good accounting books?

[jb85]

buffett has said to learn as much as you can about accounting.  Besides accounting textbooks, any other good books people can recommend to gain more knowledge on this, or anybody recommend how they would go about learning this stuff.  If textbooks, anybody recommend any specific ones out there?

[Zpoly]

Pick a few companies that you like and read through their financial statements. Try to understand how the company makes money, why it has lost money, and try to understand the interrelationships between the three main statements. If you don't understand something, look it up in a book. You might struggle at first, but it will get easier and easier.

 

That's my best advice.

[ericd1]

Buffett's advice about accounting is sound, but rather than tackling accounting per se, I'd suggest starting with a text that provides insight into how to understand the content of financial statements and their inter-relationships. After learning the basics you can delve into specific accounting nuances of a particular industry, or concept.

 

I still have my dog-eared copy of Fundamentals of Financial Accounting by Welsch and Anthony (1977) - I found a couple of copies available on Amazon < $10. There's a current book with the same name and probably a few new concepts for $143 (also used available).

 

It's a good place to start if you want to learn about financial statements.  Enjoy!   

[valuecfa]

Learning how to read financial statements is imperative. All the value investing books in the world won't help you if you don't understand accounting. Once you understand accounting, value investing books are a fantastic source of advice. Textbooks are boring, but they really are the key. You can read a book like Intelligent Investor, Dhando Investor, or a Peter Lynch book to get u pumped up a bit, before you tackle the textbooks. But textbooks are necessary for a solid foundation, if u want to be able to truly understand every line of all financial statements, and what they mean. There's a lot of fake value investors out there b/c they skip the accounting textbooks for the more "fun" (but also very valuable) advice-driven value books. Learning GAAP accounting and its shortcomings is a must.

 

Here some books that will get you well acquainted with accounting:

 

How to read a financial report, John Tracy

 

Analysis and Use of Financial Statements

---(this was the original CFA textbook for financial statement analysis)

 

Any accounting book by Leapold Bernstein

--some listed here: http://www.bookfinder.com/author/leopold-a-bernstein/

 

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Once you get a decent grip on financial statement analysis, you may want to learn how managers play tricks with their accounting to report better results.

 

Here is a list for fine tuning some of your accounting skills within financial statements.

 

Financial Shenanigans

Financial Numbers Game

Financial Fine Print: Uncover a Company's True Value

Creative Cash Flow Reporting

Quality of Earnings

 

==============================================================================

 

From there on you can move on to other classics like:

 

Berkshire's letters to Shareholders

Security Analysis

Margin of Safety

The Warren Buffett Way

Common Stocks and Uncommon Profits

Intelligent Investor

Quest for Value

Joel Greenblatt's two books

Peter Lynch's Books

etc...(many classics)

 

===============================================================================

Then you can move on to more advanced books like:

 

Distressed Debt Analysis

Loan Workouts and Debt for Equity Swaps

Corporate Financial Distress & Bankruptcy

Fundamentals Corporate Credit Analysis

Creating Value Through Corporate Restructurings

etc...

 

===============================================================================

 

Then you can look into textbooks on international investing, fixed income, arbitrage, economics, derivatives, corporate finance, quantitative method, advanced financial reporting analysis, currency & FX, alternative asset valuation, ethics & professional standards, corporate governance, portfolio mgmt., etc....

 

The CFA program is an excellent and rigorous source for all of the above mentioned subjects in italics.

 

 

 

 

 

 

 

[SharperDingaan]

 

Focus your attention on the IFRS accounting standards which come into effect Jan 01, 2010

Much of the existing accounting texts, & CFA accounting curricula is effectively obsolete.

 

- The existing BS, P&L, CF statement dissappear entirely & are replaced with 4 new statements.

- The BS assets = liability + equity dissappears, & all existing BS & BS/P&L financial ratios will have to be calculated a different way

- Acquisitions, good will, MTM, etc. are accounted for differently, & there are transitional rules smoothing the impact of methodolgy changes.

- Disclosures is materially improved & much of what is currently off BS will now have to be revealed on 01/01/2010

- 23 new accounting standards that affect pretty much everything. Pick & choose by topic.

 

Europe allready has IFRS & has been using it for some time. Canada goes to IFRS 01/01/2010.

US GAAP will be going to IFRS - irrespective of objections.

 

Good thing on balance as all companies around the world will now use the same acounting. A US coy in the same industry now becomes directly comparable to its CDN, European, or Asian counterpart. Fail to move to IFRS, & you effectively relegate your financial system to 3rd world country status.

 

SD

 

 

 

 

 

 

[Guest dealraker]

Accounting Books? 

 

There are some very good recommendations above. 

 

Experience, experience and more experience.  As Buffett says, "It isn't the stated numbers; it is what they actually mean." 

