In the UK company accounts are submitted by the anniversary date of formation.
That means that for a company set up in September, the accounts on file at companies house at this time could be the 2001-2002 accounts.
A week is a short time in politics, but in industry, Hey! what could have happened since 2001-2002?
Accounting is not an exact science and what you see is not black and white.
What is included or ommitted depends on the accounting rules. There are three main groups: Ethical (Prudence, consistency, relevance, objectivity), Measurement rules and boundary rules. No two accountants will produce identical sets of accounts. Companies have some freedom in how they allow for depreciation, for example, stock right-off and so on.
The SEC is expected to ride herd on accounts and just as an example, asked the firm Aetna to restate its 1998 accounts in a case where it queried what had been declared about operating income.
I sure heard a lot about how bad the Enron accounts were
after the evvent but i guess some of you heard about it before anyone else got wise. Same to with Barings bank.
Discounting published accounts as a historical document and Company prospectuses (?) as often akin to double glazing salesman speak, these are not the documents a company uses for its managment. Management accounts are a great deal more sensitive.
Most companies that go bust often seem very good companies but fail through cash flow problems. Companies are not allowed to trade when they have insufficient assets to cover their debts.
Cash flow and profit and loss accounts are a critical indicator we will not gain access to.
However, Management does have access to these accounts and they govern their activities. Hence we are seeking clues to the succes or otherwise of the company based on those actions of management that might be in response to such accounts or might precipitate such a crisis. So the indicators given here and in the other thread are very real (if subjective) omens and, importantly, reflect the current state of affairs and not the historical situation nor the public face the company is trying to project to its investors.
I would add that engineers have their own jobs to do. Traders and brokers, and the people buying and selling shares (fund managers etc)are full time proffesionals aided by sophisticated computer programs and, guess what, even they don't get it right all the time.
JMW
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