read more ]

Goodbye GAAP

It’s time to start preparing for the arrival of international accounting standards.

Biased Expectations: Can Accounting Tools Lead to, Rather than Prevent, Executive Mistakes?

Accounting techniques like budgeting, sales projections and financial reporting are supposed to help prevent business failures by giving managers realistic plans to guide their actions and feedback on their progress. At least that’s the theory. But when Gavin Cassar, a Wharton accounting professor, tested this idea, he found something troubling: Some accounting tools not only fail to help businesspeople, but may actually lead them astray. … [ Read more ]

How to Nab the Rogues: 10 Fraud Tips

Why the risk of wrongdoing has migrated from senior executives to middle management — and what to do about it.

How to Become a GAAP Geek

Now open to public scrutiny, FASB’s codification tool is a one-stop shop for both accounting experts and newbies.

Business valuation… the wrong way

What is a company worth? The answer to this question can vary depending on who you ask and the purpose of the valuation. As a result, figures derived by an options trader, credit liquidator, and an acquiring firm will not only differ in amount but, more interestingly, in the methods used to reach them. While discounted cash flow methods are widely accepted as the most … [ Read more ]

Do International Financial Reporting Standards Live Up to Their Promise?

At a time when many barriers to global trade have fallen, countries all over the world are taking steps to harmonize their accounting standards and develop a truly global language of business. Under the lead of the International Accounting Standards Board (IASB), more than 100 countries have either implemented International Financial Reporting Standards (IFRS) or plan to do so. Yet while proponents of accounting harmonization … [ Read more ]

Discretion Meets Disclosure

It has long been suspected that fear of competition spurs managers to hide better-than-average business unit profit performance. However, a new study instead finds evidence that fear of increased oversight leads managers to hide less-than-average business unit performance.

Misgivings

Recent studies raise an uncharitable question: Is nonprofit accounting off track?