收藏家 J‘s Collection

FS被investor和creditor有用，还有gov regulator，tax authority和其他，提供short-term liquidity, long-term earning power, growth opportunity和asset position of the firm. 还应该是relevent，timely，reliable，material和consistent允许time-series和cross-sectional 比较。

The Financial Account Standards Board(FASB)是美国的，建立了Generally Accepted Accounting Principle(GAAP)
The International Organization of  Securiies Commission(IOSC)建立跨过的disclosure标准
The International Accounting Standards Board(IASB)目标是提供international uniformity, 虽然没有执行力，但很多国家还是采用IASB GAAP

除了Balance sheet，income statement和statement of cash flow，分析师还应该看financial statement footnotes，statement of comprehensive income，statement of stockholders’ equity，proxy statement，supplementary schedules和management dicision and analysis(MD&A).

独立auditor有doubts，就说qualified opinion； auditor能提供 reasonable assurance证明报表没有material misstatement，就说unqualified

revenue和expense在earn和incur时候就实现了，不管cash flow是什么时候。matching principle要求expense在revenue实现的同时记录。

实现revenue的条件，completion of the earning process和assuance of payment
实现revenue的方法，sale basis method,percentage-of-completion method,completed contract method, installment sales method,cost recovery method

unusual or infrequent items: 是pre-tax 在net income from continuing operations之前。线上
gains of losses from 关掉business segment
gains of losses from 下属公司卖assets or investments
provisions for environmental remediation
impairments, write-offs, write-downs 和restructuring costs
integration expense 跟收购有关

Extrodinary items: 是net of taxes 在net income from continuing operation 之后。线下
losses from expropriation of assets
uninsured losses from natural disasters

discontinued operation：是管理层决定dispose of但还没做或当年没做，在operation已经有income或者loss之后。必须在实质上与公司别的活动不一样。是net of tax，在线下

accounting change，累积效应，是after tax basis在线下，通常不需要restate 历史，除非：
1. 库存会计方法改变
2.改变(to/from)full-cost method, 比如油气开采
3.改变(to/from)percentage-of-completion method
4.IPO前的任何改变

操纵earnings和managerial discretion，4种操纵方法：
1.classification of good/bad news, 好消息放在线上，坏消息放在线下
2.income smoothing，好年份做小，坏年份做大
3.big bath behavior，所有坏消息统一公布
4.accounting change，用来smooth earnings

CFO，CFI，CFF里面容易混的几个，interest payment，receipts和dividends，USGAAP下，公司给股东的dividends是CFF，其他的dividends和interest expense都是CFO，在IAS GAAP下，花掉的dividends和interests可以是CFO也可以是CFF，收入的dividends和interests可以是CFO也可以是CFI

direct和indirect method 算CFO

indirect，bottom up，从下至上，net income开始，net income – gains +losses from financing和investing +non-cash charges+-asset和liability因为operation的改变
direct，top down，从上到下，sales开始，sales- cogs- cash operating expense – interest expense -taxes

cash flow的分类，不是影响income statement就是影响balance sheet；asset减小，liability和equity增加是正现金流。asset增加和liability和equity减小，是负现金流。

CFI,买property，plant和equipment，investments，acquisition和卖asset和business产生的cash
CFF,capital structure 改变的交易。dividends paid，short-term borrowing的改变，long-term borrowing 和payment of long-term borrowing，stock sales and repurchases

Free cash flow FCF=CFO-net capital expenditure

5个影响跨国报表的因素
legal system，tax laws，sources of financing ,inflation rates,political and economic ties

公式：
current ratio=current assets/current liability
quick ratio=(cash + marketable securies+receivables)/current liabilities
cash ratio=

cash conversion cycle=avg.receivable colletion period+avg.inventory processing period-payable payment period
receivable turnover=net annual sales/avg.receivables; avg.receivables collection period=365/receivable turnover
payable turnover=COGS / avg.trade payables;payable payment period=365/payables turnover ratio
inventory turnover=COGS/avg.inventory; avg inventory processing period=365/inventory turnover

Total asset turnover=net sales / avg total net assets
fixed asset turnover=net sales / avg net fixed assets
equity turnover =net sales / avg equity

在common-size income statement能找到
gross profit margin=gross profit / net sales
net profit margin=net income /net sales
operating profit margin=operating profit /net sales=EBIT/net sales

ROTC return on total capital=(net income+interest expense)/average total capital
return on total equity=net income / avg. total equity
return on common equity=(net income – preferred dividends)/avg. common equity

ROE
three components,traditional approach
=net income/sales × sales/assets× assets/equity=net profit margin×asset turnover×equity multiplier
假如ROE低，可能是poor profit margin或者poor asset turnover，或者under-leverage
five components,extended system
=(EBIT/sales×sales/assets-interest expense/assets)×asset/equity×(1-t)
=(operating profit margin×total asset turnover -interest expense rate)×financial leverage multiplier×tax retention rate
industry averages,economy-wide firm averages和公司自己的历史performance

D/E ratio=total long-term debt/total equity
total debt ratio=(current liability+total long-term liability)/（total debt +total equity）
interest coverage=EBIT/interest expense
cash flow to long-term debt = CFO/(book value of long term debt+PV of operating leases)
fixed financial coverage ratio(要把lease interest expense加到分子分母)

ratio的局限：独立看没用，不同的accounting 方法导致横向对比困难，跨行业的公司对比困难

retention rate=1-dividends declared/operating income after taxes
g=retention rate X ROE

common-size balance sheet是所有的BS项目以percentage of total assets表示
common-size income statement是所有IS的项目以percentage of sales表示

dilutive securities：stock option,warrants,convertable debt 和 preferred stock，行权时会减小EPS
antidilutive：行权时会增加EPS

simple capital structure,没有dilutive securities的结构，只有common stock, nonconvertible debt和non convertible preferred stock
complex capital structure,有dilutive的结构,要求report bisic EPS和diluted EPS

bisic EPS=(net income – preferred dividends)/weighted average number of common shares outstanding
diluted EPS
每个dilutive securities要分别判断是不是会dilute
convertible preferred dividends/shares from conversion of preferred stocks或者
convertible debt interest(1-t)/shares from conversion os debt 假如值小于basic EPS, 那么就是dilutive，因为转换后收益高
diluted EPS=调整后给common stocks的income/(weighted avg common stock+转换的股份)
调整后的income=earning for common shares+可转换优先股的dividends +可转债的after tax interest

Treasury stock method,只要行权价低于均价，就会增加shares
new shares =(avg market price – exercise price)/avg market price X shares covered by options/warrants

inventory valuation method
FIFO，早买的早进COGS
LIFO，晚买的早进COGS
weighted average costing

涨价时，LIFO的inventory会低估，用LIFO reserve来调整LIFO到FIFO，代表没实现的profit 和没paid的tax。调整BS要把LIFO reserve加到inventory，把t X LIFO reserve加到deferred taxes，把(1-t)×LIFO reserve加到retained earnings

