The hottest Accounting Substack posts right now

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Weekend thoughts: investing advice (not financial advice!) for non-investors

Yet Another Value Blog • 1513 implied HN points • 13 Jan 24
💰 Finance Investing Stocks Index funds Accounting Value investing
  1. Investing in low-cost index funds can be a smart choice for non-investors.
  2. Trying to outperform the market with individual stock trading is challenging and can be risky.
  3. It's important to learn the basics, understand finding an edge, and align investments with expertise when pursuing investing as a hobby.

Fraud in Asia

Asian Century Stocks • 668 implied HN points • 24 Jan 24
💰 Finance Fraud Accounting Investments Financial Analysis
  1. Tan & Robinson's book on Asian financial statement analysis is a key resource for spotting fraud and misrepresentation in Asia.
  2. Watch out for companies with high margins, poor cash flows, fast-growing balance sheets, and complex corporate structures with frequent related party transactions.
  3. High-profile short-seller reports should be taken seriously when assessing potential fraud in companies.

Is EBITDA Really Bullshit? Answer: "It Depends"

Value Investing Substack • 353 implied HN points • 05 Aug 23
💰 Finance Investing Accounting Economics Companies Metrics
  1. EBITDA can be a controversial metric in finance, with some calling it 'bullshit earnings'.
  2. John Malone successfully used EBITDA to communicate TCI's growth strategy in cable industry.
  3. Valeant Pharmaceuticals' misuse of EBITDA led to financial trouble, highlighting the importance of understanding the context behind EBITDA figures.
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Facebook (Meta) Lesson 2: Accounting Inconsistencies and Consequences

Musings on Markets • 619 implied HN points • 10 Nov 22
💼 Business Accounting Finance Investing Corporate Governance Valuation
  1. Accounting mistakes can misclassify expenses, affecting a company's reported profits and overall valuation. When money is wrongly categorized, it can look like a company is performing worse than it actually is.
  2. Correctly categorizing expenses like R&D can show a company’s true financial health. For example, treating R&D as a capital expense can increase reported profits and the value of the company.
  3. Understanding these accounting practices is important for investors. If investors misjudge a company due to these accounting errors, it may lead to undervaluation, making the company look cheaper than it really is.

Intellectual Laziness

MD&A • 404 implied HN points • 04 Jul 23
💼 Business Finance Management Strategy Corporate culture Accounting
  1. Intellectual laziness can lead to catastrophic corporate failures, as seen in the case of GE and SVB.
  2. Managers who prioritize manipulating short-term earnings over creating long-term shareholder value are intellectually lazy.
  3. Intellectual rigor is essential in identifying underrated managers and avoiding overrated ones.

How to Analyze an Income Statement

Concepts of Finance 🧠 • 219 implied HN points • 06 Jul 23
💰 Finance Accounting Investing Corporate Finance Financial Analysis
  1. An income statement shows how well a company is doing by detailing its revenue, expenses, and net income over a period. It's important because it helps you understand if a company is making a profit or losing money.
  2. Gross profit margin is a key metric to analyze. It reveals whether the company is profitable on the products it sells, and a stable or rising margin is a good sign.
  3. When reading an income statement, look for trends over time, check revenue directions, and ensure expense categories make sense. This can highlight the company's overall health and performance.

[P] BL: Accounting for Henshall

Nongaap Investing • 5 implied HN points • 14 Dec 24
💼 Business Investing Finance Accounting Management Corporate
  1. BlackLine has a new director known for his skill in mergers and acquisitions. People are curious if he can help the company grow through strategic takeouts.
  2. Nongaap investing focuses on understanding the true value of companies beyond just their financial reports. This approach can give investors a better idea of potential investments.
  3. The content shared is meant for paid subscribers, indicating a focus on delivering exclusive and premium insights.

Daily Brief: Income Statements & Heat Engines

Math Meets Money • 1 HN point • 20 Aug 24
💼 Business Finance Consulting Economics Management Accounting
  1. Every business operates on a basic principle: income equals revenue minus costs. This is like a simple equation that explains how money flows in and out.
  2. A business can be thought of as a heat engine where revenue is the input, total costs are the output, and net income is the useful energy left over to be used by the company.
  3. Businesses help organize and order capital, just like heat engines organize particles. Understanding these similarities can make it easier to grasp how businesses function.

