Proof that creative accounting is alive and well in New Zealand

[Beagle]

http://www.sharechat.co.nz/article/e...ook-betterhtml

Have you ever been suspicious that companies generally try and validate sometimes very ordinary profits by highlighting the inclusion of one-off or extraordinary profits as part of their normal operating profit ?

Companies wouldn't deliberately try and mislead or be deliberately disingenuous, surely not !

Well it seems the evidence is now in and yours and my cynicism is extremely well founded.

Really that's quite disappointing to see that three quarters of companies use creative methodologies to try and show their results in a better light.

The Financial Markets Authority has proposed an update to its guidance for companies who use financial information that doesn't follow generally accepted international rules after a survey found three-quarters of them emphasised numbers that made profits look bigger.

They know damm well that many Joe Average investors don't read much past the headline profit number.

[Balance]

http://www.sharechat.co.nz/article/e...ook-betterhtml

Have you ever been suspicious that companies generally try and validate sometimes very ordinary profits by highlighting the inclusion of one-off or extraordinary profits as part of their normal operating profit ?

Companies wouldn't deliberately try and mislead or be deliberately disingenuous, surely not !

Well it seems the evidence is now in and yours and my cynicism is extremely well founded.

Really that's quite disappointing to see that three quarters of companies use creative methodologies to try and show their results in a better light. They know dam well that many Joe Average investors don't read much past the headline profit number.

Sigh - can you remember the likes of Ceramco and the Corps (Chase, Equiti, Landmark etc) including gains from sale of properties and asset swaps (A sold to B for $100m, and B sold to C for $150m and A bought back from C for $200m ... then, reverse another asset from C to B to A to C so everyone showed $50m profits manufactured out of thin air!)?

Looks like the bad old ways just change form and the auditors (and accounting profession) still chase the lucrative $$$ than perform their real duties of true and fair view.

[Beagle]

Sigh - can you remember the likes of Ceramco and the Corps (Chase, Equiti, Landmark etc) including gains from sale of properties and asset swaps (A sold to B for $100m, and B sold to C for $150m and A bought back from C for $200m ... then, reverse another asset from C to B to A to C so everyone showed $50m profits manufactured out of thin air!)?

Looks like the bad old ways just change form and the auditors (and accounting profession) still chase the lucrative $$$ than perform their real duties of true and fair view.

Yes mate I still "fondly" remember all the creative accounting from the bull market of the 1980's. Possibly such things are a little less overt these days but nonetheless its disappointing that so many companies feel compelled to justify themselves in creative ways AKA trying to pull the wool over Mum and Dad investors eyes.

[Baa_Baa]

Looks like the bad old ways just change form and the auditors (and accounting profession) still chase the lucrative $$$ than perform their real duties of true and fair view.

The accountants and auditors are employees or paid by the very same company, to count up the beans and state their authenticity. I would be interested in the NZICA view on this ... "creating prosperity for everyone".

https://www.acuitymag.com/business/w...hing-unethical assumes unethical CA's are all "young". Lol.

It is the same as the bank employee who provides 'independent advice' yet only proposes the banks' products. Or the independent analyst who is paid by the company that they are analysing (that's goes down a treat around here).

Caveat emptor, as it has always been.

[Beagle]

Imagine being an auditor of a finance company just as the GFC started to unfold. CFO to auditor, yes this really is a random sample of receivables for you to audit and test their integrity.
Correct response. Its too early for a Tui, I'll do the sample selection and test each one individually myself. (Note to non accountants or auditors, its simply impractical to test the veracity of every single receivable).

[winner69]

As long as ACMR is growing at a fast rate all this GAAP and non-GAAP talk is irrelevant - it means squat all when talking about some companies.

[huxley]

phishing for phools?

[Snow Leopard]

phishing for phools?

پھول [phool] is Urdu for flower.

Best Wishes
Paper Tiger

[huxley]

پھول [phool] is Urdu for flower.

Best Wishes
Paper Tiger

Ha, I did not know that!

Rather, I was attempting to reference this book: http://www.economist.com/news/books-...ve-been-warned

[Baa_Baa]

As long as ACMR is growing at a fast rate all this GAAP and non-GAAP talk is irrelevant - it means squat all when talking about some companies.

I'm glad Roger brought this up. It's despicable practice misinforming investors about the financial health and integrity of the companies we invest in.

I respectfully disagree with you winner, although you may be being tongue-in-cheek, as ACMR has nothing to do with accounting integrity, it's top-line stuff for SaaS companies, typically who are not making any profit. But you know that better than most.

We're talking here about bottom line and the in-betweens, the financial health of companies. What is the income, what are the expenses, are they profitable, is their a debt burden, can they service it .. etc.

The problem is very obvious imho, that the good thing about 'standards' is that there are so many to choose from! So choices are made, typically that paint the companys' financial performance in the best light. Is it corrupt, well that's not for me to say.

The FMA could sort it pretty quickly by legislating GAAP reporting. Force every listed company to report to a common accounting methodology. That wouldn't restrict them from providing 'alternative' accounting to 'give colour' to the numbers (an alarmingly frequent market analyst term).

All these 'variants' of accounting practices are what is at the core of the problem. It plays into the adage of 'stats, damned lies and stats'.

Any clever accountant can make the books look good through creative money laundering across the GL's. Unless the company is truely fecked of course. Then the accountants and auditors turn on their clients and royally shaft them. But that's after the investors have been well and truely rooted.

The solution is standardising the methodology, with no wiggle room.