ANALISIS LAPORAN KEUANGAN

Pekan ke-7

POLITEKNIK KEUANGAN NEGARA-STAN TA 2017/2018

17 Oktober 2017
Puji Wibowo , Ak., MIDEC, CA
puji.wibowo@pknstan.ac.id
 Non-Recurring Items

Accounting Changes
First Type of Accounting Change is
Accounting Principle Change—involves
switch from one principle to another

 Disclosure includes:
• Nature of and justification for change
• Effect of change on current income and
earnings per share
• Cumulative effects of retroactive
application of change on income and EPS
for income statement years
 Non-Recurring Items

Accounting Changes
Second Type of Accounting Change is
Accounting Estimate Change—
involves change in estimate
underlying accounting
 
• Prospective application—a change
is accounted for in current and
future periods
• Disclose effects on current income
and EPS
 Non-Recurring Items

  Accounting Changes
Analyzing Accounting Changes
• Are cosmetic and yield no cash flows
• Can better reflect economic reality
• Can reflect earnings management (or even
manipulation)
• Impact comparative analysis (apples-to-apples)
• Affect both economic and permanent income
 For permanent income, use the new
method and ignore the cumulative effect
 For economic income, evaluate the
change to assess whether it reflects
reality
 Non-Recurring Items

 
Special Items
Special
Special Items--transactions
Items--transactionsand
andevents
eventsthat
thatare
areunusual
unusualor
or
infrequent
infrequent
  
Challenges
Challengesfor
foranalysis
analysis


 Often
Oftenlittle
littleGAAP
GAAPguidance
guidance

 Economic
Economicimplications
implicationsare
arecomplex
complex

 Discretionary
Discretionarynature
natureserves
servesearnings
earningsmanagement
managementaims
aims
  
Two
Twomajor
majortypes
types


 Asset
Assetimpairments
impairments(write-offs)
(write-offs)

 Restructuring
Restructuringcharges
charges
 Non-Recurring Items

Special Items
Asset
AssetImpairment—when
Impairment—whenasset assetfair
fairvalue
valueisisbelow
belowcarrying
carrying(book)
(book)value
value
  
Some
Somereasons
reasonsfor forimpairments
impairments
Decline
Declinein indemand
demandforforasset
assetoutput
output
Technological
Technologicalobsolescence
obsolescence
Changes
Changesin incompany
companystrategy
strategy
  
Accounting
Accountingfor forimpairments
impairments
Report
Reportatatthethelower
lowerof
ofmarket
marketor orcost
cost
No
Nodisclosure
disclosureaboutaboutdetermination
determinationof ofamount
amount
No disclosure about probable impairments
No disclosure about probable impairments
Flexibility
Flexibilityin indetermining
determiningwhen
whenand andhow
howmuch
muchtotowrite-off
write-off
No
Noplan
planrequired
requiredforforasset
assetdisposal
disposal
Conservative
Conservativepresentation
presentationofofassets
assets
 Non-Recurring Items

Special Items
Restructuring
RestructuringCharges—costs
Charges—costsusually usuallyrelated
relatedto
tomajor
majorchanges
changesin
incompany
company
business
business
  
Examples
Examplesof ofthese
thesemajor
majorchanges
changesinclude
include
 Extensive
Extensivereorganization
reorganization
 Divesting
Divestingbusiness
businessunits
units
 Terminating
Terminating contractsand
contracts andjoint
jointventures
ventures
 Discontinuing
Discontinuingproduct
productlines
lines
 Worker
Workerretrenchment
retrenchment
 Management
Managementturnover
turnover
 Write-offs
Write-offs combinedwith
combined withinvestments
investmentsin inassets,
assets,technology
technologyor
ormanpower
manpower
  
Accounting
Accountingfor forestimated
estimatedcosts
costsof ofrestructuring
restructuringprogram
program
 Establish a provision (liability) for estimated costs
Establish a provision (liability) for estimated costs
 Charge
Chargeestimated
estimatedcosts
coststotocurrent
currentincome
income
 Actual
Actualcosts
costsinvolve
involveadjustments
adjustmentsagainst
againstthe
theprovision
provisionwhen
whenincurred
incurred
 Non-Recurring Items

 
Analyzing Special Items

Earnings Management with Special Charges

(1)  Special charges often garner less investor

attention under an assumption they are non-recurring
and do not persist

(2)  Managers motivated to re-classify operating

charges as special one-time charges

(3) When analysts ignore such re-classified charges

it leads to low operating expense estimates and
overestimates of company value
 Non-Recurring Items

 
Analyzing Special Items

Income Statement Adjustments

 
(1) Permanent income reflect profitability of a company
under normal circumstances
• Most special charges constitute operating expenses
that need to be reflected in permanent income
• Special charges often reflect either understatements
of past expenses or investments for future profitability
 
