Index Abu Dhabi investment, 436–437 ASC 815 (Derivatives Hedging) (SFAS 133), 14 Accounting ASC 820 (Fair Value Measurements) (SFAS assets, 55 157), 70–71, 100, 239, 491–492 board oversight, problem, 309 ASC 825.10, 70–71 concepts, 93 ASC 825 (Disclosures about Fair Value of data, conversion, 277 Financial Instruments) (SFAS 107), 97–98 dominant systems, convergence, 48 change, absence, 416–417 formula, 49 EBR initiative, 16, 36–37, 315–339 full cost method, 132 Accrual accounting, 114, 148 global convergence, 107 Accrual net income, approximation, 120 numbers, limitations, 51–53 Accruals objectives, 411–416 cash, contrast, 119–120 period, 417 changes, calculation, 120 principles, 416–418 concept, 417 qualitative characteristics, 411–416 Acid ratio, 86, 88 questions, 49–50 Acquisitions, shares (valuation), 375–382 standards, 14, 40 Active market, absence, 84–85 Accounting for Financial Guarantee Insurance Active ownership, value (addition), 535 Contracts, 82–83 Agenda projects, 422 Accountingization, 298 Agriculture (IAS 41), 66 Accounting models, variation, 13–14 AIG, bankruptcy potential, 368–369 Accounting rate of return (ARR), 87 Alchemy of Finance, The (Soros), 231, 233 Accounting Series Release (ASR) Algebra, 444–446 ASR 113, 101 http://www.pbookshop.comAlgorithmic trading, 31, 229–230 ASR 118, 101 Algorithms, asset basis, 86–90 guidance, 85 Allen, Franklin, 294 Accounting Standards Codifi cation (ASC), 40 Allowance for loan and lease losses ASC 230 (Statement of Cash Flows) (SFAS 95), (ALLL), 82 158, 200–210 American Institute of Certifi ed Public ASC 320 (Other-Than-Temporary Impairments) Accountants (AICPA) (SFAS 115),COPYRIGHTED 63 EBR initiative, MATERIAL 16, 56–57, 315–339 ASC 350 (Goodwill and Other Intangible Assets) papers, issuance, 417 (SFAS 142), 75, 99 Special Committee on Enhanced Business ASC 360 (Impairment or Disposal of Long- Reporting, 315 Lived Assets) (FAS 144), 191 standards, 12 ASC 470 (Property, Plant, and Equipment) American Society of Appraisers, 90–91 (SFAS 6), 147, 148 Amortization charges, 118 ASC 715 (Postretirement Benefi t Plan Assets) Amortized cost (calculation), cash fl ow (SFAS 132), 84 (usage), 191 ASC 805 (Business Combinations) (SFAS 141), Analytic Hierarchy Process, 45 99, 387 Anchoring, 483–484 541 bbindex.inddindex.indd 554141 99/4/10/4/10 110:05:430:05:43 AAMM 542 index Angles, 216–217 liabilities, 67–69 Annual income rate, derivation, 138 metric, 277–278 Annual income statement, sample, 143e–144e reconciliation, 273–275 Anthony, Robert, 108 sample, 177e–179e Antivaluation, 483 spatial challenge, 50–51 Appel, Gerald, 222 temporal challenge, 50 Applied Finance Group, 265 Bands, 217–218 Appraisers, role, 69–70 Bank holding companies (BHCs) test, 82 Arbitrage property, 463–465 Banking strategies, culture (usage), 356–357 Aristotle, fallacies, 487–488 Bankruptcy Arithmetic, usage, 443–444 emergence, shares (valuation), 387 Arthur, W. Brian, 22 fi ling, 110 Artifi cial infl ation/defl ation, impact, 6 shares, valuation, 385–387 Aspen Institute, 124–125, 151, 315–316 Banks Asset-and-liability windfalls, calculation, 274 debt ratio reliance, 232–233 Asset-based fi nancing, 60 earnings, analysis, 130–131 Asset-based model, 108 investments, valuation (Norges Bank), 64–65 Asset-based valuation, 79–83 stress tests, 6 Asset-focused investor, 60–61 valuation, 81–82 Assets Barclays-Qatar Holding, 436 accounting treatment, 55 Barrow, John, 24 characteristics (IASB), 54 Bear Stearns, 6, 58–59 defi nition, 53–55, 68 Bebchuk, Cohen & Ferrell (BCF) Entrenchment earnings, relationship, 108, 110–111 Index (E index), 329 enhancements, 112 Behavioral fi nance, 23 fair value, 70–72 Benchmarks, corporate requirement, 296 global defi nition, 49 Bench strength, corporate requirement, 296 MD&A, usage, 77–78 Berle, Adolf, 295 overview, valuation unit, 48–51 Bernstein, Stan, 387 quality, 84–85 Bertoluzzo, Francesco, 229 reporting, conservatism, 52 Bianco, David, 124 resource, control, 92 Bids prices (valuation), algebra (usage), 445–446 term, description, 78 Big picture valuation spreadsheets, 476 types, 55, 62–66 Bishop, Matthew, 314 usage, 69–70 Black, Fischer, 133, 447 value, 47–48, 86, 163 Black-Scholes-Merton formula, 431–432 Asset valuation, 69–70, 83–84, 173 Black-Scholes method, 25–26 AT&T, cash fl ow example, 195–200 Black-Scholes option-valuation formula, 133 Attractors, 235–236 Black Swan, The (Taleb), 448 Attribution bias, 484 Black swan events, 306 Availability bias, 23 Black Swan stock price valuation approach, Average accounting returnhttp://www.pbookshop.com (ARR), 172 230–231 Average book value, 87 Board Accountability Index, 335 Average collection period, 88 Board of directors Average rate of return (ARR), 104 RiskMetrics standard, 329–330 confusion, avoidance, 139 shareholder