Margins of Error in Accounting Book

List of Figures viii

List of Tables ix

Acronyms x

Preface xii

Postscript xiv

1 Introduction 1

1 Accounting rules 1

2 Inputs and outputs 3

3 Is too much expected of accounts? 4

4 Quantifying margins of error 6

5 Causes and types of error 8

6 Simple mistakes 10

2 The 'Interim-ness' of Accounts 12

1 Introduction 12

2 Fixed assets - tangible 16

3 Current assets 23

4 Liabilities 26

5 Sales revenue 29

6 Revenue investments 30

7 Taxation 33

8 Conclusions 35

3 Basis of Measurement 36

1 The purpose of accounts 36

2 Realised and unrealised profits 40

3 Technical aspects of Current Value accounting 41

4 Implications of Current Value accounting 44

5 Revaluation of tangible fixed assets 51

6 Goodwill 52

7 Cash and liquid resources 55

8 Executive stock options 56

9 Provision for pensions 57

10 Discounting long-term liabilities 58

11 Derivatives 59

12 Conclusions 60

4 The Unit of Account 61

1 Money and inflation 62

2 Constant Purchasing Power accounting 69

3 Lucas Industries plc, CPP accounts 1969-94 79

4 Foreign currencies 82

5 Conclusions 84

5 Accounting Profit Versus Economic Income 85

1 Economic income 86

2 Historical cost accounting profit versus economic income 89

3 Interest on equity capital 91

6 Creative Accounting 95

1 What is 'creative accounting'? 95

2 Incentives and pressures on managers 98

3 Profit and loss account 101

4 Balance sheet 104

5 Presentation and trends 107

6 Politics 109

7 Fraud 112

8 Non-public and non-profit-seeking entities 113

9 Conclusions 114

7 Spurious Accuracy 116

1 Accounting 116

2 Finance 122

3 Economics 128

4 Miscellaneous 131

8 Near Enough 134

1Accounting 134

2 Sports 136

3 Weather 139

4 Political elections 140

5 Transport 141

6 Miscellaneous 142

7 Back to accounting 143

9 Conclusions 145

1 Introduction 145

2 Interim-ness 146

3 Basis of measurement 147

4 The unit of account 148

5 Accounting profit versus economic income 150

6 Creative accounting 150

7 Spurious accuracy 151

8 Near enough 152

9 Mis-reporting profit 152

10 Preventing avoidable error 153

Bibliography 155

Glossary 159

Name Index 160

Subject Index 163