COGSF=COGSL-(ending LIFO reserve-beginning LIFO reserve)

Profitability ratio 用LIFO衡量，asset和equity用FIFO衡量；COGS用LIFO更好，FIFO要调整成LIFO
Liquidity ratio 用FIFO更好，inventory用FIFO更好， LIFO要调整成FIFO
Activity ratio，inventory turnover最好是用LIFO的COGS和FIFO的avg inventory
Sovency ratio，调整BS和Shareholders’ equity要用FIFO，LIFO要调整。

长期资产，实物资产可以depreciation，natural resources可以depletion，intangible asset可以amortize

折旧：
直线折旧=(原值-残值)/折旧年限
SYD折旧(x)= (原值-残值)(n-x+1)/(1+….n)
双重折旧(x)=2/折旧年限 X book value at beginning of year x (不管残值)

impairments， carrying value大于未来现金流（不折现）就必须impairment
impairment的loss = carrying value-fair value，假如fair value不能算，用未来现金流折现于incremental borrowing rate

SFAS 143要求asset retirement obligation(AROs),要求AROs的现值，加到fixed assets和liabilities中，liability像zero coupon一样增加，asset就折旧，interest expense会增加，liabilities to equity 会增加

tax return的术语
Taxable income
Taxes payable
Income tax paid
Tax loss carryforward

FS上，
pretax income
income tax expense
deferred income tax expense

DTL ， BS上income tax expense比taxes payable多的部分
最常见的是，income statement上的折旧比tax return的折旧少。
DTA，BS上taxes payable 比income tax expense多的部分
比如warranty expense，income statement上warranty expense可以deductible，tax return上只有发生了的warranty expense才可以deductible

DTL和DTA计算，taxable income 和pretax income所有临时的差别 X 未来的tax rate，not netted，同时反映在BS上，税率的改变同时影响，net change反映在当期income tax expense
如果asset不断增加，导致DTL不会reverse，分析师会把liability变成equity；如果有可能reverse，要用现值来调整。

免税债券的interest不增加DTL或DTA，要调整到taxes payable=income tax expense

par value 发行的bonds
BS上，bond全程记做face value
interest expense=book value X market rate=par value X coupon rate
cash flow，interest payment=coupon payment，CFF=发行价，总结时CFF=redeem价=发行价

溢价或折价发行
BS上，总是premium逐年amortized直到最后0， discount同样；最后回复par value
interest expense=coupon payment – premium amortization; coupon payment + discount amortization
cash flow, primuim CFO 低估，CFF高估

capital lease 分类
1.租期结束title transfer
2.a bargin purchase option exists
3.租期>=75%的设备寿命
4.payment的现值>=90%的fair value of the asset, 折现率是lower the lessee’s incremental borrowing rate or implicit interest rate on the lease, implicit rate是lease payment的现值=fair value

operating lease：Lessee，开始时没有entry，rent expense = lease payment 对income和CFO影响。footnotes公布未来5年的lease payment需求
capital lease：开始时asset和liability增加最小lease payment的现值，折现率是lower the lessee’s incremental borrowing rate or implicit interest rate on the lease, implicit rate是lease payment的现值=fair value
分成两部分，CFO减少interest expense=discount rate X leaseliability at the beginning of the period，CFF减少principal payment= lease payment-interest payment

Off balance sheet financing methods
take-or-pay contracts and throughput arrangements: 承诺买一定量在一定时间，价格固定，买方要在footnotes里面披露。分析师要把这个信息加入FS

sale of receivables with recouse
把receivable卖掉的公司，要把收来的receivable给new owner，记为sales减少receivable增加CFO，买家风险小，卖家承担receivable的风险，就像一个抵押贷款
分析师要加回account receivable和current liabilities，卖掉的CFO要改成CFF

Lessor对于lease的处理
operating lease，lease payment是revenue，asset要折旧。
capital lease，
1.如果sales lease，lessor是制造商或者dealer，开始时就算profit；增加net income,retained earnings和assets
2.如果是financing lease，只有利息收入算作每期的income

租期当中，operating lease的net income 会higher，所以两种方式的asset equity和retained earning是一样的。

Concept Checkers P17

1. 分析师的role：根据报表做决策 ，做决策或建议，根据过去的信息推测将来 auditor的role：保证报表信息无误
2. balance sheet包含公司在特定日期的financial position，income statement，cash flow statement和statement of changes in owners’ equity显示一个时间段的performance
3. 会计方法和estimates一般在footnotes 里面，financial statement notes
4. auditor 会issue qualified opinion如果fs make any exceptions to applicable accounting standards and explain the effect of these exceptions in the auditor’s report.
5. proxy statement 里面有关于shareholders vote，比如董事会成员选举
6. 分析FS的6个步骤：FS analysis framework 1.state the objective and context 2.gather data 3.process the data 4.analysis and interpret the data 5.report the conclusions or recommendations 6.undate the analysis

Concept Checkers P28

1. 买设备是investing activity
2. 公司借钱时financing activity，银行借出贷款是operating activity
3. accounting receivable是asset，accounting payable是liabilities
4. annual depreciation是expense，accumulated depreciation是contra asset account
5. owners’ equity = asset-liabilities
   liabilities = assets – contributed capital -ending retained earnings
   Assets=liabilities + contributed capital + beginning retained earnings + revenue – expense – dividends
6. 根据5中最后一个公司，任何元素的变化都会导致asset变化。
7. 记账了交易但没付钱，卖方记accrued revenue，买方记accured expense,没给invoice，不能记在account receivable和payable
8. 发行股票，记cash flow from financing在cash flow statement,记increase in contributed capital在statement of owners’ equity, 记equity(common stock) increase 在balance sheet. income statement 没影响。
9. general journal按日期显示公司交易，general ledger 按account显示
10. 分析师无法获得FS里面detailed account entries，管理者可以在符合会计准则的前提下，操纵报表利润
11. 帐目分类：
    

    account payable	liabilities
    account receivable	assets
    accumulated depreciation	assets
    additional paid-in capital	owners’ equities
    allowance for bad debts	assets
    bond payable	liabilities
    cash equivalents	assets
    common stock	owners’ equities
    costs of goods sold	expenses
    current position of long-term debt	liabilities
    deferred tax items	liabilities/assets
    depreciation	expenses
    dividends payable	liabilities
    dividends received	revenues
    gain on sale of assets	revenues
    goodwill	assets
    inventory	assets
    investment securities	assets
    loss on sale of assets	expenses
    notes payable	liabilities
    other comprehensive income	owners’ equities
    prepaid expenses	assets
    property,plant and equipment	assets
    retained earnings	owners’ equities
    sales	revenues
    unearned revenue	liabilities

Concept Checkers P43

1. standard-setting bodies are private sector organizations that establish financial reporting standards.
   加强信息披露是监管部门的责任。
2. international accounting standards board -  IASB ， standard-setting bodies
   financial services authority – FSA 英国的regulatory authority
   securities and exchange commission – SEC 美国的regulatory authority
   international organization of securities commission – IOSCO national regulatory authority
3. biz groups 并不支持统一fs标准，各国的监管机构也是统一标准阻碍
4. fs的可靠性相符的是prudence，neutrality，completeness。timeliness跟reliability是tradeoff的。
5. asset liability 和owners’ equity 反映financial position，income expense反映financial performance
6. 上市公司每年要发Form 10-K， fair presentation, the ban of offsetting都是principle
7. international financial reporting standards(IFRS) 考虑comparability, understandability, reliability和relevent，更多侧重于going concern assumption
   financial accounting standards board(FASB) 只考虑reliability和relevent
8. MD&A里面会出现 impact of adopting the new standard, conclude that  it does not apply or will have no material impact, or state that they are still evaluating the potencial impact.

