SlideShare une entreprise Scribd logo
1  sur  15
1www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Corporate Valuation
Accounting Refresher - Extract
Prof: Ferdinand Petra (www.ferdinand-petra.com)
Any reproduction, copy of this document is strictly forbidden without prior consent of the author
2www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Accounting Refresher
3www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Understanding the Flows Between Statements (1/4)
Accounting Refresher
Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables*
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Revenue
- Cost of Sales
= Gross Profit
- SG&A Expenses
+ Other Income
- Other Expenses
= Earnings Before
Interest and Taxes
+ Interest Income
- Interest Expenses
= Profit Before Tax
- Tax
= Net income
Net Income
+ D&A
+ Other Non-cash Charges
+/- Change in WC
+/- Change in LT Assets /
Liabilities
= Operating Cash-Flow
- Capital Expenditure
- Dividends
+/- Change in Equity
+/- Change in Debt
= Change in Cash & Cash
Equivalent
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables & others
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Working Capital Flows Accrual basis Cash basis
(incl. other payables)
4www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Understanding the Flows Between Statements (2/4)
Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Revenue
- Cost of Sales
= Gross Profit
- SG&A Expenses
+ Other Income
- Other Expenses
= Earnings Before
Interest and Taxes
+ Interest Income
- Interest Expenses
= Profit Before Tax
- Tax
= Net income
Net Income
+ D&A
+ Other Non-cash Charges
+/- Change in WC
+/- Change in LT Assets
/ Liabilities
= Operating Cash-Flow
- Capital Expenditure
- Dividends
+/- Change in Equity
+/- Change in Debt
= Change in Cash & Cash
Equivalent
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Equity Flows Accounting Refresher
5www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Understanding the Flows Between Statements (3/4)
Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Revenue
- Cost of Sales
= Gross Profit
- SG&A Expenses
+ Other Income
- Other Expenses
= Earnings Before
Interest and Taxes
+ Interest Income
- Interest Expenses
= Profit Before Tax
- Tax
= Net income
Net Income
+ D&A
+ Other Non-cash Charges
+/- Change in WC
+/- Change in LT Assets
/ Liabilities
= Operating Cash-Flow
- Capital Expenditure
- Dividends
+/- Change in Equity
+/- Change in Debt
= Change in Cash &
Cash Equivalent
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Debt Flows
+ Short Term Debt
Accounting Refresher
6www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Understanding the Flows Between Statements (4/4)
Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Revenue
- Cost of Sales
= Gross Profit
- SG&A Expenses
+ Other Income
- Other Expenses
= Earnings Before
Interest and Taxes
+ Interest Income
- Interest Expenses
= Profit Before Tax
- Tax
= Net income
Net Income
+ D&A
+ Other Non-cash Charges
+/- Change in WC
+/- Change in LT
Assets / Liabilities
= Operating Cash-Flow
- Capital Expenditure
- Dividends
+/- Change in Equity
+/- Change in Debt
= Change in Cash & Cash
Equivalent
Assets
+ Cash
+ Inventory
+ Account Receivables
+ PP&E
+ Intangible Assets
+ Others
= Total Assets
Liabilities
+ Account Payables
+ Short Term Debt
+ Long Term Debt
+ Others
= Total Liabilities
= Shareholder’s Equity
Fixed Assets Flows Other Flows Accounting Refresher
7www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Accounting Questions (1/2)
 Impact on I/S, B/S and CFS of the following events (each question is independent)
− Increase of 10 in Depreciation
− Machine acquisition for 100 (depreciable over 10 years), financed 60/40 by new loan (4%) and new
equity
− Buy 10 of inventory from a competitor (paid cash straight away)
− Buy 10 of inventory from a competitor (paid next year)
− You pay a supplier for 20 in cash
− Decrease of 10 in account receivable
− Issue 100 of new equity through a rights issue (fees paid to banks: 1%)
− Record a PP&E write-down of 10
− Buy a building for 100 and immediately resell it for 120
− Increase of deferred revenues by 10 (+ give an example of deferred revenue)
− Decrease of prepaid expense by 10 (+ give an example of prepaid expense)
Accounting Refresher
8www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Accounting Questions (2/2)
 2 companies have the same Net income but one has 10 more of D&A. All other things being equal, what’s
the difference in cash generation between the 2 companies?
 Why dividend is not shown in the I/S but in the CFS? (hint: tax impact?)
 What is the purpose of “Change in Working Capital” in CFS? (hint: accrual vs. cash basis)
 Give examples of “other non-cash charges” added back in the CFS (CF from operations part)?
Introduction
9www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Overview of Consolidation Methods
Full consolidation Proportional Equity method
Principle
 Considered fully owned  Sub. considered fully owned  Considered like a financial
investment
