The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals.


PCAOB Inspection Scrutiny of Fair Value Measurement Continues

Fair value measurement has been a hot topic during the last few years, increasingly attributable to PCAOB identified audit deficiencies and heightening scrutiny over the existing fair value framework and related auditing standards.  In this post, we take a look at the causes of attention and recent responses from professionals and professional organizations.

New Market Evidence Confirms Control Premium Best Practices

The Appraisal Foundation’s forthcoming VFR Valuation Advisory #3, The Measurement and Application of Market Participant Acquisition Premiums (“Advisory #3”) suggests that control of a business enterprise has limited value for its own sake. Rather, the value of control is correlated to the expectation for enhanced economic benefits from exercising such control. Recently published research from McKinsey & Company confirms this insight, finding that investors view acquisitions more favorably when specific synergies are identified and quantified at the announcement date.

Market Trends: 3Q17 Update

The first three quarters of 2017 were active for U.S. markets.  Major indices were characterized by low volatility and upward momentum against a backdrop of tightening monetary policy and strong economic indicators.  Private equity saw steady deal flow despite challenging market conditions, and record levels of venture capital deployment were seen amidst declining deal volume as capital continued to gravitate to the unicorns.  With one quarter left, we take a look at market activity during the first three quarters of 2017.   

Basics of Financial Statement Analysis

Football coaching legend Bill Parcells famously said, “You are what your record says you are.” Adapting that thought to the corporate world, one could say, “Your company is what its financial statements say it is.” Although we would not deny that there are important non-financial considerations in business, the remark strikes close enough to the truth to underscore the importance of being able to read financial statements. Accounting is the language of business, and financial statements are the primary texts to be mastered.

Our latest whitepaper is intended to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company. After reviewing each statement, we explain how the different statements relate to one another. Finally, we provide some guidance on how to evaluate projected financial statements.

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