Concept Checkers P77

1. depreciation 包含在operating expenses里面，所以在income statement；interest expense是financing cost, 不属于operating expenses所以不在income statement里面
2. income taxes 是根据nature来分类的，cost of good sold包括同样function的一堆expenses
3. 实现收入：确定价格，确定交易，交货。cash拿不拿到不重要。
4. 算出第一年cost占总cost的百分比 X 总价格 – 第一年cost=第一年收入(percentage-of-completion)
   Completed-contract 只有最后结束才有收入。
5. match principal要求expense和revenue同期记账
6. 减少资产的残肢，导致每期折旧增加，导致pre tax income减小
7. FIFO和LIFO在美国都允许，但IFRS不允许LIFO
8. accelerated depreciation导致早年折旧率高，总折旧expense跟直线折旧是一样的，直线折旧的的book value在晚年会比较高，所以报废设备的损失要比加速折旧要少。net income 两种方法是一样的。
9. FIFO，从早的开始减，LIFO从晚的开始减。
10. double-declining-balance method折旧，第一年 2/y ×总值， 第二年=2/y ×(总值-第一年)
11. bad debt expenses是operating expense，dividend received from 可售证券，interest expense on subordinated debenture，额外loss from destruction of building都是nonoperating expenses
12. accounting estimate的改变，要reported prospectively，不需要restatement of prior period statement.
13. a physically and operationally distinct division currently for sale 当作discontinued operation.这个division的income是net of tax在income from continuing  operations下面。
    改变折旧方式，会改变accounting principle，会改变operating income,要retrospectively application
14. 改变accounting principle 要retrospectively application，以前的FS要restate来反映change
15. basic share：按月份平均，diluted share，加上按月份平均的可转债。派息前的股份要加上。
16. warrant价格低于均价，(均价-warrant价)/均价 × warrant数= 股份数
17. basic EPS=earnings/ shares，看可转债的影响：numerator impact=债息×(1-t); denominator impact=可转股份数；per share impact = 分子/分母，假如大于 basic EPS，就不转，diluted EPS=basic EPS ， antidilutive；小于就转。
18. 均价<可转债转换价，可转债就不转，总股数还是basic
19. 分析COGS，用它除以sales
20. pre-tax margin(pre tax earnings / revenue) 用来衡量profitability
21. 外汇交易的gain不包含在net income里面，但是增加owners’ equity
22. comprehensive income 包括所有equity变化，除去跟股东的交易，所以dividends paid to shareholders不算。

Concept Checkers P100

1. asset 是future economic benefit，有些是tangible有些是intangible
2. asset=owners’ equity + liability
3. report format：asset liability和equity在一个column里面展示。a classified balance sheet 分组类似的item
4. operating lease的租金prepaid， 减少cash(asset)增加prepaid expense(asset),所以asset不变，liability也没影响。
5. 预售票到款，只能算defered revenue，直到event举行。
6. estimated income tax 算作current liability。warranty expense要probable，而不是possible才算。future operating lease payment 不反映在balance sheet中，客户的倒闭影响receivable(asset)
7. 美国GAAP的inventory valuation method是 the lower-of-cost-or-net-realiable-value
   FIFO,LIFO和average cost 是公司可选的inventory cost flow assumptions
8. 内含的goodwill不反映在bs里面，买的patent要反映
9. 全资收购子公司，purchase price(股价X股份)-fair value(book value+primium)=goodwill、
10. property and equipment的价值= 原始价值-累计折旧，不需要公布fair value在footnotes里面
    policy和accounting method要公布，contingencies and commitments要公布，off-balance-sheet financing 要公布。
11. trading securities和available-for-sale securities在bs中反映的都是fair value，市场股价
12. income statement里面，trading securities是包括分红后的fair value，available-for-sale securities是没卖出去前的收入，比如分红
13. treasury shares=issued-outstanding，不按总股份数来算。
14. total owners’ equity = common stock + preferred stock + retained earnings +accumulated other comprehensive income(包括投资利润)
15. 应收款的回收，增加cash减小account receivable，所以current asset不变，current ratio也不变，但cash ratio变(包含cash和martketable security)
16. company ratio的横向对比是cross-sectional  analysis

Concept Checkers P127

1. cash flow from operation= net income – profits from sale of land + depreciation+decrease in receivable -increase in inventory + increase in accounts payable – decrease in wage payable + increase in deferred tax
2. cash flow from operation=net income – profit on sale of building + depreciation, tax和interest在算net income已经减掉了。
3. cash flow from investing = cash from sale of building – purchase of machinary
4. cash from financing = sale of preferred stock  + issuance of bond – principle payment on bank borrowings – repurchase of common stock – dividends paid , debt retired through issuance of common stock是noncash transaction，不算在cash flow里面。
5. net income= salesXprofit margin， cash flow from operations= net income – gain on sale  of machinary + depreciation – increase in account receivable – increase in inventory – decrease in account payable
6. 在US GAAP里面interest payment on debt 是operating cash flow
7. 折旧不算现金流，增加折旧影响operating 不影响investing
8. notes payable是financing cash flow
9. US GAAP里面dividend paid是financing，IFRS下可以是operating也可以是financing
10. sale of inventory是operating
11. 发债券是financing
12. sale of land是investing
13. increase in tax payable是operating
14. increase in notes payable 是financing
15. increase in interest payable是operating
16. increase in divident payable是financing
17. write-off obsolete equipment没有cash flow impact
18. sale of obsolete equipment 是investing
19. IFRS下，interest expense可以是operating 也可以是financing
20. depreciation是non cash flow
21. GAAP下dividends received from investments是operating
22. debt和equity的转换是non cash flow
23. cach flow from operations=net income + depreciation – unrealized gain – increase in accounts receivable + increase in account payable
24. GAAP下dividends received from investments是operating
25. common – size format的cash flow转换成total revenue的percentage

