Company Valuation Under IFRS: Interpreting and Forecasting Accounts Using International Financial Reporting Standards / Edition 2

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More About This Textbook


Written by practitioners for practitioners, the book addresses valuation from the viewpoint of the analyst, the investor and the corporate acquirer. It starts with valuation theory: what is to be discounted and at what discount rate? It explains the connection between standard methodologies based on free cash flow and on return on capital. And it emphasizes that, whichever method is used, accurate interpretation of accounting information is critical to the production of sensible valuations. The authors argue that forecasts of cash flows imply views on profits and balance sheets, and that non-cash items contain useful information about future cash flows - so profits matter.

The book then addresses the implications for analysis and valuation of key aspects of IFRS.

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Product Details

  • ISBN-13: 9781905641772
  • Publisher: Harriman House Publishing
  • Publication date: 6/1/2008
  • Edition description: 2nd Revised ed.
  • Edition number: 2
  • Pages: 406
  • Product dimensions: 6.40 (w) x 9.40 (h) x 1.20 (d)

Table of Contents

Index of exhibits     vii
About the authors     xi
Preface to first edition     xiii
Acknowledgments     xix
An IFRS briefing     xxi
Preface to second edition     xxiii
It's not just cash; accounts matter     1
Introduction - Valuation refresher     1
Distributions, returns and growth     3
Cash, accruals and profits     13
The Economic Profit model     15
The real world of specific forecasts     17
Introducing debt     18
WACC - Forty years on     21
Risk and Return     21
Diversification and portfolio effects     24
The problem of growth     34
Leverage and the cost of equity     37
Building in tax shelters     40
Time varying WACC     54
The walking wounded - real options and capital arbitrage     55
International markets and foreign exchange rates     68
Conclusions on discount rates     68
What do we mean by 'return'?     71
IRR versus NPV     72
Calculating CFROI     76
Another approach: CROCI     85
Uses and abuses of ROCE     85
Key issues in accounting and their treatment under IFRS     87
Revenue recognition and measurement     89
Stock options     100
Taxation     107
Accounting for pension obligations     117
Provisions     129
Leasing     135
Derivatives     145
Fixed assets     154
Foreign exchange     161
Valuing a company     169
Building a forecast     170
Ratios and scenarios     197
Building a valuation     201
Frequent problems     212
Three period models     238
Conclusions regarding basic industrials     243
The awkward squad     245
Utilities     245
Resource extraction companies     262
Banks     273
Insurance companies     299
Property companies     335
An introduction to consolidation     343
Introduction     343
Treatment of Investments     343
Methods of consolidation     344
Further issues in consolidation     349
Accounting for associates and joint ventures     350
Purchase accounting and uniting of interests     355
Foreign subsidiaries     356
Accounting for disposals     357
Modelling mergers and acquisitions     363
Conclusions and continuations     379
Conclusions     379
Continuations     382
Further reading     385
Appendices     389
IAS or IFRS in, or coming into, force     389
IFRS in Emerging Markets     391
Chinese Accounting Standards - major differences with IFRS     393
Analysis formulae     394
Index     399
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