Another facet of this discussion is management

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Another facet of this discussion is management incentives. Management often has an incen- . °e to report favorable financial information due to compensation agreements and a desire to maximize share price. While U.S. GAAP and IFRS put some restrictions on what is reported, the iinancial data can be biased, misleading, or obscuring of reality. Our analysis attempts to recog- nize and adjust for such possibilities. However, our estimates of value are only as good as the counting numbers that underlie them. If we are able to perform effective analysis and gain a zhorough understanding of where the firm operates, is currently situated, and is going, then even in an efficient market there are gains available through financial statement analysis. NALYZING GLOBAL REPORTS The u.s. is among only a few economically developed countries (such as India, Singapore, and Russia) that do not use IFRS (a list is at ). While laws and
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1-25 Module 1 I Framework for Analysis and Valuation enforcement mechanisms vary across countries, the demand and supply of accounting informa- tion are governed by global economic forces. Thus, it is not surprising that companies under IFRS prepare and disclose the same set of financial statements. While account titles and footnote details differ, the underlying principles are the same. That is, U.S. GAAP and IFRS both capture, aggregate, summarize, and report economic activities on an accrual basis. Given the global economy and liquid transnational capital markets, it is critical that we be conversant with both U.S. GAAP and IFRS. For this purpose, each module includes a summary of any notable differences between these two systems of accounting for topics covered in that module. Also, each module has assignments that examine IFRS companies and their financial statements. By using a wide array of financial informa- tion, we will speak the language of accounting in at least two dialects. MODULE-END REVIEW Following are selected data from Progressive Corporation's 2010 lO-K. $ millions Sales . Net income . Average assets . Average stockholders' equity . $14,963 1,068 20,600 5,899 Required a. b. The solution is on page 1-43. APPENDIX 1A: ACCESSING SEC FILINGS All companies traded publicly in the U.S. are required to file various reports with the SEC, two of which are the lO-Q (quarterly financial statements) and the lO-K (annual financial statements). For filings of companies publicly traded outside the U.S., the regulators ofthose stock exchanges usually require financial statements to be filed that can be accessed through the exchange Websites. Popular exchanges outside the U.S. include the London, Tokyo, Hong Kong, Frankfurt and Toronto Stock Exchanges. These and other exchanges belong to the World Federation of Exchanges whose Website ( ) includes links to the respective exchanges. Following is a brief tutorial to access these electronic filings for firms traded in the U.S. The SEC's Website is .
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