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Asset Write-Downs – Invested Capital Adjustment

Monday, July 22nd, 2013 AWDF1

For debt investors, which GAAP was primarily designed for, write-downs are analytically helpful. They provide a more accurate assessment of the liquidation value of a company’s assets. For equity investors, on the other hand, write-downs are not helpful because they distort the return on invested capital (ROIC) of a company.

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Employee Stock Option Costs and Goodwill Amortization – NOPAT Adjustment

Friday, June 28th, 2013 ESO_Goodwill

Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.

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Red Flag Report: Hidden Management Failures: Asset-Write Downs

Thursday, January 20th, 2011 dreamstimefree_694811_SkullCrossBones_Beige

Most investors are not aware of how many corporate managers destroy shareholder value because accounting rules allow them to erase their mistakes from financial statement. A little-known accounting trick called an “asset-write down” allows managers to simply remove assets and shareholders’ equity from the balance sheet as if they never existed.
Investors must beware companies that report artificially high profits due to asset-write-down loophole.

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