Illumina: Fraud by Omission

Nongaap Investing • 32 implied HN points • 18 May 23
💼 Business Fraud Insider trading Accounting Investments Legal issues
  1. Fraud by omission is a significant concern in the case of Illumina insiders and their financial windfall on Grail.
  2. By omitting material facts, Illumina insiders potentially misled investors and reaped undisclosed financial windfalls.
  3. The use of cost method accounting instead of equity method accounting may be seen as a form of fraud by omission, allowing for undisclosed financial benefits.

Issue #89: Mastercard Makes Moves In China, Wise Posts A Healthy H1 Result, And Adyen Launches A New Product In Australia

Fintech Radar • 6 implied HN points • 22 Nov 23
💰 Finance Fintech Investment Startups Insurtech Accounting
  1. Wise reported impressive financial results for H1 2023 with quadrupled pre-tax profits, showing success in expanding beyond peer-to-peer money exchange.
  2. Adyen launched Capital in Australia, recognizing the growing demand for embedded financial services in platform businesses.
  3. Mastercard received approval for bankcard clearing in China, a big step to settle transactions directly and establish presence in the Chinese market.

Triggered Disclosures: Escaping the Disclosure Dilemma

Musings on Markets • 19 implied HN points • 19 Oct 21
💼 Business Corporate Finance Accounting Regulation Investment Market Analysis
  1. Corporate disclosures have become very long and confusing, making it hard for investors to find important information. This complexity can confuse rather than inform potential investors.
  2. Instead of having a one-size-fits-all approach, disclosure rules should be tailored to fit the unique needs of different companies. This would help make disclosures clearer and more useful.
  3. The definition of materiality needs to change from focusing on past earnings to considering how information affects future company value. This would encourage companies to provide information that truly matters to investors.

Stock-based Employee Compensation: Value and Pricing Effects

Musings on Markets • 19 implied HN points • 13 Feb 14
💰 Finance Financial Analysis Corporate Finance Accounting Valuation
  1. Stock-based compensation is an expense that affects a company's earnings. It should be counted and not ignored because it represents a real cost to the business.
  2. Adjusting financial metrics like profits to remove stock-based compensation can be misleading. It can make a company look more profitable than it really is, especially when comparing with others that don’t do the same.
  3. The way companies handle stock-based compensation can impact their valuation. Analysts need to account for this properly to get an accurate picture of a company's worth.

My Valuation Class: The Fall 2015 Model Preview

Musings on Markets • 0 implied HN points • 24 Aug 15
🚌 Education Valuation Finance Accounting Statistics Investment
  1. Valuation is a skill, not just numbers or theory. It's like cooking or building things, where you get better by doing it rather than just studying the details.
  2. There's a big difference between valuing an asset and pricing it. Valuation looks deeper into the intrinsic value, while pricing is often about what the market will pay.
  3. You can value almost any asset, even if it seems tricky. By the end of a valuation class, you'll have the tools to value different types of assets confidently.

Acquisition Accounting II: Goodwill, more plug than asset

Musings on Markets • 0 implied HN points • 17 Dec 12
💰 Finance Accounting Valuation Investments Mergers Corporate Finance
  1. Goodwill on balance sheets can confuse investors because it doesn't really represent an actual asset. It basically acts as a placeholder that can mix a lot of different values together.
  2. Changes in accounting rules made it harder to compare companies that do acquisitions with those that grow internally. This makes it tricky for investors to understand a company's real value.
  3. Impairments of goodwill can impact stock prices, but they also create more confusion in financial reports. This could mean that investors are often surprised by these impairments long after the acquisition.

Acquisition Accounting I: Accretive (Dilutive) Deals can be bad (good) deals

Musings on Markets • 0 implied HN points • 08 Dec 12
💼 Business Finance Mergers Investing Accounting Corporate strategy
  1. Accretive deals are not always good; it depends on the earnings and risks of the companies involved. Just because a deal raises earnings per share doesn't mean it will help the stock price.
  2. Dilutive deals can also be beneficial if the acquired company has better growth potential or lower risk. Sometimes, risks from a lower-quality target company can hurt the combined firm's value.
  3. Market reactions to accretive and dilutive deals don't always align with assumptions. The market may not reward or punish these deals in the expected way, making the traditional analysis less useful.