Comprehensive problem:
1.indirect method cash flow from operation= net income – gain on sale of machinery + depreciation  - increase in receivables + decrease in inventories + increase in accounts payable + increase in interest payable
2.cash  collections = sales – increase in receivables
cash paid to suppliers = – cost of goods sold + decrease in inventory + increase  in account payable，结果负数转正。
other cash expenses=-interest expenses + increase in interest payable – tax expenses，结果负数转正
3.direct method CFO = cash collections – cash to suppliers – other cash expenses 必须跟间接法的结果一致
4.CFF=sale of stock+ new bank note – payment of mortgage – dividends + increase in dividends payable
CFI=sale of fixed assets – new fixed assets
total cash flow = CFO+CFF+CFI
5.Free cash flow to equity owners FCFE=CFO – capital spending + sale of fixed assets + debt issued – debt paid
6.假如租赁代替购买设备，CFI会高，CFF会低

Concept Checkers P154

1. inventory accounting method的选择最终影响tax
2. ending inventory=beginning inventory+purchase-COGS
3. 同2
4. COGS高估，导致ending inventory低估
5. inventory高估导致tax低估
6. 同2
7. FIFO中，COGS反映先买的，ending inventory反映最近买的
8. 计算库存FIFO
9. 计算库存LIFO
10. 计算利润LIFO
11. 计算利润FIFO
12. 计算库存平均法
13. 计算利润平均法
14. 涨价期间，LIFO COGS>平均法>FIFO，FIFO的income最高
15. 跌价期间，相反，LIFO的income 最高
16. 分析师的角度来看，用FIFO，现有的inventory反映的现在的cost。
17. 分析师偏向用LIFO分析current income，因为COGS是现在的cost
18. 涨价和库存增加期间，LIFO导致高COGS，低income所以低tax和高cash flow
19. 涨价期间，用FIFO的公司，导致低COGS，higher net income
20. LIFO liquidation导致COGS per unit decline和profit margin increase
21. 降价期间，FIFO导致高COGS，lowering net income
22. 涨价期间，FIFO的inventory会higher，导致current asset higher导致higher current ratio
23. 同17
24. LIFO说higher net income，价格是下跌。
25. 涨价和库存不跌，LIFO有低profitability ratios，低 inventory levels，低 current ratio
26. 涨价和库存不跌，FIFO有higher level of assets因为higher inventory
27. FIFO COGS=LIFO COGS – (ending LIFO reserve – beginning LIFO reserve)
28. LIFO比FIFO低，所以加上LIFO reserve
29. retained earnings要加上LIFO reserve，不需要根据tax调节
30. account payable跟inventory accounting methods无关
31. 调整LIFO COGS 到FIFO应该FIFO COGS=LIFO COGS – (ending LIFO reserve – beginning LIFO reserve)
32. cost减小，income 增加，再减去税
33. LIFO的cost可以通过adding the inflation rate X beginning inventory
34. 用LIFO的FS，用于横向对比时，要调整stock holders’ equity，因为inventory会增加，equity也会增加
35. 竞争对手的LIFO reserve或者产业统计数据都可以用来估计inflation rate
36. 上限是net realizable value(NRV) =selling price – selling cost, 下限是NRV-normal profit(selling price×利润率)， 范围里面，历史成本和replacement cost取最低。

Concept Checkers P173

1. capitalization和expensing没有operatianal difference
2. 分析用途，interest expense要加到CFI
3. 开发patent的cost是expense，买patent的cost是capitalized
4. capitalized的公司，早年有higher profitability ratio，因为cost 被spread out
5. 开发软件是operational activity，cost是expensed，建房子的interest是capitalized
6. accounting choise影响cash flow components，可能不会影响总cash flow。但如果影响到tax就会影响cash flows
7. 用expense的公司，因为lower level of assets，导致debt ratio高
8. 建筑利息capitalized，导致lower debt ratio，折旧导致lower reported income
9. Capitalized有高的net income，低的debt-to-equity ratio，greater cash flow from operation
10. expense的公司，有低net income，所以smaller  initial return on assets，same total cash flow(分类不同)，和larger CFI(expense是CFO)
11. 广告花费是expense，软件开发是expense，开发patent和copywrite是expense，R&D是expense
12. 建筑中的interest是capitalized，根据建筑的寿命来amortized
13. 收购的品牌是capitalized，goodwill是capitalized，保护专利的legal costs可以capitalized

Concept Checkers P193

1. 报废asset，inventory不受影响，fixed asset受影响，deferred tax受影响，stockholders’ equity不受影响。
2. 减小残值导致折旧增加，导致income减小。增加income，可以通过增加残值，减小折旧。
3. 直线折旧=(原值-残值)/年数
4. sum-of-years’ digits（SYD）=(原值-残值)(年限-年数+1)/(年数相加) 如，4年的使用期第一年的折旧是(原值-残值)(4-1+1)/(4+3+2+1)
5. double declining balance (DDB)第一年折旧=2/年限 ×原值
6. units-of-production 算出per unit的折旧量= (原值-残值)/总预算量，再X使用量
7. 用直线折旧比SYD的reported income要多。都不考虑使用量
8. 同4
9. 同5，第二年折旧=2/剩余年限X残值
10. 同7，直线折旧最小，income最大
11. 平均折旧年限=ending gross investment / 折旧值
12. 已折旧寿命百分比=累计折旧值/总值
13. 同12
14. sunking fund 折旧在美国不允许，加速折旧用于tax purpose，SL用于FS，导致deferred tax liability
15. 一直投new assets会有higher depreciation expense因为使用加速折旧。会有lower equity，lower income，lower return on assets
16. 残值变更，不需要restate 历史，会对目前和未来的income有影响，改变accounting estimate
17. inflation导致折旧不能反映true cost of replacing the asset，导致ROA和ROE太高，income 太高。基于现在的折旧导致将来的income有优势。
18. 折旧方式的更改是accounting principle的更改。income的历史累计的影响要被noted
19. asset impaired定义：公司不能fully recover the carrying amount of the asset through operation
20. impairment 的loss不影响cash flow
21. average life calculation允许分析师获得asset quality的数据，帮助预测major capital 的花费。
22. testing for impairment用undiscounted cash flow，但是计算impairment要用discounted cash flow
23. SFAS 143环境补偿，inflate depreciation expense，lower asset turnover，higher debt-to-equity ratio；asset and liability记录于asset acquisition包括cost of return the land to the condition requird
24. sink funing 折旧用于计算constant return on investment