Conditions
 Control of the entity
 Usually >50% voting rights
 Joint control with other
partners
 Significant influence on the
entity
 Usually >20%
B/S impact
 Assets/liabilities added at
100% + non-Controlling
interests in equity
 Assets/liabilities added at %
ownership level
 Added as Financial
investment (i.e. shares
owned)
P&L impact
 Income/expense added at
100%
 Share of net income not
owned by parent subtracted
 Income/expense added at %
ownership level
 Share of net income owned
added (income from
associates)
Comments
 Does not reflect economic
truth
 Reflects economic truth
 Not allowed anymore (since
Jan-14 for IFRS)
 Does not reflect full risks of
entity
Note: table does not include minority investment (usually <20% ownership) – treated as financial assets
Accounting Refresher
10www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Non-Controlling Interests (1/3)
 If a parent company P owns >50% (voting rights) of a subsidiary S (i.e. control), this subsidiary will be fully
consolidated
− All subsidiary’s assets and liabilities will be consolidated individually at 100%
− A shareholders’ equity account will be created (called Non-controlling Interests , previously known as
Minority Interest) to reflect the share of equity of the subsidiary not owned by the Parent company
shareholder
100%
Assets of
P+S
100%
Liabilities
P+S
Group SHE
NCI
 P owns 80% of its subsidiary S
Definition
Consolidated B/S Shareholding Structure Example
P
S
Minority
shareholders
Shareholders
of P
20%
Minority
shareholders
80%
Accounting Refresher
11www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Non-Controlling Interests (2/3)
Building The Consolidated B/S Building The Consolidated P&L
Parent P
P&L Yr1
Revenues 100
Costs (80)
Net income (NI) 20
Subsidiary S
P&L Yr1
Revenues 30
Costs (15)
Net income (NI) 15
Conso
P&L Yr1
Revenues (P+S) 130
- Costs (P+S) (95)
= Net income group (P+S) 35
- Minority interest (20% S) (3)
= NI Group share 32
= (100% NI of P + 80% NI of S)Note: P owns 80% of S and no transaction between P & S
Accounting Refresher
Parent P
Assets Liab. & Sh. Equity
Investment in S 8 SHE 48
Assets 100 Liabilities 60
Subsidiary S
Assets Liab. & Sh. Equity
Assets 15 SHE 10
Liabilities 5
Conso (end of Yr0)
Assets Liab. & Sh. Equity
Assets 115 SHE group share 48
= 108+15-8 = 48 - 8 + 80% x 10
NCI = 20% x 10 2
Liabilities = 60+5 65
12www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Non-Controlling Interests (3/3)
Consolidated Cash Flow Statement Consolidated Balance Sheet (end Yr1)
Note: P owns 80% of S and no transaction between P & S
Events Occurring in Yr1
 Subsidiary S pays a dividend during Yr1 (dividend payout ratio of 40%) – P does not pay dividend
 For both P & S companies
− No Capex/D&A
− All revenues and costs are cashed-in and -out the same year
CFS Yr1
NI Group share 32
+ Minority Interest 3
- Div paid to MI (40% x 3) (1.2)
Change in cash 33.8
Accounting Refresher
Assets Liab. & Sh. Equity
Assets 148.8 SHE group share 80.0
=115 + 33.8 = 48 + 32
NCI 3.8
= 2 + 3 - 1.2
Liabilities 65
13www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Associates (1/3)
 When a parent company P has significant influence and no control on another company (let’s call it A)
− Usually needs >20% voting rights (and <50% otherwise full consolidation)
 On P’s consolidated B/S, an Asset account will be created : Equity Affiliates (or Associates)
− Share of equity of A. attributable to P
Assets
(P)
Liabilities
(P)
SHE
(P)
 P owns 30% of A (no control on A but a
significant influence on it)
Equity Method Of Accounting
Consolidated B/S Shareholding Structure Example
P
A
Other
shareholder(s)70%
30%
Associate
Accounting Refresher
14www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Associates (2/3)
Consolidated B/S Consolidated P&L
Note: P owns 30% of A and no transaction between P & A
Parent P
Assets Liab. & Sh. Equity
Investment in A 3 SHE 42
Other assets 100 Liabilities 61
Associate A
Assets Liab. & Sh. Equity
Assets 15 SHE 10
Liabilities 5
Conso (end of Yr0)
Assets Liab. & Sh. Equity
Invest. in Associates 3 SHE 42
= 30% x 10
Other Assets 100 Liabilities 61
Parent P
P&L Yr1
Revenues 100
- Costs (80)
Net income (NI) 20
Associate A
P&L Yr1
Revenues 30
- Costs (15)
Net income (NI) 15
P&L Yr1
Revenues (P only) 100
- Costs (P only) (80)
+ Income from Associates 4.5
= 30% x NI of A
= Net income 24.5
Accounting Refresher
15www.ferdinand-petra.com – Valuation – All rights reserved 2018 ©
Associates (3/3)
Consolidated Cash Flow Statement Consolidated Balance Sheet (end Yr1)
Events Occurring In Yr1
 Associate A pays a dividend in Yr1 (dividend payout ratio of 40%)
 For both P & A companies
− No Capex/D&A
− All revenues and costs are cashed-in and -out the same year
Note: P owns 30% of A and no transaction between P & A
CFS Yr1
Net Income 24.5
- Income from Associates (4.5)
+ Div paid by Associates 1.8
= 40% x 4.5
Change in cash 21.8
Assets Liab. & Sh. Equity
Invest. In Associates 5.7 SHE 66.5
= 3 + 4.5 - 1.8 = 42 + 24.5
Other Assets 121.8 Liabilities 61
= 100 + 21.8
Accounting Refresher

