Profits You Can Trust: Spotting & Surviving Accounting Landmines - Hardcover

Sherman, David; Young, David; Collingwood, Harris

9780131001961: Profits You Can Trust: Spotting & Surviving Accounting Landmines

Hardcover

ISBN 10: 0131001965 ISBN 13: 9780131001961

Publisher: Ft Pr, 2003

Profits You Can Trust gives managers, directors, lenders, audit partners and analysts a clear framework to demystify global financial reporting in a market fraught with danger. Filled with provocative and enlightening examples, it offers a fresh perspective and clear guidance for everyone involved withfinancial reporting strategy and communication, as well as specific and easily understood questions that must be asked to avoid accounting landmines that can destroy even the most successful business. The authors begin with an overview of the challenges of financial literacy for business decision-makersoperating in both U.S. and global environments, the reasons decision-makers tacitly "conspire" to inflate stated revenues and reduce stated costs, and how "small" lies inevitably lead to bigger ones. Next, using easy-to-understand examples, they discuss six key accounting minefields in detail. These includerevenue recognition; provision for uncertain future costs; asset values; risk management and the use of derivatives; related party transactions; and performance benchmarking. Finally, they turn to the key questions and lessons arising from recent financial scandals, including accounting firm conflict ofinterest; why Generally Accepted Accounting Practices aren't always sufficient; assessing mergers, acquisitions, and restructuring reserves; and the appropriate role of non-financial measurements such as balanced scorecards.

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From the Back Cover:

Profits You Can Trust demystifies global financial reporting for managers, board members, lenders,audit partners, analysts, and investors alike.

Long before the Enron implosion, H. David Sherman and S.David Young exposed the techniques of dishonest financial reporting in amuch-discussed Harvard Business Review article. In this book, they expand uponthose ideas to present a complete framework for accurate financial reporting.Along with author Harris Collingwood, they systematically identify areas ofunacceptable risk, and offer detailed guidance on both reporting strategy andcommunication.

Every chapter is illuminated with non-technical,easy-to-understand examples. You’ll find specific questions toask—and actions to take—to enhance your firm’s financialcredibility, strengthen your personal financial literacy, and avoid detonatingthe accounting landmines that can destroy your business or your investments.

A complete framework for trust in corporate reporting: Systematically identifying real profits—and eliminating “fake” ones
Sins of omission: What companies don’t tell you about risk
Good will hunting: How to tell hard assets from hot air
The mismeasure of business: The use—and misuse—of performance comparisons and benchmarks
The fine art of revenue recognition : What is a sale? When do you book it?
Don’t like the numbers? Make up new ones: Watching out for EBITDA, pro forma earnings, and “Stupid Cash Tricks”

Advance praise for Profits YouCan Trust—

“This book blasts throughmisleading financials.”

—Bruce Wasserstein

Head of Lazard

“Tired of getting snookeredon financial accounting issues in your investments? Worried about your abilityto exercise adequate financial oversight as a board member? This concise,readable, authoritative book will enable you to spot accounting landmineswithout earning a CPA. A must-read for all investors and overseers!”

—Regina E. Herzlinger

Nancy R. McPherson Professor of Business

Administration Chair, Harvard Business School

Current and former director of 12 publicly traded corporations

A “financial expert” under the current SEC definition

“This comprehensive layman'sguide is a must-read for senior management, boards, committees, and theiradvisors. Writing in largely non-technical language, the expert authors providethe most concise and complete road map to understanding, preventing, detecting,and remediating accounting and reporting shenanigans that I have read.”

—C. Russel Hansen, Jr.

Former President and CEO, National Associationof Corporate Directors

Former Senior Partner, Hale & Dorr

Founder and Managing Director of The Board Place.

“This enjoyable book hasvaluable insights for board members, analysts, and stock and bond managers. Inmy three-plus decades of managing money, this is one of the most user-friendly,as well as expert, books I have seen on this subject. We can all make great useof it.”

—Fred Kobrick

Former manager of the State StreetCapital Fund

One of USA Today's Top 5 funds of the 15-year bull market

“If shady accounting isdetectable to outsiders, Profits You Can Trust will show you how to spot it. Amust read for every investor who wants to avoid or profit from questionablecorporate accounting.”

—David Hawkins

Lovett-Learned Professor of Business Administration, Harvard Business School

“This book performs anextremely valuable service for investors by explaining in clear terms thevariations on basic tricks that manipulate the figures in business. It will help investors spot red flagsearly, and belongs on every investor’s book shelf.”

—Dr. Cynthia J. Smith

Ohio State University, andco-author of Inside Arthur Andersen

About the Author:

About the Authors

H. David Sherman is a Professor at Northeastern University’s College of BusinessAdministration, and an Adjunct Professor at the Tufts University School ofMedicine. He has served on the faculty of the MIT Sloan School of Management,and as a visiting faculty member at INSEAD in Fontainebleau, France. ProfessorSherman is a Certified Public Accountant (CPA) and received his MBA andDoctorate degrees from Harvard Business School. His research has long focusedon financial reporting, performance measurement/management, and financialliteracy issues facing corporate management and Boards of Directors in globalbusinesses. David has served as a director and manager of several businesses,and has consulted on financial performance issues with major corporations aswell as the U.S. Department of Defense and the Financial Accounting StandardsBoard. (Email: h.sherman@neu.edu)

S. David Young isa Professor at INSEAD, one of the world’s leading business schools. Hisgeneral expertise is in the area of corporate financial management,specializing in how companies can align their business systems with thevalue-creation imperative. He is the co-author of EVA and Value BasedManagement: A Practical Guide to Implementation, and has served as an advisorand consultant to many companies in Europe, Asia, and North America.

HarrisCollingwood is a journalist specializing in business and finance. His work hasappeared in the Harvard Business Review, the New York Times Magazine, Inc.,Worth, and many other publications. He lives in Cambridge, Massachusetts.

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