Concept Checkers P212

1. tax payable和tax expense的差距是由于financial 和tax accounting 的差别
2. pretax income和income tax expense 不总是linked
3. taxable income=利润-折旧=10000
   3-10的题：120000总价，每年利润50000，税率40% 3年折旧tax purpose，fs上4年折旧，
4. tax payable= taxable income × tax rate=4000
5. 第四年pretax income=利润-FS上折旧=20000
6. 第四年tax expense= pretax income × tax rate=8000
7. 第四年tax payable是taxable income × tax rate=20000
8. 第二年bs上会有deferred tax liability 8000
9. 第二年税率上调至50%，用累计延税income×新税率
10. 第二年上调50%后的，tax expense = taxes payable + increase in deferred tax (第二年10000-第一年4000) =11000
11. taxable income是亏损，就有deferred tax 是资产
12. 一公司有deferred tax liability但未来持续增长，应该全额认为是equity
13. 一公司有deferred tax liability但未来会减少，现值应被认为是liability，其余应被认为是equity
14. 税率下降，bs上的DTL和DTA都减少，taxable income没影响，如果DTA>DTL, income tax expense 会增加
15. 计算deferred tax liability应该用reversal时的税率
16. 如果taxable income和pretax income一直有差距，用于计算tax expense的effective tax rate 需要调整
17. valuation allowance是用来offset deferred tax assets的(DTA不可能实现的情况下)

Concept Checkers P242

1. book value of debt = interest 和 principal payments的现值。基于debt发行时的市场价
2. annual interest expense=book value × 发行时的interest rate
3. 发行时coupon rate < market rate, 折价发行，discount bound
4. coupon payment = book value × coupon rate
5. total cash payment = coupon payment + face value
6. 初始book value，折价销售肯定<面值，总价按市场利率折现
7. 同2
8. 第二年新的book value=beginning book value + interest expense – coupon payment，也可以用更新后的pv来计算
9. coupon payment + amortized interest = coupon payments + face value – issue value
10. CFO overstate= true interest expense-coupon
11. 同2
12. actual coupon payment 是operating cash flows
13. 发行时coupon rate比市场rate 高0.25，溢价发行，第二年的premium会减小。一年后市场rate跌0.5%，对溢价没影响。
14. preferred share是equity，bond with warrant，bond算liability，warrant算equity，加到原来公式中计算debt-to-total capital ratio
15. 股价>可转债的转换价，可转债是equity
16. 发可转债比一般的债券利率低，增加CFO
17. exchangeable debt的好处delay income tax impact，利率低，买股票产生的市场影响被削弱，控制股票的同时产生cash

Concept Checkers P256

1. operating lease
   Lessee：higher profitability ratio，不需要在bs上有debt；lower leverage ratio
   Lessor：higher cash flow from operation，lower profitability ratio；lower return on asset
2. lease payment用lower of the implicit lease rate or lessee’s  incremental borrowing rate.而不是两者较大的；lease period>=75%就是capital lease；capital lease中，所有的好处和ownership风险都在lessee方；lessee要把capital lease的资产记账，并折旧摊销
3. capital lease的条件，满足任一：
   title transferred at the end of lease period
   a bargin purchase option exist
   租期至少75%的asset’s lift
   lease payment 的现值至少90% fair value of the asset
4. operating lease是contract，花费是lease expense；capital lease是purchase，花费是interest expense
5. capital lease是asset，也是long-term liability也是short-term liability
6. 卖了receivable但保留credit risk，account receivable，current ratio和debt-to-equity都要调整。inventory turnover不用调整。
7. 可转债不是off-balance-sheet financing method；sale of receivables，finance subsidiaries，throughput arrangements都是off bs financing method
8. 总cash flow跟lease种类无关，都一样。capital lease有higher operating cash flow和lower financing cash flow。operating expense在早年expense较低，capital expense在晚年较低。capital lease，initiation没有cash flow，lease payment的principal部分记做cash flow from financing
9. 早年capital lease的net income较低，晚年较高
10. capital lease的interest expense是每年的beginning value of the leasehold liability X discount rate, charged to income and operating cash flow
11. capital lease 的debt-to-equity ratio 增加，因为增加了asset和liability；operating lease没有debt
12. 同前几题
13. capital lease导致current ratio较小，因为下几年的lease payment是current liability
14. 按照implicit discount rate算lease payment的折现=leasehold asset at the inception of the lease
15. interest  expense= leasehold value × implicit discount rate
16. 直线折旧=leasehold value/年限
17. interest expense是CFO
18. CFF=lease payment- interest expense

comprehensive problem

1. 	capital lease
   CFF	lower
   CFO	higher
   CFI	unchanged
   Total CF	unchanged
   EBIT	higher
   Net income	早年lower
   D/A	higher
   D/E	higher
   ROA	lower
   ROE	lower
   Total asset turnover	lower

2. debt	increase
   Cash	unchange
   current ratio	unchange
   D/E	increase
   receivables	increase
   working capital	unchange
   receivables turnover	decrease
   cash conversion cycle	longer
   interest coverage	increase
   CFO	decrease
   CFF	increase
   CFI	unchange

Concept Checkers P299

1. common-size income statement 所有account去除以sales
2. financial ratio的限制，单独看没意义；决定target和笔记，要做调整 ；不同的accounting treatment需要调整
   数据难获得不是限制。
3. fixed charge coverage 是solvency ratio；return on total capital是衡量profitability；the defensive interval ratio是衡量liquidity ；number of days of payables 是activity ratio
4. payable turnover=COGS/avg.AP, payables payment period=365 / payable turnover
5. total asset turnover = sale / total asset
   inventory turnover = COGS/ avg.inventory = (sales- profit) / inventory
6. 同4
7. current ratio= (cash + AR+inventory)/ AP, CR>1时，分母减小>分子减小，CR增加
8. quick ratio=(cash + AR)/AP,  cash 减小，分母不变，QR减小
9. Current ratio=CA/CL，CR>1时，CACL同时减小，CR增大
10. receivable turnover是10倍，inventory turnover是5倍，payable turnover是9倍，cash convertion ratio是365/10+365/5-365/9
11. interest coverage ratio=EBIT/I
12. 经典杜邦公司three-ratio DuPont Model，ROE=net profit margin × total asset turnover × financial leverage multiplier
13. ROE=net income/sales × sales/assets × assets/equity
14. ROE=[EBIT/S × S/A-I/A](A/E)(1-t)
15. net profit margin × equity turnover=net profit margin×total asset turnover×asset/equity
    =(operating profit margin×total asset turnover – interest expense rate)×financial leverage multiplier×tax retention rate
    ROA×interest burden×tax retention rate不是ROE
16. 同15
17. g=retention rate × ROE
    ROE=net profit margin×asset turnover×equity multiplier
18. 分析师预测earning会预测收入增长，会假设financial ratio不变，检查variablity of predicted outcome by performing a sensivity or scenario analysis

comprehensive problem

inventory turnover=COGS/avg.inventory
days of inventory on hand=365/inventory turnover
receivable turnover=sales/avg.AR
days of sales outstanding=365/receivable turnover
payable turnover = COGS/avg.payables
days of payable=365/payable turnover
cash conversion cycle=days of inventory on hand+days of sales outstanding -days of payables