Contenu connexe

Dernier

SURVEY I created for uni project research
SURVEY I created for uni project researchSURVEY I created for uni project research
SURVEY I created for uni project research
CaitlinCummins3
 
Financial Accounting IFRS, 3rd Edition-dikompresi.pdf
Financial Accounting IFRS, 3rd Edition-dikompresi.pdfFinancial Accounting IFRS, 3rd Edition-dikompresi.pdf
Financial Accounting IFRS, 3rd Edition-dikompresi.pdf
MinawBelay
 
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
中 央社
 

Dernier (20)

REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptxREPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptx
 
Removal Strategy _ FEFO _ Working with Perishable Products in Odoo 17
Removal Strategy _ FEFO _ Working with Perishable Products in Odoo 17Removal Strategy _ FEFO _ Working with Perishable Products in Odoo 17
Removal Strategy _ FEFO _ Working with Perishable Products in Odoo 17
 
Envelope of Discrepancy in Orthodontics: Enhancing Precision in Treatment
 Envelope of Discrepancy in Orthodontics: Enhancing Precision in Treatment Envelope of Discrepancy in Orthodontics: Enhancing Precision in Treatment
Envelope of Discrepancy in Orthodontics: Enhancing Precision in Treatment
 
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
 
HVAC System | Audit of HVAC System | Audit and regulatory Comploance.pptx
HVAC System | Audit of HVAC System | Audit and regulatory Comploance.pptxHVAC System | Audit of HVAC System | Audit and regulatory Comploance.pptx
HVAC System | Audit of HVAC System | Audit and regulatory Comploance.pptx
 
Pragya Champions Chalice 2024 Prelims & Finals Q/A set, General Quiz
Pragya Champions Chalice 2024 Prelims & Finals Q/A set, General QuizPragya Champions Chalice 2024 Prelims & Finals Q/A set, General Quiz
Pragya Champions Chalice 2024 Prelims & Finals Q/A set, General Quiz
 
SURVEY I created for uni project research
SURVEY I created for uni project researchSURVEY I created for uni project research
SURVEY I created for uni project research
 
How to Manage Closest Location in Odoo 17 Inventory
How to Manage Closest Location in Odoo 17 InventoryHow to Manage Closest Location in Odoo 17 Inventory
How to Manage Closest Location in Odoo 17 Inventory
 
IPL Online Quiz by Pragya; Question Set.
IPL Online Quiz by Pragya; Question Set.IPL Online Quiz by Pragya; Question Set.
IPL Online Quiz by Pragya; Question Set.
 
philosophy and it's principles based on the life
philosophy and it's principles based on the lifephilosophy and it's principles based on the life
philosophy and it's principles based on the life
 
Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17
 
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
 
Financial Accounting IFRS, 3rd Edition-dikompresi.pdf
Financial Accounting IFRS, 3rd Edition-dikompresi.pdfFinancial Accounting IFRS, 3rd Edition-dikompresi.pdf
Financial Accounting IFRS, 3rd Edition-dikompresi.pdf
 
II BIOSENSOR PRINCIPLE APPLICATIONS AND WORKING II
II BIOSENSOR PRINCIPLE APPLICATIONS AND WORKING IIII BIOSENSOR PRINCIPLE APPLICATIONS AND WORKING II
II BIOSENSOR PRINCIPLE APPLICATIONS AND WORKING II
 
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽會考英聽
 
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
 
An overview of the various scriptures in Hinduism
An overview of the various scriptures in HinduismAn overview of the various scriptures in Hinduism
An overview of the various scriptures in Hinduism
 
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjj
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjjStl Algorithms in C++ jjjjjjjjjjjjjjjjjj
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjj
 
Graduate Outcomes Presentation Slides - English (v3).pptx
Graduate Outcomes Presentation Slides - English (v3).pptxGraduate Outcomes Presentation Slides - English (v3).pptx
Graduate Outcomes Presentation Slides - English (v3).pptx
 
UChicago CMSC 23320 - The Best Commit Messages of 2024
UChicago CMSC 23320 - The Best Commit Messages of 2024UChicago CMSC 23320 - The Best Commit Messages of 2024
UChicago CMSC 23320 - The Best Commit Messages of 2024
 

En vedette

Social Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie InsightsSocial Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie Insights
Kurio // The Social Media Age(ncy)
 

En vedette (20)

PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024
 
Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)
 
How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024
 
Social Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie InsightsSocial Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie Insights
 
Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024
 
5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summary5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summary
 
ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd
 
Getting into the tech field. what next
Getting into the tech field. what next Getting into the tech field. what next
Getting into the tech field. what next
 
Google's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search IntentGoogle's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search Intent
 
How to have difficult conversations
How to have difficult conversations How to have difficult conversations
How to have difficult conversations
 
Introduction to Data Science
Introduction to Data ScienceIntroduction to Data Science
Introduction to Data Science
 
Time Management & Productivity - Best Practices
Time Management & Productivity -  Best PracticesTime Management & Productivity -  Best Practices
Time Management & Productivity - Best Practices
 
The six step guide to practical project management
The six step guide to practical project managementThe six step guide to practical project management
The six step guide to practical project management
 
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
 
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
 
12 Ways to Increase Your Influence at Work
12 Ways to Increase Your Influence at Work12 Ways to Increase Your Influence at Work
12 Ways to Increase Your Influence at Work
 
ChatGPT webinar slides
ChatGPT webinar slidesChatGPT webinar slides
ChatGPT webinar slides
 
More than Just Lines on a Map: Best Practices for U.S Bike Routes
More than Just Lines on a Map: Best Practices for U.S Bike RoutesMore than Just Lines on a Map: Best Practices for U.S Bike Routes
More than Just Lines on a Map: Best Practices for U.S Bike Routes
 
Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
 
Barbie - Brand Strategy Presentation
Barbie - Brand Strategy PresentationBarbie - Brand Strategy Presentation
Barbie - Brand Strategy Presentation
 

Ferdinand petra - valuation - accounting (extract)

