Effects of Accounting Practices on Net Income

hanso6's picture
Rank: Senior Monkey | banana points 80

Hi,

I often read that it is important to understand how certain accounting practices/changes affect net income. I am aware that accounting is a very complicated topic, however, are there specific things to watch out for that are usually used to sugarcoat or run down income?

Best,
Hanso6

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Comments (4)

Nov 19, 2018

hanso6, way too quiet in here. What about these resources:

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  • inherit dads CA practice of 400K net or go for quant degree for trading quant or structuring. However I am having real changes of thought. My dad has a developed CA practice of ... he can take 200-300K net a year after taxes because he can play around with taxes. He has been urging ... route. Downside is Ill have to sit for CA exams do 2 years of training and I have never been a fan of the ...
  • More suggestions...

Hope that helps.

Dec 1, 2018

Hi Hans,

A few thoughts here:

  1. Watch out for different revenue recognition policies.
  2. Inventory methods can skew income higher/lower depending on an inflationary/deflationary environment.
  3. Uncertain tax positions can be easily manipulated to increase/decrease net income.
  4. Look out for fluffy seeming reserve balances that management can more easily judgementally fluctuate if needed.

Hope that helps.

Dec 1, 2018

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Dec 1, 2018