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[The core of accounting is assets] assets are expenses that can be extended to future losses; expenses are assets that are lost at present; income is new assets due to non-external investment reasons; liabilities are assets that need to be paid in the future; owners' equity is the net amount of assets minus assets that need to be paid in the future, that is, liabilities, also known as net assets; in the absence of external investment and external distribution, the appreciation of net assets is profit, and impairment is loss.
007: Only assets can obtain future economic benefits.
Shang_Shui Han: These two sentences are too awesome: assets are expenses that can be extended to future losses, and expenses are assets that are lost at present.
Ma Jinghao: Assets have been lost as expenses now, but they have to be artificially extended to the future to amortize, which is an alternative - long-term amortization of expenses in the guise of assets.
The net profit under asset consolidation is credible, but the net profit under asset swelling is not credible. Whether the net profit is credible or not must be judged in combination with assets, which is the fundamental point. For example, accounts receivable, as long as they cannot be recovered, then the recorded income is virtual, and the corresponding profit is also virtual. Net profit can only be trusted if the asset quality is assured.
March Pick-up Day: The tax bureau does not care whether you can recover it or not, you must confirm the income and complete the tax payment task!
Ma Jinghao: You know? That's why the tax bureau likes accrual accounting!
Libra-Song: So does it mean that the income statement is viewed together with the cash flow statement?
Ma Jinghao: Assets have "moisture", and profits must have "moisture". But there is "moisture" in profits, and there is not necessarily "moisture" in assets, because there may be off-balance sheet liabilities.
It is wrong for accounting standards to allow the measurement of certain assets to choose between historical cost and fair value, and to allow the choice of fair value measurement, it is possible to include the floating profit and loss of assets at the balance sheet date in the income statement, for example, in the case of continuous high housing prices, for investment real estate, the choice of fair value measurement not only does not need to be depreciated according to the historical cost model, but also the appreciation part can be recognized as fair value change profit or loss and included in profits. This makes it very easy for some listed companies to boost their profits by changing the measurement basis. In fact, in this regard, the accounting standard is a slap in the face, because fair value measurement will cause "early recognition of earnings" and the provision of accounting standards that "enterprises cannot recognize earnings in advance".
Todd Liu: I always feel that there is something wrong with the content of this piece, but I don't understand it. Today, after reading Mr. Ma's short few lines, I suddenly became enlightened, thank you, Mr. Ma.
Chang Yuanyuan JX: But is there any better way to account for investment? After all, his assets have to appreciate.
Serve your illegal characters: appreciation may also depreciate, making it so complicated to provide space for manipulating profits, before you dispose of all changes are floating clouds, just like stock speculation, not selling is self-congratulatory!
Sweet groom: The historical cost principle belongs to seeking truth from facts, and the fair value belongs to the empty glove white wolf.
Amortization and depreciation are the two black magic of accounting: Amortization is for intangible assets, and depreciation is for tangible assets. Amortization and depreciation are rooted in the accounting principle of proportionality. For example, when a manufacturer spends money on a new set of production equipment, the new production equipment remains on the balance sheet as a tangible asset. But the equipment will be old, and the products produced by this set of equipment in each accounting interval are actually wearing out this set of equipment. According to the principle of matching revenue and cost, the depreciation of this set of equipment should be counted as the production cost of this batch of products and included in the income statement of the current period. Amortization and depreciation are both estimates, and the company feels that this part is impaired and should be counted as a cost. Since it is an estimate, it has a gray space. Because estimates are all subjective, as long as your story makes sense, it's hard to find evidence of accounting fraud.
So, in what ways can companies manipulate amortization and depreciation to "manage" profits?
1. Choose the method of amortization and depreciation. There are generally two methods of amortization and depreciation: straight-line method and acceleration method. The straight-line method is to distribute it evenly according to the number of years of use, while the acceleration method is to allocate the maximum amount to the cost in the first year, and gradually reduce it in the second year until it expires.
2. Select the period of amortization and depreciation. The useful life of intangible and tangible assets is estimated. If a company wants to make more profits reported every year, it can deliberately extend the period of amortization and depreciation.
3. Change the residual value of intangible and tangible assets. The calculation method of amortization and depreciation is relatively simple, taking the straight-line method as an example, amortization and depreciation expense = (initial value of intangible/tangible assets - residual value) / useful life. Therefore, if a company wants to overestimate profits, it can reduce amortization and depreciation expenses by overestimating the residual value.
[Proportion of assets related to enterprise operation to total assets] total assets related to enterprise operation = monetary funds + trading financial assets + notes receivable + accounts receivable + receivables financing + prepayment + inventory + contract assets + long-term receivables + fixed assets + construction in progress + right-of-use assets + intangible assets + development expenditure + long-term amortized expenses + deferred income tax assets. The higher the proportion of assets related to business operations to total assets, the better. When we choose a company, the assets related to business operation of the best companies account for > 90% of total assets, and normally the assets/total assets related to business operation of good companies should also > 70%.
By analyzing fixed assets and construction in progress, it is possible to understand the cost of a company to maintain its competitiveness. Specifically, you can use "(fixed assets + construction in progress)/total assets ratio" to analyze. The higher the ratio, the higher the cost of the company to remain competitive. Companies with a ratio of (fixed assets + construction in progress)/total assets greater than 40% are asset-heavy companies. Although the cost of maintaining competitiveness of asset-heavy companies is relatively high and the risk is relatively large, if the top companies in the same industry are all greater than 40%, it means that the industry is basically an asset-heavy industry, and the cost of maintaining competitiveness in this industry is relatively high. By analyzing investment assets, you can understand the focus of a company's main business. Investment assets mainly include: financial assets measured at fair value through profit or loss, debt investment, other debt investment, available-for-sale financial assets, held-to-maturity investment, long-term equity investment, investment in other equity instruments, other non-current financial assets, and investment real estate. Specifically, you can use the "Investment Assets/Total Assets Ratio" to analyze. Excellent companies must be focused on the main business of the company, and the proportion of investment assets unrelated to the main business to total assets should be very low, preferably below 10%, in practice, the proportion of investment assets unrelated to the main business to total assets is greater than 20% of the company's focus is not enough, in the stock selection can be considered to eliminate. Explain the profound financial logic in concise language, such as the article is approved by you as a sign of encouragement. It is not easy to adhere to the original for a long time, I want to give up many times, persistence is a belief, focus is an attitude, accompany all the way, together with the heavens, thank you.
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