New to this edition
Colgate Replaces Dell as a Featured Company. Colgate provides a stable consumer products' company to illustrate the analysis; it is also used to explain many business practices and is of interest to a broad audience. Campbell Soup is retained as another company for illustrations and assignments.
Discussion on Fair Value Accounting (Chapter 2). The large scale adoption of fair value accounting is one of the most significant events in the history of accounting. Fair value accounting will fundamentally change the way we analyze the financial statements. Chapter 2 provides a conceptual introduction to fair value accounting by incorporating some of the material from the recent standards on fair value accounting. The discussion also covers analysis implications of fair value accounting.
Discussion on Concept of Income (Chapter 2). The discussion on income concepts has been streamlined and moved to Chapter 2. Covering income concepts in the overview part of the text will provide a nice framework to understand accounting analysis issues covered in Chapters 3 to 6.
Streamlining and updating discussion on postretirement benefits (Chapter 3). A revised Chapter 3 further streamlines the discussion relating to pensions and OPEBs. In particular, the discussion in the chapter has been considerably shortened to give an overview of pension and OPEB accounting. A detailed discussion of pension accounting mechanics with the help of an integrated illustration is now provided separately in an Appendix. The discussion has also been updated so as to incorporate the recent changes to pension and OPEB accounting with its analysis implications.
Equity Carve-Outs Included (Chapter 3). Equity carve-outs, spin-offs, and split-offs have increased in frequency as companies seek to unlock shareholder value. Chapter 3 includes a new section to introduce the accounting for and interpretation of them.
Fair Value Option (Chapter 5). Companies are now allowed the option of measuring financial assets and liabilities on a fair value basis. Chapter 5 now includes a separate section regarding the fair value option with its analysis implications.
Employee stock options updated (Chapter 6). The discussion on employee stock options has been streamlined and updated to incorporate the latest accounting pronouncements.
Comprehensive Case Expanded to Include a Revised Disaggregation of Return on Equity. Analysis framework in Chapter 8 is extended to the comprehensive case to reinforce the importance of the operating and nonoperating distinction for financial statement analysis.
EOC Streamlined and updated. EOC material has been streamlined and updated to reflect changes to the text.
Book is Focused and Practical. The authors continue to emphasize a stream-lined and concise book with an abundance of practical applications and directions for analysis.
Expanded Discussion of Accrual Accounting (Chapter 2). Accrual accounting is the cornerstone of financial statement analysis. This edition includes further discussion to aid students in their analysis and interpretation of company fundamentals.
Investments in Marketable and Derivative Securities (Chapter 5). This edition consolidates all securities investments in one chapter. The discussion has been updated to incorporate some of the latest fair-value based standards. The analysis of foreign currency disclosures is streamlined and placed in an appendix to Chapter 5.
Book is focused and practical. The authors continue to emphasize a streamlined and concise book with an abundance of practical applications and directions for analysis.
Emphasis on analysis, less on mechanics. Details of financial reporting requirements are streamlined, and include only information necessary to conduct effective financial statement analysis.
Emphasis on Valuation. All analysis sections include linkages to securities valuation when relevant – as debt and equity valuation is an important topic in financial statement analysis. The comprehensive case also demonstrates the application of valuation models.
Special Purpose Entities. A section on special purpose entities is included with additional discussion and analysis of such off-balance-sheet financing. Special boxed features are updated and include references to fraud using real companies as examples.
Consolidations and Analysis. Discussions of equity method accounting and consolidations reflect recent changes to accounting standards and their implications for financial statement analysis and interpretation.
Prospective Analysis. An expanded section on prospective analysis (forecasting) is included. It provides step-by-step guidance on the forecasting process and demonstrates prospective analysis in stock valuation, including the comprehensive case.
Analysis Features. Each chapter opens with a feature article drawn from the business press that spotlights the importance of financial statement analysis. This gives readers a benchmark and motivation to apply the skills described in the chapter.
Student Annotations. Marginal notes convey additional hints and examples, providing students with a basis to think critically about the issues discussed.
Analysis Viewpoints. These allow readers to assume the role of business decision maker (investor, analyst, director, and lender) to show real world applications of statement analysis.
Research Insights boxes appear throughout the book and describe research that is relevant to analysis and interpretation of financial statements.
Real Financial Statements. Dell is featured throughout the book and related assignments provide continuity based on those statements. Campbell Soup's statements are also reproduced in the book and used for illustration and assignment materials.