communications, focus, 385 measure, 138–139 Bogle, John, 7 Averages, 86–90 Bollinger, John, 217 Averaging process, 139 Bollinger bands, 217, 218e Bonds, security, 241–242 Baghat, Sanjai, 310 Bonus plan, EVA basis, 282–284 Bailouts, asset values, 86 Book-value equity, growth/decline Balance sheet (measurement), 33 accounting formula, 49 Brands, 72–77 assets, 236 Brealey, Richard A., 294 values, 52 Bright lines, impact, 15 equity, 67–69 British Petroleum (BP), oil spill (impact), 325–326 intangible assets, valuation, 72–77 Broker quotes, input (usage), 240 bbindex.inddindex.indd 554242 99/4/10/4/10 110:05:440:05:44 AAMM INDEX 543 Brown, Keith C., 129 value integer, 156 Buffett, Warren, 401 working capital, changes (impact), 120 valuation methodology, absence, 258 Cash-fl ow-from-operations ratio, calculation, 120 Business Cash Flow Return on Equity (CRFOE) appraisal, development, 467–472 combination, 286 cycle, expansions/contractions, 527–529 valuation approach, 259, 260 fi lings, American Bankruptcy Institute data, 385 Cash Flow Return on Investment (CFROI) social value, 501 fi ve-year projection, 261–262 valuation, asset-based approach, 90–91 valuation approach, 259, 260–262 Business Combinations (ASC 805) (SFAS 141), variables, 260 99, 387 Cash fl ow statement, 155 Buybacks, 368, 371–372 components, 158–160 direct method, 203 Calculated intangible value (CIV), 278 indirect method, 166, 203 Calculus, 446–448 direct method conversion, 161–163 California Public Employees Retirement System indirect method, usage, 161e (CalPERS) presentation, 202–204 environmental/social/governance issues, 401 reconciliation, 275–277 Focus List Program, 311 example, 276e indexing, 227 sample, 180e–182e Candlesticks, 218–219 usage, 156–157 charting, methodologies, 218 Cash gap analysis, 119–120 Capital Cash-generating potential, 167 decrease, 283 Cash Return on Gross Investment (CROGI) expenditures, funding arrangements, 167 usage, 286 measurement, 298 valuation approach, 259, 262–263 payback, legal obligation, 9 Cash Value Added (CVA) (valuation approach), value, 274 259, 263 Capital Asset Pricing Model (CAPM), 243 Caux Round Table (CRT) Carbon investigations, 316 cost, fi nancial risk, 347 principles, 339–343 environmental issue, 324–325 wealth ownership, principles (proposal), footprint data, usage, 345–346 341–343 risk exposure, 347 Center for Financial Research and Analysis, 123 Carbon Disclosure Project (CDP), 325 Channels, 219–220 Cash Chaos/complexity theory, overview, 234–236 accruals, contrast, 119–120 Charting, 216 infl ows, 173 angles, 216–217 net present value, 168–169 bands, 217–218 receipts, 173 candlesticks, 218–219 utilization requirements, 167 channels, 219–220 value, 157 http://www.pbookshop.comdirectional movement, 220 Cash analysis statement, sample, 182e–184e geometry, 221–222 Cash/cash equivalents, 62–63 line charts, 222 Cash fl ow moving averages convergence/divergence achievement, 142 (MACD), 222–223 analysis, 172–173 parabolic systems, 223 brand name, impact, 74 percentage range, 223–224 division, 120 relative strength indicator (RSI), 224 fi nancing activities formula, 160 stochastics, 224 global standard setters, perspective, 157–158 waves, 224–226 IFRS impact, 191–192 Chartwell Litigation Trust v. Addus Healthcare, internal operations source, 159 Inc., 386–387 lenses, 194–195 Chemicals methodologies, 168–172 cash fl ow patterns, 193 patterns, 192–194 demand, 79–80 reporting practices, survey, 207–208 Chrysler, government involvement, 305 sample, 188e Citizenship, investment, 318–321 bbindex.inddindex.indd 554343 99/4/10/4/10 110:05:440:05:44 AAMM 544 index Claim liability, recognition, 83 Controlling transaction, 212–213 Climate Disclosure Standards Board (CDSB), noncontrolling transaction, contrast, 212e 324, 325 Corazza, Marco, 229 Closing price, 212 Corcoran, Robert L., 318 Coase, John, 294, 377 Core Earnings Metric (S&P), 123–124 Cognitive bias, 23 Corporate culture, 300 Cognitive dissonance, 484 power orientation, increase, 356 Colfax Corporation, key performance Corporate equity securities, value, 293–294 indicators, 355 Corporate fi nance spreadsheets, usefulness, 475 Commission on Public Trust and Private Corporate governance Enterprise, 124 social responsibility, correlation, 403 Commodity prices, 132 value, 309–310 increase, 81 Corporate Governance (Monks/Minow), 310 Common law system, 359 Corporate Governance Quotient (CGQ), Common ratios, 86–90 replacement, 309 Common stocks, price movements, 480e Corporate law, provisions, 361 Communication practices, importance, 299 Corporate Library, The (TCL) Companies Board Effectiveness rating, 330–332 assets, replacement, 141 corporate governance ratings, 402 bankruptcy (emergence), shares governance traits problems, 309 (valuation), 387 Corporate life cycle, equity values,