HP's Deal from Hell: The mark-it-up and write-it-down two-step

Musings on Markets • 0 implied HN points • 26 Nov 12
💼 Business Mergers Acquisitions Accounting Corporate Governance Financial Analysis
  1. HP had a huge loss of $8.8 billion from buying Autonomy, which was a large part of the money they spent. This was mostly due to dishonesty in Autonomy's accounting practices.
  2. The market was really surprised by HP's announcement of the loss, and their stock dropped quickly. Usually, companies' losses from bad deals aren't a shock to investors, but this was a standout case.
  3. Many people involved in the deal are blaming each other for the mess. This highlights the problems in making big mergers and how important it is to have trust in financial reporting.

The disclosure dilemma: Why more disclosure has led to less information

Musings on Markets • 0 implied HN points • 15 Oct 12
💰 Finance Investing Accounting Regulation Corporate Finance Market Trends
  1. Increasing disclosure often leads to overwhelming data that makes it harder for investors to find valuable information. More pages in financial reports can cause confusion rather than clarity.
  2. Not all details in long reports are important; focusing on major aspects can save time. Investors should ignore minor issues that don’t significantly impact big companies.
  3. Simplifying disclosures and targeting them to investors instead of lawyers could improve understanding. Companies might benefit from presenting two types of reports: one for legal eyes and one for investor insights.

From revenues to earnings: Operating, financing and capital expenses....

Musings on Markets • 0 implied HN points • 15 Jun 11
💼 Business Accounting Valuation Investment IPO Financial Analysis Finance Accounting Valuation Investment IPO
  1. Groupon reported high revenues but also significant operating losses, raising questions about their accounting practices. It's important to understand how companies measure their profits and expenses.
  2. Groupon claimed it would be profitable by using 'Adjusted CSOI,' which excludes customer acquisition costs. This approach may mislead investors about the company's true profitability.
  3. Reclassifying expenses can make a company's earnings look better, but it can also hide the real costs involved in growth. Evaluating a company's return on investment is key to understanding its value.

What is "fair value"?

Musings on Markets • 0 implied HN points • 07 Jun 10
💰 Finance Valuation Accounting Legal Investment Taxation
  1. Fair value is the real worth of an asset, aiming for unbiased and accurate valuation in accounting and legal contexts.
  2. In accounting, fair value means valuing assets correctly, but there are many complex rules that can complicate this process.
  3. Appraisers often have biases based on how they get paid, which can affect their estimates of fair value for businesses.

Baseball and Carbon Accounting, Part 1

Solar Powered Data • 0 implied HN points • 21 Aug 23
🎾 Sports Analytics Performance Accounting Statistics
  1. Measuring carbon emissions is challenging and involves various frameworks like the GreenHouse Gas Protocol and Science-Based Targets.
  2. Just like baseball teams aim to score more runs by balancing offense and defense, individuals in carbon accounting also strive to reduce emissions while enhancing carbon removal.
  3. In both baseball and carbon accounting, accurately attributing individual contributions is complex, and there is a need for improved methods to credit and analyze performance.

Stock versus Flow: My thoughts

Musings on Markets • 0 implied HN points • 09 Apr 10
💰 Finance Investing Financial Analysis Corporate Finance Accounting Valuation Investing Accounting Corporate Finance Financial Analysis Valuation
  1. Balance sheets show a company's financial position at a specific time, but they can be misleading. Numbers like debt and cash can change significantly over time, making it hard to trust a single balance sheet.
  2. Flow statements, like the income and cash flow statements, show money coming in and going out over a period. These are generally more reliable for understanding a company's performance.
  3. To get a clearer picture of a company's financial health, look at quarterly balance sheets and current numbers instead of just year-end figures. This helps catch any manipulation or changes in financial status.

Goodwill: Plug Variable or Real Asset?

Musings on Markets • 0 implied HN points • 31 Mar 10
💰 Finance Accounting Valuation Investment Corporate Finance Financial Reporting
  1. Goodwill shows up on a company's balance sheet usually after an acquisition. It's the difference between what a company pays for another company and the book value of that company's assets.
  2. Goodwill is there to make the balance sheet balance, reflecting the difference between historical asset value and current market value, as well as the potential for future growth.
  3. When valuing a company, goodwill can complicate things. It can affect earnings and book value, but in reality, it shouldn’t change how you view the underlying assets or the company itself.

