The End of Accounting and the Path Forward for Investors and Managers

June 2016 978-1-119-19109-4 Hardcover (288 pages)

Baruch Lev, Feng Gu

John Wiley & Sons, Inc.

The End of Accounting and the Path Forward for Investors and Managers shows how the ubiquitous financial reports have become useless in capital market decisions and lays out an actionable alternative. Based on a comprehensive, large-sample empirical analysis, this book reports financial documents' continuous deterioration in relevance to investors' decisions. An enlightening discussion details the reasons why accounting is losing relevance in today's market, backed by numerous examples with real-world impact. Beyond simply identifying the problem, this report offers a solution—the Value Creation Report—and demonstrates its utility in key industries. New indicators focus on strategy and execution to identify and evaluate a company's true value-creating resources for a more up-to-date approach to critical investment decision-making.

While entire industries have come to rely on financial reports for vital information, these documents are flawed and insufficient when it comes to the way investors and lenders work in the current economic climate. This book demonstrates an alternative, giving you a new framework for more informed decision making.

  • Discover a new, comprehensive system of economic indicators
  • Focus on strategic, value-creating resources in company valuation
  • Learn how traditional financial documents are quickly losing their utility
  • Find a path forward with actionable, up-to-date information

Major corporate decisions, such as restructuring and M&A, are predicated on financial indicators of profitability and asset/liabilities values. These documents move mountains, so what happens if they're based on faulty indicators that fail to show the true value of the company? The End of Accounting and the Path Forward for Investors and Managers shows you the reality and offers a new blueprint for more accurate valuation.

Categories: M&A valuations

Table of Contents

Acknowledgments xi

The Book in a Nutshell xiii

Prologue xxv

CHAPTER 1 Corporate Reporting Then and Now: A Century of “Progress”

CHAPTER 2 And You Thought Earnings Are the Bottom Line

PART ONE Matter of Fact

CHAPTER 3 The Widening Chasm between Financial Information and Stock Prices

CHAPTER 4 Worse Than at First Sight

CHAPTER 5 Investors’ Fault or Accounting’s?

CHAPTER 6 Finally, For the Still Unconvinced

CHAPTER 7 The Meaning of It All

PART TWO Why Is the Relevance Lost?

CHAPTER 8 The Rise of Intangibles and Fall of Accounting

CHAPTER 9 Accounting: Facts or Fiction?

CHAPTER 10 Sins of Omission and Commission

PART THREE So, What’s to Be Done?

CHAPTER 11 What Really Matters to Investors (and Managers)

CHAPTER 12 Strategic Resources & Consequences Report: Case No. I—Media and Entertainment

CHAPTER 13 Strategic Resources & Consequences Report: Case No. 2—Property and Casualty Insurance

CHAPTER 14 Strategic Resources & Consequences Report: Case No. 3—Pharmaceutics and Biotech

CHAPTER 15 Strategic Resources & Consequences Report: Case No. 4—Oil and Gas Companies

PART FOUR Practical Matters

CHAPTER 16 Implementation

CHAPTER 17 So, What to Do with Accounting? A Reform Agenda

CHAPTER 18 Investors’ Operating Instructions

Epilogue: Advocacy Needed

Author Index

Subject Index