 

There is so much manipulation of numbers it is rediculous.  I majored in accounting and have spent 35 years since then obsessively reading and learning and what I have progressed with the most is most often, but not always, being one step ahead of all the fake stuff we get to read in financial reports.

 

I hate to admit it but I actually think that about 90% of our financial statements have numbers that say one thing while the reality, and often it is an obviouly reality- but one only discoverd from seemingly centuries of learning, is entirely different and most often much worse.

 

I have a friend who is an investor.  He is a lawyer and he reads all the time.  But he does not mix all his knowledge together and he tends to just follow one source of information at a time.  He has made nearly all the obvious mistakes and each time he has this revalation afterwards.  Unfortunately, he is much smarter than he gives himself credit for but he wants to believe, always, that there is one place where he can go and get the knowledge to outperform Mr. Market.  My guess is that he has not made one dime in the stock market since I started interacting with him in 1993.  At all times he just dismisses any suggestion that his current methodology may be more of an oversimplified idology that will again fall flat on its face. 

 

When his stocks go up he is a little arrogant and when they fall he is overly humble. 

[tooskinneejs]

In addition to purchasing a textbook on the fundamentals of accounting (i.e., an accounting 101 text), I would highly recommend purchasing a textbook on "cost accounting."  Cost accounting is different than "financial accounting" (GAAP stuff) in that it deals with things such as break even points, fixed vs. variable costs, direct vs. indirect costs, overhead, financial ratios, etc.  This is the kind of stuff that is helpful in understanding the quality of the economics of various businesses after you read a fundamentals of accounting book.

[Suhit Anantula]

 

Focus your attention on the IFRS accounting standards which come into effect Jan 01, 2010

Much of the existing accounting texts, & CFA accounting curricula is effectively obsolete.

 

- The existing BS, P&L, CF statement dissappear entirely & are replaced with 4 new statements.

- The BS assets = liability + equity dissappears, & all existing BS & BS/P&L financial ratios will have to be calculated a different way

- Acquisitions, good will, MTM, etc. are accounted for differently, & there are transitional rules smoothing the impact of methodolgy changes.

- Disclosures is materially improved & much of what is currently off BS will now have to be revealed on 01/01/2010

- 23 new accounting standards that affect pretty much everything. Pick & choose by topic.

 

Europe allready has IFRS & has been using it for some time. Canada goes to IFRS 01/01/2010.

US GAAP will be going to IFRS - irrespective of objections.

 

Good thing on balance as all companies around the world will now use the same acounting. A US coy in the same industry now becomes directly comparable to its CDN, European, or Asian counterpart. Fail to move to IFRS, & you effectively relegate your financial system to 3rd world country status.

 

SD

 

 

 

 

 

 

 

Thanks for this. You are right on IFRS.

 

For anybody who is interested I found this site from Deloitte that provides free training.

 

http://www.deloitte.com/view/en_GX/global/services/Audit/global-ifrs-offerings-services/ifrs-implementation-services/ifrs-elearning/

 

Cheers

Suhit

[Valuebo]

Let me bump this topic instead of making a new one...

 

I'm wondering about how to get started on learning more about accounting given two facts : (1) I'm an European and (2) interested in both EU stocks (IFRS) as US stocks (GAAP).

 

Can I just pick up a book like "How to Read a Financial Report: Wringing Vital Signs Out of the Numbers" as a starting place and ignore the differences between GAAP en IFRS? In what way are they different and how much in-depth knowledge will be required on the subject to understand both GAAP and IFRS enough to sufficiently value stocks with different accounting regulations?

 

Thanks!

[valuecfa]

Let me bump this topic instead of making a new one...

 

I'm wondering about how to get started on learning more about accounting given two facts : (1) I'm an European and (2) interested in both EU stocks (IFRS) as US stocks (GAAP).

 

Can I just pick up a book like "How to Read a Financial Report: Wringing Vital Signs Out of the Numbers" as a starting place and ignore the differences between GAAP en IFRS? In what way are they different and how much in-depth knowledge will be required on the subject to understand both GAAP and IFRS enough to sufficiently value stocks with different accounting regulations?

 

Thanks!

 

Yes. There aren't that many differences between GAAP and IFRS, and where there are differences they are fairly easy to convert one to the other. They are both trying to serve the same purpose in accurately representing the business, but go about a few things in different ways they deem more appropriate in getting to the same objective.

 

You might as well begin learning IFRS though, if you are at the earlier stages of learning accounting. Be careful reading older books though. There have been some changes over the past 5-10 years in GAAP, and you might be learning outdated info that no longer applies.

[scorpioncapital]

Best text book on accounting? Easy - buy Turbotax Incorporated Edition and prepare a mock return for a company. It can either be your own or get some real world data. This will accelerate your learning ten fold and you will experience all the differences between accounting treatment and tax treatment, as well as learning all the little games you can play to adjust your financial statements.