Читать книгу The Value Equation - Christopher H. Volk - Страница 11

If you think in accounting terms, you probably think of business investment as the “left side” of a balance sheet, which is where the assets are. I do not view business investment in this light. I am a finance person, which is the foundation for accounting, but one step removed.

Finance is like music; it is a universal language, whereas accounting is not.

There exist multiple global accounting standards, which are subject to frequent changes. The dominant standards are US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), which is used by much of the rest of the world. With that said, GAAP is widely used globally among larger companies owing to its requirement for a US stock exchange listing. Accounting was devised to represent financial reality to investors and financial statement readers. However, the reflection will always have material imperfections. This is why there are so many analysts who make a living from interpreting financial statements. This is why financially inclined value investors pore over financial statements to see what the markets cannot.

From a finance perspective, total assets as they appear on a corporate financial statement do not equal business investment. To arrive at business investment, a financial analyst must ignore all the non-cash accounting conventions. This means that items like “accumulated depreciation,” which is designed to illustrate the cumulative “wear and tear costs” of a business on its hard assets, need to be added back. It's not that assets don't have wear and tear; they do. It's that the wear and tear does nothing to alter what the assets originally cost. Wear and tear does not alter the business investment. Since the accounting profession has added numerous non-cash financial reporting conventions over the years, you can be busy eliminating balance sheet items.

The somewhat shameful fact is this: If you are looking at a corporate financial statement and actually trying to understand business investment, the number is nowhere reported. Our accounting profession has wrongfully determined that it is unimportant to keep track of what assets originally cost.

The next chapter will discuss the “right side” of the accounting balance sheet, which discloses liabilities and shareholder equity. But as a finance professional, some of the liabilities must be netted against cash assets at cost to arrive at business investment. Those liabilities are the ones having no cost and no claim on the assets of a business. Normally, there are two such liabilities: accounts payable and accruals. We have already briefly discussed the first of these, which represents trade vendors who are willing to give you clear title to their merchandise and then wait a period for payment. The second of these represents the timing gap between a service being provided and payment for that service. The most major example of this is employee wages; employees come to work and then generally must wait two weeks for their paycheck. There might be other unsecured, non-interest-paying cash obligations, such as customer deposits, which would be shown on the financial statement as a deferred income liability.