  • 1. 1www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Corporate Valuation Accounting Refresher - Extract Prof: Ferdinand Petra (www.ferdinand-petra.com) Any reproduction, copy of this document is strictly forbidden without prior consent of the author
  • 2. 2www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Accounting Refresher
  • 3. 3www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Understanding the Flows Between Statements (1/4) Accounting Refresher Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables* + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Revenue - Cost of Sales = Gross Profit - SG&A Expenses + Other Income - Other Expenses = Earnings Before Interest and Taxes + Interest Income - Interest Expenses = Profit Before Tax - Tax = Net income Net Income + D&A + Other Non-cash Charges +/- Change in WC +/- Change in LT Assets / Liabilities = Operating Cash-Flow - Capital Expenditure - Dividends +/- Change in Equity +/- Change in Debt = Change in Cash & Cash Equivalent Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables & others + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Working Capital Flows Accrual basis Cash basis (incl. other payables)
  • 4. 4www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Understanding the Flows Between Statements (2/4) Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Revenue - Cost of Sales = Gross Profit - SG&A Expenses + Other Income - Other Expenses = Earnings Before Interest and Taxes + Interest Income - Interest Expenses = Profit Before Tax - Tax = Net income Net Income + D&A + Other Non-cash Charges +/- Change in WC +/- Change in LT Assets / Liabilities = Operating Cash-Flow - Capital Expenditure - Dividends +/- Change in Equity +/- Change in Debt = Change in Cash & Cash Equivalent Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Equity Flows Accounting Refresher
  • 5. 5www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Understanding the Flows Between Statements (3/4) Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Revenue - Cost of Sales = Gross Profit - SG&A Expenses + Other Income - Other Expenses = Earnings Before Interest and Taxes + Interest Income - Interest Expenses = Profit Before Tax - Tax = Net income Net Income + D&A + Other Non-cash Charges +/- Change in WC +/- Change in LT Assets / Liabilities = Operating Cash-Flow - Capital Expenditure - Dividends +/- Change in Equity +/- Change in Debt = Change in Cash & Cash Equivalent Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Debt Flows + Short Term Debt Accounting Refresher
  • 6. 6www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Understanding the Flows Between Statements (4/4) Closing Balance SheetOpening Balance Sheet Income Statement Cash-Flow Statement Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Revenue - Cost of Sales = Gross Profit - SG&A Expenses + Other Income - Other Expenses = Earnings Before Interest and Taxes + Interest Income - Interest Expenses = Profit Before Tax - Tax = Net income Net Income + D&A + Other Non-cash Charges +/- Change in WC +/- Change in LT Assets / Liabilities = Operating Cash-Flow - Capital Expenditure - Dividends +/- Change in Equity +/- Change in Debt = Change in Cash & Cash Equivalent Assets + Cash + Inventory + Account Receivables + PP&E + Intangible Assets + Others = Total Assets Liabilities + Account Payables + Short Term Debt + Long Term Debt + Others = Total Liabilities = Shareholder’s Equity Fixed Assets Flows Other Flows Accounting Refresher
  • 7. 7www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Accounting Questions (1/2)  Impact on I/S, B/S and CFS of the following events (each question is independent) − Increase of 10 in Depreciation − Machine acquisition for 100 (depreciable over 10 years), financed 60/40 by new loan (4%) and new equity − Buy 10 of inventory from a competitor (paid cash straight away) − Buy 10 of inventory from a competitor (paid next year) − You pay a supplier for 20 in cash − Decrease of 10 in account receivable − Issue 100 of new equity through a rights issue (fees paid to banks: 1%) − Record a PP&E write-down of 10 − Buy a building for 100 and immediately resell it for 120 − Increase of deferred revenues by 10 (+ give an example of deferred revenue) − Decrease of prepaid expense by 10 (+ give an example of prepaid expense) Accounting Refresher
  • 8. 8www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Accounting Questions (2/2)  2 companies have the same Net income but one has 10 more of D&A. All other things being equal, what’s the difference in cash generation between the 2 companies?  Why dividend is not shown in the I/S but in the CFS? (hint: tax impact?)  What is the purpose of “Change in Working Capital” in CFS? (hint: accrual vs. cash basis)  Give examples of “other non-cash charges” added back in the CFS (CF from operations part)? Introduction