Concept Checkers P312

1. 根据销售，库存，AR，AP计算出inventory turnover, receivable turnover, payable turnover,再算出days of invenroty on hand，days of sales outstanding，days of payables，改变最大的一项就是最需要提高的。receivable和payable数字基本不变，表示对供应商和vendor的credit policy没改变。
2. 预测income和cash flow基于COGS，operating expense，non cash working capital对于sales的比例不变。interest expense是用于针对additional debt的调整
3. lower leverage 提高公司的creditworthiness. larger  scale,more diversification ,higher operating efficiency,和more stable margins提高better credit quality。
4. 高增长率的公司，有high market value to book value; 高operating profit margin不一定高增长，low price to cash flow ratio用于发现value stock而不是growth stock，高派息公司用于发现mature firm同时低增长。
5. 不同的折旧方法，inventory cost和不同的会计准则IFRS和US.GAAP都需要分析师做调整。direct method 和indirect method的cash flow都一样，不需要做调整。

Concept Checkers P325

1. held-for-trading securities在BS上反映fair value；influential security用equity method来记账，不在BS上反映fair value
2. develop goodwill不能capitalized，买goodwill 可以。
3. impairment loss记在当年的net income里，第二年如果资产涨价了，前面loss就记在net income里面，剩下的部分加到owners’ equity里面。而总数是equity增加了涨价的部分，其中一部分记在net income，另一部分记在direct adjustment
4. 项目到一半，因为罢工中断，之前的revenue能不能实现？USGAAP是completed-contract method，不能记revenue；IFRS可以用percentage-of-completion method，这样可以记对应cost的revenue，但完工前没有profit
5. IFRS下，利息和分红收入可以记做CFO也可以记做CFI；在US GAAP下，只能记做CFO
6. FIFO COGS=LIFO COGS-(ending reserve-beginning reserve)
7. 去除unrealized gain，total asset turnover会higher，debt-to-equity也会higher

Self-test：

1. MD&A里面包括，sales趋势的信息，expenses的分类，预计capital expenses和events with liquidity implications，outlook for future result基于已知trend。折旧方法在footnotes里面
2. POC会增加net income，retained earnings和equity和assets，所以debt/assets和D/E ratio会减低，cash flow不变。
3. interest expense是CFO，dividend 是CFF
4. inventory turnover是sales和avg.inventory算出来的，所以不能从common-size statement里面算出。tax可以算(income tax expense/sales) / (net income / sales)
   debt/equity 可以用 (debt/assets)/(equity/assets), operating profits/sales 可以从common-size表中找到。
5. cash conversion cycle=days of inventory on hand+days of sales outstanding -days of payables
6. ROE=net profit margin×asset turnover×equity multiplier
   retention rate=1-dividend payout ratio；growth = retention rate×ROE
7. 行权价低于均价的option，算在dilutive shares里面，高于的不算。
8. LIFO reserve不会amortized，LIFO reserve下跌，有可能是因为跌价，或者inventory liquidity
9. 可转债算liability，bond with warrant的bond算liability，warrant的fair value算equity。所以bond with warrant的liabilitiy和equity都小，leverage ratio就提高。
10. 买了个特许权，要capitalized，原来的CFO就会变成CFI，asset和equity会增加，所以D/A和D/E会减小
11. 不能实现的DTA用valuation allowance来冲销
12. interest expense=市场利率XBS上的liability，par bond的利率=coupon rate，所以interest expense不变。premium bond，第一年expense一样，以后会amortized，每年的interest expense会减小，net income会增加
13. capital lease的CFO会高，因为部分被扔到了CFI，同时开始的时候，liability和asset同时增加，equity不变。operating lease不影响CFI，所以不会影响CFI的波动。
14. asset acquisition时，环保费的现值要记liability和asset，对equity 没影响。liability每年会用interest expense减少，interest coverage ratio会lower，net income会减小，因为interest expense和asset的折旧。
15. impairment charge导致operating income和net income减少，税不变，D/E ratio会增加。因为equity减小。
16. 多年建筑的贷款利息必须capitalized，asset of insiginificant value是expensed，即使年限很长。software 开发费在technological feasibility 建立以后，可以capitalized也可以不，R&D cost 是expensed
17. 跌价时计算profitability，用LIFO算COGS，用FIFO算inventory
18. 跌价时，用FIFO，net income减小，因为tax减小，所以higher cash flow
19. 折旧的年限=(已折旧+账面价值)/年折旧，年龄=已折旧/年折旧
20. 免税债券的利息，要把税率调节低于征税税率，没有defer因为不会reverse，也不能直接记做operating income
21. 买receivable的公司当成loan来看，要加回AR，减小receivable turnover，current liability也会增加，增加debt ratio，减小current ratio。cash和marketable securities没变。
22. 国外公司符合IRFS要在美国上市，可以符合GAAP或者单独提供reconciliation of IFRS statement with USGAAP，包括帮助美国投资者分析的相关的披露
23. unrealized gains&losses on trading securities 在income statement里面报告（USGAAP和IFRS），IFRS不许用LIFO，goodwill 是内生还是很外购处理不同。future minimum operating lease payment to asset 和equity。
24. indirect method换成direct，分析师可以把cash expense和receipts分类，CFO不需要调整，都一样。dividends 在us GAAP下不在CFI

Revenue Recognistion
Earning process is complete
realization of payment is assured

5种方法：
1.sales basis: 最常用
2.percentage of completion: accounts for profits in stages
3.Completed contract: recognition of profit delayed until contract completion
4.Installment sales: accounts for earnings in stages in proportion to cash collections
5.cost recovery: profits are not recognized until all costs are recovered

Impact on balance sheet

impact on Cash
2种方法，ending cash balance是一样的， using the net of cash received and cost incurred

accounts receivable
2种方法ending AR balance 是一样的，用net of cash receivable and amount billed

Construction in progress(CIP)
ending CIP = cost incurred + pro-rata profit
POC下，profit recognized throughout the project life
CC下，no profit recognized until contract completion
CIP POC> CIP CC

Advance Billings
2种方法，Gross AB一样，

Netting AB and CIP
2种方法，balances是net的， cumulative construction in progress – cumulative advance billings 显示在FS里
如果value是正，记做CIP（asset side），如果负，记着AB（liability side）

Retained Earnings=(total costs to date / total estimated costs) × gross profit
represents the cumulative share of total gross profit to date

Appropriate method: 根据status of completion of the earnings process, assurance of payment, reliable estimate of total cost

Unsual or infrequent items
above the line pre-tax as part of continuing operations
例如：gains/losses on disposal of a business segment, gains/losses on sale of investments, environmental costs , restructuring/impairment, integration expenses associated with acquisitions

below the line
Net income from continuing operations
+-income from discontinued operations
+-extraordinary items, expropriations, debt retirement, uninsured losses
+-cumulative effect of accounting changes
= net income,    reported net of taxes

Discounted operations, below the line, net of taxes
management adopts a formal plan to dispose of a business segment
business segment must be separable from the company’ s operations

Change in accounting principle
a change from one GAAP principle to another
disclosures, nature and justification, effect on income, pro forma effects for prior statements, footnotes.

