Financial Statements Demystified 4th Edition
by David Hey-Cunningham
ISBN: 978 1 74114 821 3
Publisher: Allen and Unwin (2006)
Reviewed by: Julie Garland McLellan*
Figures don't lie - that is the cliché. However they can mystify the unwary director to the point where a journey through the accounts is akin to a trip through the looking glass complete with three impossible things before breakfast and always jam tomorrow!
This excellent book by one of Australia's best boardroom level financial trainers will get any director to a level of expertise that allows incisive and insightful reading of even the most complex accounts.
The current edition is accompanied by a CD Rom with Excel spread-sheets that allow directors to practise the concepts outlined in the book until they have a clear view of how different activities and reporting can affect the statements. The foreword by Trevor Sykes is clear and brief and finishes with the observation that failure to grasp the essentials of financial statements is more properly attributed to a lack of interest (or perhaps effort) than any inherent mystique. Whatever the cause, this book is a good remedy.
The book starts at the very beginning and introduces the three basic financial statements with examples of both a successful and a failing business to help make the message clear.
After looking at the regulatory framework the book then dives into its most important work, setting out a good example of financial statements and explaining what must be going on in the business if these are the results. This is followed by an analysis of the different components of the statements. It is the single clearest explanation I have ever found of these basic devices. It is compatible with the international financial reporting standards which will please international readers who are new to the Australian reporting context.
The book then looks at ratio analysis and ways of judging financial performance. There is a section on warning signs and a useful piece on groups and consolidations that will assist directors of companies that are starting to develop complex organisational structures.
The book is demystified without being dumbed down. Complex information is treated in a matter of fact manner; it simply states what needs to be said and resists temptation to veer into obscure, if interesting to accounting cognoscenti, areas.
It is available from Amazon.com.
* Julie Garland McLellan is a professional non-executive director, board and governance consultant and mentor. She is the author of "Presenting to Boards", Dilemmas, Dilemmas: Practical Case Studies for Company Directors, "The Director's Dilemma", "All Above Board: Great Governance for the Government Sector" and numerous articles on corporate strategy and governance.