Preface |
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xiii | |
Introduction |
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Company reports and accounts -- an introduction |
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1 | (6) |
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The profit and loss account |
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The accounts of a newly-formed company |
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Financial reporting standards and principles |
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7 | (8) |
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The Financial Reporting Council (FRC) |
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Financial Reporting Review Panel (FRRP) |
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The Accounting Standards Board (ASB) |
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The Urgent Issues Task Force (UITF) |
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Financial Reporting Standards (FRSs) |
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Statements of Recommended Practice |
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International accounting standards |
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Principles of financial reporting |
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Need for a conceptual framework |
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Fundamental accounting concepts |
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FRS 18 Accounting policies |
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Statement of Principles for Financial Reporting |
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What financial statements comprise |
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The need to read the notes |
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The objective of financial statements |
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Users and their information needs |
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15 | (2) |
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Incorporation of a company |
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Memorandum of Association |
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Members' (shareholders') liability |
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Small and medium-sized companies |
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17 | (3) |
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Stock Exchange listing -- `quoted companies' |
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Listing Particulars (prospectus) |
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Keeping the public informed |
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Methods of obtaining a listing |
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Alternative Investment Market |
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THE BALANCE SHEET: CAPITAL EMPLOYED |
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Share capital and reserves |
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20 | (14) |
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Authorised and issued share capital |
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Another substantial shareholder |
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Share schemes for directors and employees |
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Executive share option schemes |
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Unapproved share option schemes |
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Enterprise Management Incentives (EMI) |
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Save-As-You-Earn (SAYE) share options |
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All employee share ownership plans (AESOPs) |
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The issue of further equity |
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Further information on shares |
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Company purchasing its own shares |
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Reduction of share capital |
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Arrangements and reconstructions |
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Capital and revenue reserves |
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Capital redemption reserve |
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34 | (16) |
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The advantages of borrowing |
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Security given to the lender |
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Typical characteristics of debentures and ULS |
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Accounting for finance costs |
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The amount a company can borrow |
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Capital and income covers |
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Terms of a convertible loan |
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Convertibles with `put' options |
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Off balance sheet financing |
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FRS 5 Reporting the substance of transactions |
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Interest rate sensitivity |
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50 | (4) |
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Capitalised development costs |
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Copyright and similar publishing rights |
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Purchased goodwill - old rules |
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Purchased goodwill - FRSs 10 and 11 |
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54 | (13) |
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Companies Act requirements |
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Subnormal depreciation charges |
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Where depreciation is shown in the accounts |
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The straight line or fixed instalment method |
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The reducing balance method |
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The sum of the years' digits method |
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Change in expected useful life |
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Writing down of asset values |
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Freehold land and buildings |
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The revaluation of assets |
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The arguments for and against valuations |
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FRS 15 Tangible fixed assets |
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Sales and other disposals of fixed assets |
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67 | (4) |
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Investment in subsidiaries |
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Investments in joint ventures |
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Other fixed asset investments |
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Disclosures on significant holdings |
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Balance sheet presentation |
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Stocks and work in progress |
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71 | (10) |
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Different classes of stock |
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The importance of stock valuation |
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Problems in valuing stock |
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Stocks in a large retail business |
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Stocks in a manufacturing business |
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Methods of pricing issues from stock |
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Taxation of stock profits |
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Requirements of the Companies Act 1985 and of SSAP 9 on stocks and WIP |
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The danger of rising stocks |
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SSAP 9 requirements on long-term contracts |
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Stocks/Cost of sales ratio |
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Cost of sales/Stock ratio |
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81 | (8) |
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Trade debtors and other debtors |
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Bad debts and doubtful debtors |
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The importance of debtors |
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What we would like to know |
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Factors affecting the debt collection period |
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Debtors due after more than one year |
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Hire-purchase and credit sale transactions |
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Hire-purchase information given in accounts |
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Factoring in the accounts |
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Current asset investments; cash at bank and in hand |
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89 | (3) |
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Types of current asset investment |
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Accounting for current asset investments |
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Current asset investments in practice |
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Significance of short-term investments |
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Availability of short-term investments |
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Bank loans and overdrafts |
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92 | (7) |
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The cost of borrowing on overdraft |
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Balance sheet presentation |
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Derivatives and other financial instruments |
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99 | (7) |
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Derivatives can seriously damage your wealth |
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Definition of a derivative |
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Risk management and derivative trading |
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Common types of derivative |
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Commodity related derivatives |
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Reducing the risks of trading in derivatives |
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Concern about derivatives |
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But why bother with derivatives? |
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Recognition and measurement |
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Creditors, provisions, contingent liabilities and contingent assets |
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106 | (12) |
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Working capital and liquidity ratios |
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Comment on The Body Shop's ratios |
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Annual review and disclosure |
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Provisioning -- the main areas |
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Other accounting standards on provisions |
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Other uses of the term `provision' |
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What does all this mean to the investor? |
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Contingent liabilities and contingent assets |
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Examples of contingent liabilities |
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The significance of contingent liabilities |
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Other financial commitments |
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THE PROFIT AND LOSS ACCOUNT |
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118 | (20) |
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Disclosures required by the Companies Act |
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Other items in the profit and loss account |
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Parent company profit and loss account |
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Disclosures required by accounting standards |
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Disclosures required by the UKLA Listing Rules |
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Effect of accounting policies on profitability |
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What is it reasonable to capitalise? |
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Changes of accounting policy |
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Defined contribution schemes |
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Problems faced by actuaries and pension funds |
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Disclosure of information |
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FRS 17 Retirement benefits |
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Basic purpose of the profit and loss account |
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Is it extraordinary or exceptional? |
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`Headline' or `normalised' earnings |
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FRS 3 Reporting financial performance |
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Improving the return on capital employed |