  • 9. 9www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Overview of Consolidation Methods Full consolidation Proportional Equity method Principle  Considered fully owned  Sub. considered fully owned  Considered like a financial investment Conditions  Control of the entity  Usually >50% voting rights  Joint control with other partners  Significant influence on the entity  Usually >20% B/S impact  Assets/liabilities added at 100% + non-Controlling interests in equity  Assets/liabilities added at % ownership level  Added as Financial investment (i.e. shares owned) P&L impact  Income/expense added at 100%  Share of net income not owned by parent subtracted  Income/expense added at % ownership level  Share of net income owned added (income from associates) Comments  Does not reflect economic truth  Reflects economic truth  Not allowed anymore (since Jan-14 for IFRS)  Does not reflect full risks of entity Note: table does not include minority investment (usually <20% ownership) – treated as financial assets Accounting Refresher
  • 10. 10www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Non-Controlling Interests (1/3)  If a parent company P owns >50% (voting rights) of a subsidiary S (i.e. control), this subsidiary will be fully consolidated − All subsidiary’s assets and liabilities will be consolidated individually at 100% − A shareholders’ equity account will be created (called Non-controlling Interests , previously known as Minority Interest) to reflect the share of equity of the subsidiary not owned by the Parent company shareholder 100% Assets of P+S 100% Liabilities P+S Group SHE NCI  P owns 80% of its subsidiary S Definition Consolidated B/S Shareholding Structure Example P S Minority shareholders Shareholders of P 20% Minority shareholders 80% Accounting Refresher
  • 11. 11www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Non-Controlling Interests (2/3) Building The Consolidated B/S Building The Consolidated P&L Parent P P&L Yr1 Revenues 100 Costs (80) Net income (NI) 20 Subsidiary S P&L Yr1 Revenues 30 Costs (15) Net income (NI) 15 Conso P&L Yr1 Revenues (P+S) 130 - Costs (P+S) (95) = Net income group (P+S) 35 - Minority interest (20% S) (3) = NI Group share 32 = (100% NI of P + 80% NI of S)Note: P owns 80% of S and no transaction between P & S Accounting Refresher Parent P Assets Liab. & Sh. Equity Investment in S 8 SHE 48 Assets 100 Liabilities 60 Subsidiary S Assets Liab. & Sh. Equity Assets 15 SHE 10 Liabilities 5 Conso (end of Yr0) Assets Liab. & Sh. Equity Assets 115 SHE group share 48 = 108+15-8 = 48 - 8 + 80% x 10 NCI = 20% x 10 2 Liabilities = 60+5 65
  • 12. 12www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Non-Controlling Interests (3/3) Consolidated Cash Flow Statement Consolidated Balance Sheet (end Yr1) Note: P owns 80% of S and no transaction between P & S Events Occurring in Yr1  Subsidiary S pays a dividend during Yr1 (dividend payout ratio of 40%) – P does not pay dividend  For both P & S companies − No Capex/D&A − All revenues and costs are cashed-in and -out the same year CFS Yr1 NI Group share 32 + Minority Interest 3 - Div paid to MI (40% x 3) (1.2) Change in cash 33.8 Accounting Refresher Assets Liab. & Sh. Equity Assets 148.8 SHE group share 80.0 =115 + 33.8 = 48 + 32 NCI 3.8 = 2 + 3 - 1.2 Liabilities 65
  • 13. 13www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Associates (1/3)  When a parent company P has significant influence and no control on another company (let’s call it A) − Usually needs >20% voting rights (and <50% otherwise full consolidation)  On P’s consolidated B/S, an Asset account will be created : Equity Affiliates (or Associates) − Share of equity of A. attributable to P Assets (P) Liabilities (P) SHE (P)  P owns 30% of A (no control on A but a significant influence on it) Equity Method Of Accounting Consolidated B/S Shareholding Structure Example P A Other shareholder(s)70% 30% Associate Accounting Refresher
  • 14. 14www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Associates (2/3) Consolidated B/S Consolidated P&L Note: P owns 30% of A and no transaction between P & A Parent P Assets Liab. & Sh. Equity Investment in A 3 SHE 42 Other assets 100 Liabilities 61 Associate A Assets Liab. & Sh. Equity Assets 15 SHE 10 Liabilities 5 Conso (end of Yr0) Assets Liab. & Sh. Equity Invest. in Associates 3 SHE 42 = 30% x 10 Other Assets 100 Liabilities 61 Parent P P&L Yr1 Revenues 100 - Costs (80) Net income (NI) 20 Associate A P&L Yr1 Revenues 30 - Costs (15) Net income (NI) 15 P&L Yr1 Revenues (P only) 100 - Costs (P only) (80) + Income from Associates 4.5 = 30% x NI of A = Net income 24.5 Accounting Refresher
  • 15. 15www.ferdinand-petra.com – Valuation – All rights reserved 2018 © Associates (3/3) Consolidated Cash Flow Statement Consolidated Balance Sheet (end Yr1) Events Occurring In Yr1  Associate A pays a dividend in Yr1 (dividend payout ratio of 40%)  For both P & A companies − No Capex/D&A − All revenues and costs are cashed-in and -out the same year Note: P owns 30% of A and no transaction between P & A CFS Yr1 Net Income 24.5 - Income from Associates (4.5) + Div paid by Associates 1.8 = 40% x 4.5 Change in cash 21.8 Assets Liab. & Sh. Equity Invest. In Associates 5.7 SHE 66.5 = 3 + 4.5 - 1.8 = 42 + 24.5 Other Assets 121.8 Liabilities 61 = 100 + 21.8 Accounting Refresher

Notes de l'éditeur

  1. Vernimmen ch. 6
  2. Vernimmen ch. 6
  3. Vernimmen ch. 6
  4. Vernimmen ch. 6