(2) Economic income reflects the effects on equity of all
events that occur in the period
• Entire amount of special charges is included
 Non-Recurring Items

Analyzing Special Items

Balance Sheet Adjustments

Balance sheets after special charges often better reflect
business reality by reporting assets closer to net realizable
values
 
Two points of attention
(1) Retain provision or net against equity?
• If a going-concern analysis, then retain
• If a liquidating value analysis, then offset against equity
 
(2) Asset write-offs conservatively distort asset and liability
values
 Revenue Recognition

Guidelines
Revenue
Revenue Recognition
Recognition Criteria
Criteria
 Earning
Earningactivities
activitiesare
aresubstantially
substantiallycomplete
completeand
andnonosignificant
significant
added
addedeffort
effortisisnecessary
necessary
 Risk
Riskof
ofownership
ownershipis iseffectively
effectivelypassed
passedto
tothe
thebuyer
buyer
 Revenue,
Revenue,andandrelated
relatedexpense,
expense,are
aremeasured
measuredor orestimated
estimatedwith
with
accuracy
accuracy
 Revenue
Revenuerecognized
recognizednormally
normally
yields
yieldsan
anincrease
increasein incash,
cash,
receivables
receivablesor orsecurities
securities
 Revenue
Revenuetransactions
transactionsare areat
atarm’s
arm’s
length
lengthwith
withindependent
independentparties
parties
 Transaction
Transactionis isnot
notsubject
subjecttotorevocation
revocation
 Revenue Recognition

Guidelines
Some
Somespecial
specialrevenue
revenuerecognition
recognitionsituations
situationsare
are

 Revenue
RevenueWhen
WhenRight
Rightof
ofReturn
ReturnExists
Exists
 Franchise
FranchiseRevenues
Revenues
 Product
ProductFinancing
FinancingArrangements
Arrangements
 Revenue
Revenueunder
underContracts
Contracts
 Percentage-of-completion
Percentage-of-completionmethod
method
 Completed-contract
Completed-contractmethod
method
 Unearned
UnearnedRevenue
Revenue(amount
(amountofofrevenues
revenuesthat
thatare
arestill
still
unrecognized
unrecognizedappear
appearin
inthe
thebalance
balancesheet
sheetas
asaaliability)
liability)
 Revenue Recognition

 
Analysis
Revenue
Revenueis isimportant
importantfor for
 Company
Companyvaluation
valuation
 Accounting-based
Accounting-basedcontractual
contractualagreements
agreements
 Management
Managementpressure
pressureto toachieve
achieveincome
incomeexpectations
expectations
 Management
Managementcompensation
compensationlinkedlinkedtotoincome
income
 Valuation
Valuationof ofstock
stockoptions
options
  
Analysis
Analysismust
mustassess
assesswhether
whetherrevenue
revenuereflects
reflectsbusiness
businessreality
reality
 Assess
Assessrisk
riskofoftransactions
transactions
 Assess
Assessrisk
riskofofcollectibility
collectibility
  
Circumstances
Circumstancesfueling
fuelingquestions
questionsaboutaboutrevenue
revenuerecognition
recognitioninclude
include
 Sale
Saleof
ofassets
assetsor oroperations
operationsnot notproducing
producingcash
cashflows
flowstotofund
fundinterest
interest
or
ordividends
dividends
 Lack
Lackofofequity
equitycapital
capital
 Existence
Existenceof ofcontingent
contingentliabilities
liabilities
 Deferred Charges

Costs
Costs incurred
incurred but
but deferred
deferred because
because they
they are
are
expected
expected to
to benefit
benefit future
future periods
periods

Consider
Consider four
four categories
categories of
of deferred
deferred costs
costs

•• Research
Research and
and development
development
•• Computer
Computer software
software costs
costs
•• Costs
Costs in
in extractive
extractive industries
industries
•• Miscellaneous
Miscellaneous (Other)
(Other)
 Deferred Charges

Research and Development

Accounting for R&D is problematic due to:*

• High uncertainty of any potential benefits

• Time period between R&D activities and determination of success
• Intangible nature of most R&D activities
• Difficulty in estimating future benefit periods
 
Hence:
• U.S. accounting requires expensing R&D when incurred
• Only costs of materials, equipment, and facilities with alternative future uses
are capitalized as tangible assets
• Intangibles purchased from others for R&D activities with alternative future
uses are capitalized
 
*These accounting problems are similar to those encountered with employee
training programs, product promotions, and advertising
 Deferred Charges

Computer Software Costs

[Note:
[Note:Accounting
Accounting forfor costs
costsofof computer
computer software
software to tobe
be
sold,
sold,leased,
leased,ororotherwise
otherwisemarketed
marketed identifies
identifies aa point
point
referred
referredto
toas
astechnological
technologicalfeasibility]
feasibility]
  