role of nonrecurring item in estimating earnings power
classification of good/bad news
income smoothing
big bath techniques
accounting changes, suspicious->no cash implication

Financial reporting 的目标
1.equity investors: 寻找长期投资目标，盈利能力，增长机会和付息能力
2.short term creditors:研究liquidity of business
3.long term creditors:长期目标和盈利能力

FR的用户，investors-debt and equity, govenment-taxes and regulators, others-public,special interest group,workforce etc

Accrual Accounting principles
1.Going concern
2.Recognition
3.Prudence
4.Histonic cost
5.Matching

Accounting characteristics
1.Comparability and consistency
2.Materiality
3.Conservatism
4.Full disclosure
5.cost/benifit

Accrual Accounting
1.revenues are recorded when earned regardless of cash collection
2.expenses are recorded when incurred regardless of cash payment
3.Matching principle, report expenses in the income statement in the same period as revenues that were earned as a result of those expenses

Accounting information的质量
understandability
usefullness, relevance -disicion making, reliability – credible/verifiable

Statement of financial accounting concepts 2 (SFAC)
Relevance , 影响决策的信息
Timeliness, 信息瞬间失去意义，最好可以forecasting
Reliability,verifiable and representational faithfulness
Consistency, same accounting principle consistency applied over time
Comparability, 不同公司间对比。
Materiality, 重要的数据

Contents of stockholders report
1.Management discussion and analysis(MD&A)
2.Balance sheet
3.Income statement
4.statement of stockholders’ equity
5.statement of cash flows
6.statement of comprehensive income
7.auditor’s report
8.explanatory notes
9.supplementary information

Contents of MD&A
1.results of operations + discussion of trends
2.Capital resources and liquidity + trends in cash flows
3.Gerenral business overview based on known trends
4.effects of known trends, events and uncertainties
5.discountinued operations, extraordinary items, ununsual items
6.disclosures in interim financial statements
7.segmental cash flow requirements and contributions

Balance sheet

Current asset= Cash + account receivable + inventory + trading securities + prepaid expences
within one year

Long-term asset=available-for-sale securities +ｈeld-to-maturitysecurities+investments in companies+Gross PP&E+ less accumulated depreciation+ intangible assets

Current liabilities=account payable + tax payable + dividends payable+current portion long-term debt

Long-term liabilities = bond payable + mortgage payable+ deferred taxes

Equity=preferred stock + common stock + additional paid-in-capital + contributed capital+retained earnings

Income statement
Net sales – cost of good sold = gross profit
gross profit – SG&A expense – depreciation = EBIT
EBIT – interest expense = EBT
EBT – taxes = Net income

Stock holders equity
Beginning stockholders’ equity +-net income + sales of common stock + additional paid in capital – preferred stock dividends – common stock dividends= ending retained earnings

Preferred stock: disclosure – dividends(fixed, floating, participating) call provisions, conversion privileges; if redeemable by holders,reclassify after liabilities

Common stock: each class reported separately, recorded at par value, treasury stock contra for repurchases

Additional paid in capital:普通股溢价发行，超过部分记做additional paid in capital

Other items: minimum liability adjustment (pensions), forex gains and losses under the all-current method, market valuation adjustment(available-for-sale securies), unearned shares issued to employee stock ownership plans(ESOPs)

Statement of Cash Flows
+-cash from operations
+-cash from investing
+-cash from financing
= ΔCash
+beginning cash balance
=ending cash

Statement of comprehensive income
Net income
cumulative translation adjustment
minimum pension liability
unrealized gains/losses on available-for-sale securities
deferred gain and losses on cash flow hedges

Footnotes
提供信息关于accounting methods/assumptions/ estimates, Audited, 提供其他信息关于depreciation method, inventory valuation methods, leasing arrangements, deferred tax details, 未列于FS但相关或者重要数据。

Proxy statements
在company meeting前，发给所有股东，解释需要股东投票的proposal， 包括management remuneration, stock options, special deals and related party transactions, 也detail any change of auditor

Common-sized statement
1.normalize balance sheet and income statement to facilitate comparison of different-sized firms
2.Common-sized balance sheets express all balance sheet accounts as a percentage of total asssets
3.Common-sized income statement express all income statement items as a percentage of sales

Auditor report， independent review of the company’s financial statements, true and fair
unqualified opinion VS qualified opinion, uncertainties
Contents: responsibility of management to prepare statements, independence of auditors, properly prepared in accordance with relevant GAAP, free from material misstatement, accounting priciples and estimates chosen are reasonable

Income statement format
Revenues from the sales of goods and services
+other income and revenues
-operating expenses
-financing costs
+-unusual or infrequent items
=pretax earning from continuing operations

-income tax expense
=net income from continuing operations

+- income from discontinued operations
+-extraordinary items
+-cumulative effect of accounting changes
=Net incom

Financing liabilities的种类
1.Discount Bonds/Zero coupon bonds, issuer的好处lower coupons paid,CFO overstated;  分析师处理：reduce CFO by amortization amount
2.Convertible Debt, issuer的好处，比vanilla bond利息花费低，CFO高,一样的B/S Liability; 分析师处理：股价>转换价，是Equity,反之是Debt
3.Bonds with warrants, issuer的好处，比可转债利息花费低，CFO高,B/S更低(balance sheet liability);分析师处理：bond value是debt, warrant 是equity
4.Exchangeable Debt, issuer的好处，低利息花费，不需要卖investment来产生现金流，delay tax, control timing of gain; 分析师处理：跟可转债一样
5.Commodity bonds, issuer到好处，把fixed的利息支出变为variable, reduce interest coverage variability; 分析师处理：可能比可转债risk要小
6.Perpetual debt ，好处，低利率时锁定长期利率，处理：作为equity
7.Preferred stock, 好处，debt/equity hybrid security,处理，redeemable preferred shares是debt, dividends是利息，variable-rate shares是short-term liabilities

Debt/Capital = LTD/ (LTD + EQUITY)

利率变化的影响
Book value of debt 反映market rate at date of issurance 分析师用Prevailing market rate重估价值 分析leverage ratios和公司的economic value时，考虑revised value

SFAS107要求公司披露外债的fair value

Covenants: 保护bond holder, trigger repayment on violation (technical default) , 在footnotes里披露。种类：
1. restrictions on dividends and share repurchases
2. restrictions on M&A and sale leaseback and disposal of certain assets
3. restrictions on the issuance of new debt
4. repayment patterns

典型的Ratio Based Covenants
Current ratio, working capital, interest coverage, debt/equity

Lease and Off-Balance-Sheet Debt
Operating lease,Off-Balance-Sheet 好处
1.avoid balance sheet recognition
2.lower assets and debt, 使之lower leverage and higher turnover and ROA
3.Covenants(leverage restriction)
4.Management compensation linked to invested capital
5.Lease term < asset’s life, lessor 更容易在end of lease时卖掉资产

