The DARK SIDE of Financial Statement Analysis And How to Greatly Improve Stock Idea Filtering and Analysis Complete

Events Details (Code: 170329W)

HKSFA is bringing the highly-acclaimed “DARK SIDE" seminar by Professor Litman to Hong Kong. The seminar has been held in various cities and received highest ratings at other member societies of CFA Institute including New York, Singapore, London, and more than ten other societies around the world.

“The DARK SIDE of Financial Statements” focuses on the severe distortions in as-reported IFRS and GAAP financial reporting and the non-GAAP, non-IFRS solutions for it such as UAFRS uniform accounting.  

As Professor Litman has stated, “Financial reporting is an inconsistent mess and getting worse around the world, misreporting revenue, earnings, cash flows, assets, equity, and debts.”

This “accounting mess” causes financial professionals to see stocks as expensive which truly aren’t and to see businesses as low quality which in actuality are solid cash flow generators.

Various SEC officers, FASB and IASB members and experts, and others have spoken similarly about “an erosion
in the quality of earnings” and have chastised the financial statements as being “internally inconsistent; misleading; confusing; inaptly named; likely to be misunderstood…”

IFRS rules have provided no solution. “The fact that IFRS provides more opportunity for the application of judgment … only adds to the risk,” Barry J. Epstein, author of the Wiley published GAAP Guide, IAS Guide, and the IFRS Guide.  

This engaging seminar, through real world investing examples, reveals the severe distortions lurking in reported earnings, assets, liabilities, and even cash flows. With live data and current situations, Litman highlights problems with performance and valuation measures based on as-reported data such as P/E, P/B valuation ratios and ROE, ROA, and margins metrics.  

Severe inconsistencies in financial reporting include lease capitalization, R&D expensing, depreciation, cost of goods sold pricing, inventory pricing, off-balance sheet debts and assets, ‘non-recurring’ charges, M&A misreporting… and new misreporting problems every year.

The solution is to adjust the financials simply and effectively to make the accounting rules consistent across companies and across time. One such solution is UAFRS, Uniform Adjusted Financial Reporting Standards, a framework of uniform accounting wherein all companies’ financial statements are restated with identical reporting rules.

The goal is a consistent reporting framework with consistently reported corporate results. This would greatly enhance peer comparability, trend analysis, and assessment of quality and valuation levels. In other words, to more quickly sift through scores of companies to be able to determine which may really be long or short ideas and to better understand the context of any particular investment more accurately.

Investors, management teams, and the SEC have noted an erosion in the quality of financial reporting. Under GAAP and IFRS, severely inconsistent rules confound comparisons and trend analysis of assets, earnings, credit, and even the statement of cash flows.

How different can a company look under globally consistent UAFRS, Uniform Adjusted Financial Reporting Standards?

· In January 2015, Barron's highlighted AMD (AMD) as a long idea at $2.60 per share. The stock had been depressed by headline bankruptcy concerns. UAFRS showed strong underlying cash flows that GAAP did not. AMD's stock has hit $9 since.

More Information Here  

· In January 2016, Facebook (FB)'s valuation at $95 per share looked expensive and its performance looked poor under GAAP. In SeekingAlpha, UAFRS-based reporting showed a far higher quality, inexpensive firm. FB has increased $25 to $35 since.
·  More Information Here  

· Mid-2016, at a CFA conference at Bloomberg in Frankfurt, Germany, BMW's stock looked as cheap as it had for two years with an as-reported P/E ratio of 8. Under UAFRS, the earnings multiple has persisted above 22X, explaining BMW's sideways market performance.

More Information Here  

Highlights of the Workshop:
·Advanced financial statement analysis: Just how distorted as-reported earnings, assets, liabilities, and even cash flows are today… and increasingly so.

·The decision-changing differences in P/E multiples, earnings measures, P/B, and a host of other calculations when using UAFRS, Uniform Adjusted Financial Reporting Standards instead of as-reported numbers.  

Line-by-line case examples of how to fix the major inconsistencies in global financial reporting utilizing uniform accounting methods of UAFRS.

Focus on financial reporting issues and improved performance measurement and valuation analysis in 9 of 11 major market sectors: Consumer Discretionary and Staples; Energy, Utilities, and Materials; Technology, Media and Telecom; Industrials; and Healthcare.

Learning Objectives:
  • Identify the major distortions due to the inconsistencies in accounting rules and principles
  • See what a difference an adjustment can make: how equity, credit, and macro analysis radically improves by applying uniform accounting rules
  • Learn the fundamentals of uniform accounting rules such as UAFRS for repairing the inconsistencies and dramatically improving business and valuation analytics
  • Learn how to improve the signal quality and insights from P/E, P/B ratios, and quality and profitability metrics
Prerequisite: Understanding and experience in analyzing company financial statements and familiarity with performance measurement and valuations measures such as P/E ratios, earnings trends and analysis, and other as-reported financial metrics.  

Remarks: Classrooms are not equipped with computers, participants may bring their own laptops or tablets, but not required.  

Workshop Rating –
(Material presented will have technical elements requiring a working knowledge of the subject to make full use of the presentation.)  

About the Instructor

Professor Joel Litman
Chief Investment Strategist and Managing Director
Valens Research

Professor Joel Litman is Chief Investment Strategist and Managing Director at Valens Securities, Inc. and Valens Research, a boutique global investment research firm. He advises institutional investors in fundamental analysis of equities, corporate credit, and macroeconomic strategy. He is a member of the Board of Directors of COL Financial Group, a leading brokerage firm in Asia (PSE:COL).

Litman is a recognized global expert in advanced financial statement analysis and valuation including uniform accounting methods such as UAFRS. He has appeared on CNBC and has been quoted in Barron’s and Institutional Investor and interviewed in He has published in Harvard Business Review, is a top 5 contributor to SeekingAlpha, and co-authored the highly-acclaimed DRIVEN: Business Strategy, Human Actions, and the Creation of Wealth.

Litman has taught or guest-lectured at Harvard Business School, U Chicago Booth, Wharton, LBS, SAIF Jiao Tong, and others. He is a Professor at Hult International Business School, an FT and Economist Magazine top 25 MBA program, and a Clinical Professor at DePaul University. He conducts seminars regularly for CFA and CPA Societies, industry conferences, and major firms around the world.

Litman helped build The Valens Institute of Strategy & Valuation; Credit Suisse’s HOLT University; and the Center for S.E.V. and MBA Concentration at the Driehaus College of Commerce at DePaul University.

Litman has held positions at Credit Suisse, Diamond Tech Partners (now PwC), Deloitte, and American Express. He is a member of CFA Institute, the global association for investment professionals, and the Association of Certified Fraud Examiners. He received a B.S in Accounting from DePaul University. He is a CPA (Certified Public Accountant) and holds an MBA/MM from the Kellogg Graduate School of Management at Northwestern University.

Litman’s philanthropic work is focused on developing communities with elementary-through-college scholarships, job training programs, and extensive microfinance lending, particularly in the Philippines.  
  • Special Discount: 10% off for those who register with early bird rate on or before 15th March (Wed).
  • Only Visa and Master Card are accepted for online payment.
  • The fee includes course materials.
  • Classrooms are not equipped with computers, participants may bring their own laptops or tablets, but not required.