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Analysis of profitability |
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138 | (8) |
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Tax in the profit and loss account |
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Tax in the cash flow statement |
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Example of a timing difference |
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Advance corporation tax from earlier years |
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Depreciation and capital allowances |
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When corporation tax rates are set |
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Accounting for deferred tax |
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Definition of deferred tax |
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Reasons for `abnormal' tax charges |
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Adjustments to previous years |
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Profit after tax, dividends and earnings per share |
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146 | (17) |
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Profit attributable to ordinary shareholders |
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What is legally permissible |
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Company articles on dividend distribution |
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ASB curbs `enhancement' of e.p.s. |
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Misleading use of the word `basic' |
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Company's own figures for e.p.s. |
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The effect of acquisitions on earnings per share |
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Wonder growth by acquisition |
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Normalised and company e.p.s. |
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Adjustments to basic earnings per share |
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When the number of shares in issue changes |
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Shares held by a group member |
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Diluted earnings per share |
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Calculation of diluted e.p.s. |
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Growth in share incentive schemes |
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Growth in the complexity of schemes |
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Further examples of dilution |
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Points to watch on incentive schemes for directors and senior management |
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Statement of total recognised gains and losses |
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Financial statistics in historical summaries |
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Movements in shareholders' funds |
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The Price Earnings Ratio (PER) |
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Price earnings growth factor (PEG) |
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Dividend policy and the PER |
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163 | (12) |
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Overview of the cash flow statement and related notes |
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The finance director's viewpoint |
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Reconciliation of net cash flow to net debt |
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Acquisitions and disposals |
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Non-cash items and restrictions on transfer |
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The direct and indirect methods |
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Restrictions on remittability |
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Limitations of cash flow statements |
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Cash flow -- definitions and ratios |
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Authors' comments on free cash flow |
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`Sherlock Holmes' approach to cash flow |
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Subsidiaries and group accounts |
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175 | (9) |
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Interests in another company |
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Buying some shares in company B |
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Making a takeover bid for company B |
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FRS 6 Acquisitions and mergers |
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Holding companies, subsidiaries and groups |
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The consolidated balance sheet |
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Goodwill on consolidation arising prior to 1998 |
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Goodwill on consolidation arising after 1998 |
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The consolidated profit and loss account |
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Unrealised profits on stocks |
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Parent company's own balance sheet |
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Parent company's own profit and loss account |
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Accounting periods and dates |
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Further statutory requirements |
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184 | (7) |
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Year of acquisition or disposal |
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Assets at the date of acquisition |
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Example of a substantial acquisition |
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Post balance sheet events |
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The mechanics of merger accounting |
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Profits in the year of merger |
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Comparison of accounting methods |
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Associates, joint ventures and related parties |
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191 | (10) |
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Companies Act definitions |
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Joint arrangement that is not an entity |
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Interest held on a long-term basis |
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Proportional consolidation |
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Ultimate controlling party |
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201 | (9) |
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The UK accounting standard |
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Mitigating the effect of currency fluctuations |
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What the analyst should study |
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Historical summaries, ratios and trends |
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210 | (11) |
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Variations in form and content |
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Our comments on Tesco's five-year record 1999--2003 |
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Changes in accounting standards |
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Accounting changes made by the company |
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Changes in the business environment |
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Changes in the composition of the group |
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Continuing and discontinued operations |
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Why capital-based ratios are unreliable |
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How e.p.s. can be `smoothed' a little |
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Total return to shareholders |
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Chairman's statement, operating and financial reviews and directors' report |
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221 | (10) |
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Sequence of study of a report and accounts |
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Estimating current year profits |
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Information on the quality of management |
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Internal controls and looking to the future |
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Combined Code on Corporate Governance |
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Post balance sheet events |
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Corporate governance and the auditors' report |
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231 | (8) |
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Auditors' access to information |
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The Auditing Practices Board (APB) |
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Statement of Auditing Standards 600 |
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Responsibilities of directors and auditors |
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239 | (3) |
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Half year on half year comparisons |
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Other sources of information |
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242 | (7) |
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Information provided by the company |
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Prospectuses and listing particulars |
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Circulars on acquisitions and disposals |
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Documents issued in a contested bid |
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Related party transactions |
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Company newsletters and magazines |
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Catalogues and sales information literature |
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The Registrar of Companies |
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Accounting standards and financial reporting |
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249 | (4) |
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Historical cost (HC) accounting |
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HC accounting with stable prices |
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HC accounting with inflation |
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The impact of modest inflation |
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The effect of inflation on the investor in fixed-interest stocks |
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The future if high (over 10%) inflation returns |
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Accounting practices - cause for concern? |
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253 | (5) |
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A good place to start fiddling |
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No UK accounting standard |
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Revenue recognition problems |
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Revenue recognition examples |
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Pulling out all the stops |
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International accounting comparisons |
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258 | (5) |
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International Accounting Standards |
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Comparison of UK GAAP and IFRS |
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What will happen to UK GAAP? |
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263 | (6) |
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Charterhouse Communications |
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Developments in accounting |
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269 | (5) |
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The Accounting Standards Board (ASB) |
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Financial Reporting Standards coming into force |
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FRS 17 Retirement benefits |
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FRS 20 Share based payment |
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FRS 21 Events after the balance sheet date |
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The Accounting Standards Board's work list |
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The comprehensive income statement |
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274 | (28) |
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Appendix 1 -- Current Financial Reporting Standards and Exposure Drafts |
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274 | (2) |
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Appendix 2 -- Present value |
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276 | (2) |
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Appendix 3 -- Retail Price Indices since 1950 |
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278 | (1) |
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Appendix 4 -- Problems and solutions |
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279 | (22) |
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Appendix 5 -- International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) |
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301 | (1) |
Index |
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302 | |