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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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