Accounting inconsistencies

Musings on Markets • 0 implied HN points • 30 Mar 10
💼 Business Accounting Finance Valuation Investments Corporate Governance
  1. Goodwill on balance sheets is often misleading; it doesn't truly represent value and can make financial statements look better than they are.
  2. Minority interests can confuse analysts because they represent liabilities rather than actual assets, which can distort financial evaluations.
  3. The accounting treatment of intangible assets and leases isn't consistent, leading to inaccurate measures of a company's true value and earnings.

Are accountants learning?

Musings on Markets • 0 implied HN points • 19 Apr 09
💼 Business Accounting Finance Corporate Governance Regulations Valuation Accounting Finance Valuation Corporate Governance
  1. Employee options should be counted as expenses when given. This means they must reflect their fair value, just like other types of employee pay.
  2. Leases should be treated like debt instead of just operating expenses. This change would provide a clearer picture of a company's financial obligations.
  3. Research and development (R&D) costs need to be considered as capital expenses. This way, valuable assets related to innovation aren't left off company balance sheets.

Accounting Fraud

Musings on Markets • 0 implied HN points • 07 Jan 09
💼 Business Corporate Governance Investor Relations Regulatory Compliance Corporate Governance Accounting Fraud Investment Risk management
  1. Self-interest is often more powerful than accountability in companies. When people face conflicts, they usually prioritize their own benefits.
  2. Good corporate governance is important to prevent fraud. Having a board that asks smart questions can help keep management honest.
  3. New accounting rules won't stop fraud. Companies often find ways to cheat around regulations, so being skeptical can save investors from losses.

Mark to Market or Not to Mark to Market?

Musings on Markets • 0 implied HN points • 01 Oct 08
💰 Finance Accounting Investment Risk management Valuation Regulation
  1. Marking to market helps investors see the current value of assets, but it can be hard for accountants to keep up with everything they need to estimate.
  2. Fair value can mean different things depending on how you look at it, making it tricky to have a clear agreement on what it actually is.
  3. The rules for marking assets vary by type, leading to inconsistencies where some assets are more strictly valued than others, like securities versus loans.

Lightning Network financial statements

bolt.observer • 0 implied HN points • 23 Mar 23
💰 Finance Accounting Assets Equity Standardization
  1. Financial reporting provides valuable insights for businesses and helps external stakeholders make informed decisions.
  2. The balance sheet is a key financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific time.
  3. In the Lightning Network, node operations are currently 100% equity-based, but in the future, liabilities such as capital borrowing/lending may emerge.

How I Calculate Profit

Kartick’s Blog • 0 implied HN points • 03 Nov 24
💼 Business Startups Consulting Accounting Finance Entrepreneurship
  1. Income is only counted when it's actually in the bank, not just when it's invoiced. This helps reduce the risk of relying on money that might not come in.
  2. Expenses are recognized in full when they occur, even if they are spread out over time. This practice makes it easier to see the real financial impact right away.
  3. It's smart to overestimate taxes and expenses while understating income. This cautious approach helps in planning for potential financial shortfalls.

Parent versus Consolidated financial statements

Musings on Markets • 0 implied HN points • 03 Jun 10
💰 Finance Accounting Investing Valuation Financial Statements Corporate Finance
  1. Parent company statements show only the parent’s results, while consolidated statements combine both the parent and its subsidiaries' financials. This can affect how investors view a company's worth.
  2. Consolidated statements leave out transactions between the parent and subsidiaries, giving a clearer picture of overall performance. This means some revenues might be excluded, which can look different from parent-only reports.
  3. When valuing a company, using parent company statements allows for flexibility across different businesses, while consolidated statements are helpful for understanding the whole group. The choice depends on how similar the parent and subsidiaries are.

The Zoom Rooms on a Big News Day

Wide World of News • 0 implied HN points • 10 May 23
🇺🇸 U.S. Politics Accounting
  1. Not all about the verdict, but now a lot about the verdict in Trump's situation.
  2. Liz Cheney firing an opening salvo by attacking Trump's fitness for office.
  3. The biggest variables in White House fiscal talks are the real X date, market reactions, and building trust between key figures.