1. Financial Information Analysis (FIA)
Introduction

2. First impressions versus analysis
Introduction
© Philip O’Regan 2016

3. Financial information
Language of business
Accounting is a “social science”
develops in response to needs of society
can be adapted
no “correct” set of accounting practices
These characteristics confirmed by history
Challenges posed by “information revolution”
Political: interest groups lobby to shape it
Introduction
© Philip O’Regan 2016

4. Political nature Because accounting is a social science it:
responds to needs of society/business
has no “correct”, immutable set of formulae
Interested parties compete to shape practice
e.g., accountants, business, shareholders, etc.
i.e., accounting practice emerges by means of a political process
Fundamental theme of this text
Introduction
© Philip O’Regan 2016

5. Role and impact of financial information
Financial information is a vital means of communication in the modern world
It can impact:
allocation of funds
cost of capital
wealth distribution
company policies in a variety of areas
Introduction
© Philip O’Regan 2016

6. Forms of accounting information
Accounting information takes many forms:
internal, e.g., budgets, forecasts, projections
external, e.g., Annual Report
Annual Report:
fulfils statutory reporting responsibilities
heavily regulated
mix of narrative and financial information
constantly changing
Introduction
Financial Information Analysis

7. Users of accounting information
Wide variety of users
shareholders and investors
financial analysts
management
employees
others
Range reflects importance of accounting information in modern society
Often not feasible to satisfy all
Introduction
© Philip O’Regan 2016

8. Interpreting financial information
Because now so ubiquitous, important to be able to interpret financial information
FIA is an approach to financial information that uses techniques to:
analyze
contextualize
interpret
This facilitates the decision-making process
Introduction
© Philip O’Regan 2016

9. Fundamental analysis One approach to analyzing financial information
Focuses on fundamentals of company
macro/micro-economy
financial performance
trading environment
Uses ratios to identify and extract information
Dominant paradigm in this text
Introduction
© Philip O’Regan 2016

10. Focus of this text
IFRS – issued by International Accounting Standards Board
Must be used in preparation of accounts of EU-listed companies
This text focuses on Annual Reports of these EU-listed companies
(Note: new UK GAAP (FRS ) allows individual companies to limit disclosure)
Introduction
© Philip O’Regan 2016