Capital lease, balance sheet impace; 好处
1.lessee 得到折旧和利息支出减少的税收好处
2.更高的CFO

术语：lease parties: lessor 借出方 own the asset; lessee 借入方，rent the asset
种类：
1. title transferred to lessee at end of lease
2. bargain purchase option
3. lease period >= 75% of asset’s feconomic useful life
4. lease payment 的PV  >= 90% of asset FMV(fair market value)

Discount rate is lower: 1. lessee incremental borrowing rate; 2. implict lease rate

To Lessee
1. Financial Statement
Capital lease : Assets higher, Liabilities Higher, Net incomes(early years) Lower, CFO higher, CFF lower, Total CF same
Operating lease: 反之，Total CF same

2. Ratios
Capital lease: Asset turnover lower, ROA lower, ROE lower, debt/equity higher,
Operating lease: 反之

Sales-Type and Direct Financing Leases

lessor方来看，是seller/dealer of the leased equipment, structured as capital lease, manufacturing and financing profit
PV – cost of asset = profit

Direct financing leases
financing profit olny – interest revenue, 类似operating lease, no gross profit at inception
PV of MLP = cost of asset  – rate implicit in the lease

Accounting at sale
1.record sales as PV of lease paymemts
2.COGs = cost of asset – PV of salvage
3.Profit – no net CF impact , CFO increased and CFI decreased by same amount
4.Asset, net investment in the lease = PV of lease payment + salvage

Periodic transactions
1.interest income = befinning net investment × discount rate
2.impact income statement / CFO
3.Ending net investment = beginning balance – principal repayment
4.Reduction in inventory = CFI
5.Ending balance = salvage; if sold , = CFI

其他off balance sheet activities
1.understate debt balance
2.understate receivable对分析师来说，restate debt 和 receivable balance 在算ratio之前做。
3.take-or-pay and troughputs
agree to purchase a minimum input quantity over a period of time
nature and minimum payments disclosed in footnotes
对分析师来说，add PV of asset and debt to balance sheet
4.Sales of receivables
collateralized borrowing
对分析师来说，increase AR and current liabilities; classify sale as CFF rather than CFO
5.Finance subsidiaries
not consolidated if < 50% owned
对分析师来说，add proportionate share to assets and liabilities
6.Joint ventures and investment in affiliates
对分析师来说，add any guaranteed debt to parent balance sheet
if no guarantees, add proportionate share of debt to parent balance sheet

Effect on ratios
1.take-or-pay and throughput
lowers leverage ratios(debt ratio and debt equity ratio)
2.sale of receivable
understates receivable
understates short-term borrowings
lowers leverage ratios

Taxable income on the tax return- pretax income on the income statement
Taxes payable on the tax returen-tax expense on the income statement,   balance sheet liability
income taxes paid: actual cash flow including payments/ refunds
tax loss carry forward: past losses used to reduce taxable income in future years

Pretax income (EBT)
Income expense: incluedes tax payable and deferred income tax expense
Deferred income tax expense: difference between taxes payable and income tax expense
Income tax expense = income tax payable + Δdeferred tax asset/liability
Deferred tax asset: income tax expense < taxes payable, expected future cash flow
Deferred tax liability: tax payable < income tax expense
Valuation allowance: reserve against deferred fax assets

Timing difference: straight line depreciation VS accelerated depreciation
Temporary difference: expected to reverse and impact taxable income in the future
Permanent diffference: not expected to reverse(不导致deferred tax)

Deferred Tax Liabilities
Tax expense on financial statements > taxes payable on the tax return
Difference is temporary
Expected to reverse and result in future cash outflows

Deferred tax asset
Tax expense on financial statements < taxes payable on the tax return
Difference is temporary
Often caused by warranty expense and tax loss carry forwards
Expected to reverse and result in future cash inflows.

Valuation Allowance
Only applies to deferred tax assets
It is a contra-account against deferred tax assets
If deferred tax assets will not be realized, then the deferred tax assets must be reduced, there by reducing income from continuing operations.

Liability Method (SFAS 109)
The amount of provision for deferred tax should be changed 假如将来税率变化， 如果asset/liability not adjusted, it will not reverse to zero.

根据将来的时间点Revalue all deferred tax assets(DTA) and deferred tax liabilities(DTL)
税率增加，减少income 和 equity ,反之。

DTL是Liability还是Equity
High likelihood of reversal = liability, Low=equity, uncertain = ignore deferred tax
DTL valuation: 为会计目的， value at undiscounted value; 为分析目的，用present value; 差价是equity

Temporary difference : expected to reverse
Permanent difference:  not expected to reverse, NO DTL or DTA

Temporary Timing Differences
Current liabilities, using installment sales metod for taxes and the sales method for pretax income.
Long-term liabilities, using the declining balance depreciation for the tax return and SL depreciation for the financial statements
Stockholder’s equity, unrealized gains or losses from carrying marketable securities at market value are deferred tax adjustments to stockholder’s equity.

Permanent Timing Differences
Taxable 和pretax incomes的差距，不会reverse
Permanent Revenue Differences, 免税利息收入，关键雇员的人身保险，Vertain dividends
Permanet Expense Differences, 免税利息收入，关键雇员人身保险，Tax credits
Statutory tax rate 不等于effective tax rate

Indefinite reversals
Treatment varies

Effective Tax Rate 有效税率
Statutory Tax Rate = 税法下的企业所得税
Reported Effective Tax Rate = Tax expense / Pre-tax income
Effective Tax Rate 1 = Tax payable / Pre-tax income
Effective Tax Rate 2 = Income tax paid / Pre-tax income

SFAS 109 Disclosure
Deferred tax liabilities, assets, valuation allowance (and change in allowance)
Unrecognized deferred tax liabilities due to undistributed earnings of JVs and subsidiaries
Current year effect of each type of temporary timing difference
Components of the income tax expense
Recociliation of income tax expense to the statutory tax rate
Tax loss carry forwards and tax credits

Warning signals
一些公司有很大的税前收入，可能采用激进的会计方法，会有低品质的收入。
资产消费的减少，预示temporary differences 的reverse，导致高tax payable。
重组费不影响税的cash flow，但会显著影响未来
因为tax law的影响，temporary differences 会reverse

Analyzing Disclosure
MACRS depreciation schedule for tax returns and straight-line depreciation for financial statements 导致Long term deferred tax liability，分析师要考虑公司的增长率和资产花费的水平来判断difference是否会reverse。
Impairments导致deferred tax asset，因为write-down of asset 立即实现。直到asset被卖，才会有tax。
美国要求用financial statement和tax用LIFO，所以no temporary differences。全球范围不一定。
重组导致deferred tax asset, costs实现，但paid才会计税；cash outflows会几年内实现
Post – employment benefits 和 deferred compensation 知道paid才计税，导致current deferred tax asset 或liability
deferred tax adjustment 改变stockholder’s equity 反映gains or losses in 市场价卖掉的可售证券。