Prior
Priortototechnological
technological
feasibility,
feasibility, costs
costs
are
areexpensed
expensedwhenwhen
incurred
incurred
  
After
Aftertechnological
technological feasibility,
feasibility, costs
costsare
arecapitalized
capitalizedas as
an
anintangible
intangibleasset
asset
 Deferred Charges

Costs in Extractive Industries

Search
Searchand
anddevelopment
developmentcosts
costsforfornatural
naturalresources
resourcesisisimportant
importantto
toextractive
extractive
industries including oil, gas, metals, coal, and nonmetallic minerals
industries including oil, gas, metals, coal, and nonmetallic minerals
  
Two
Twobasic
basicaccounting
accountingviewpoints:
viewpoints:
•• “Full
“Full‑cost” view—allcosts,
‑cost” view—all costs,
productive and nonproductive,
productive and nonproductive,
incurred
incurredin
inthe
thesearch
searchfor
forresources
resources
are
arecapitalized
capitalizedand
andamortized
amortizedtoto
income
incomeasasresources
resourcesare
areproduced
produced
and sold
and sold
•• “Successful
“Successfulefforts”
efforts”view—all
view—allcosts
coststhat
thatdo
donot
notresult
resultdirectly
directlyin
indiscovery
discoveryof
of
resources
resourceshave
havenonofuture
futurebenefit
benefitand
andshould
shouldbe
beexpensed
expensedas
asincurred.
incurred.
Prescribed for oil and gas producing companies
Prescribed for oil and gas producing companies
 Interest Costs

Interest Defined

Interest
Compensation for use of money
Excess cash paid beyond the money (principal)
borrowed
 
Interest rate
Determined by risk characteristics of borrower
 
Interest expense
Determined by interest rate, principal, and time
 Interest Costs

Interest Analysis

• Interest on convertible debt is controversial by

ignoring the cost of conversion privilege
• Diluted earnings per share uses number of shares
issuable in event of conversion of convertible debt
• Analysts view interest as a period cost—not
capitalizable
• Changes in a company borrowing rate, not explained
by market trends, reveal changes in risk
 Income Taxes


Temporary Income Tax Differences

GAAP

GAAP
GAAP
GAAP
Financial
Taxable Income
Statement Income
 Differences
Differencesthat
thatare
aretemporary
temporary in innature
nature
 expected
expectedto toreverse
reverseininthe
thefuture
future
 mainly
mainly in
inthe
thenature
natureofof timing
timingdifferences
differencesbetween
between tax
tax
and
andGAAP
GAAPaccounting
accounting
 accounted
accountedfor for using
usingdeferred
deferredtaxtax adjustments
adjustments
 Income Taxes

Income Tax Accounting

•• Identify
Identifytypes
typesand
andamounts
amountsof
oftemporary
temporarydifferences
differencesand
andthe
the
nature
natureand
andamount
amountof ofeach
eachtype
typeofofoperating
operatingloss
lossand
andtax
taxcredit
credit
carryforward
carryforward
•• Measure
Measuretotal
totaldeferred
deferredtax
taxliability
liabilityfor
fortaxable
taxabletemporary
temporary
differences
differences
•• Compute
Computetotal
totaldeferred
deferredtaxtaxasset
assetfor
fordeductible
deductibletemporary
temporary
differences
differencesand
andoperating
operatingloss
losscarryforwards
carryforwards
•• Measure
Measuredeferred
deferredtax
taxassets
assetsfor foreach
eachtype
typeof
oftax
taxcredit
credit
carryforward
carryforward
•• Reduce
Reducedeferred
deferredtax
taxassets
assetsby byaavaluation
valuationallowance
allowance
 Case Study

•• Impact
Impactof
ofIFRS
IFRS16
16on
onFinancial
FinancialStatements:
Statements:
Case
Casein inState
StateOwned
OwnedEnterprises
Enterprisesin inIndonesia
Indonesia(Group
(Group
Assignment)
Assignment)
•• What
Whataspects
aspectsaffected
affectedin inFinancial
FinancialStatements?
Statements?
•• What
Whatindustries
industriesmostmostsuffered?
suffered?
•• PT
PTJasa
JasaMargaMarga(Persero)-securitization
(Persero)-securitizationof oftoll
tollroad
roadrevenue
revenue
•• IsIsititoff-balance
off-balancesheet
sheetscheme?
scheme?
•• What
Whattypetypeofofrevenue
revenueis isconsidered
consideredtotovalue?
value?
•• What
Whataspect
aspectdo dowe wemust
mustconcern
concernmost
mostabout?
about?
•• DoDoyou youthink
thinkis
isititaarecommended
recommendedfinancing
financingscheme?
scheme?
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