tailieunhanh - The financial numbers game detecting creative accounting practices phần 10

THE FINANCIAL NUMBERS GAME been reported in the investing section of the cash-flow statement, operating cash flow in 1999 would have been $ billion, or 16% higher than the $ billion reported. Excluded from this discussion of the tax effects of the gain on sale is the fact that operating cash flow for the years 1997, 1998, and 1999 actually include the cash provided by operations of the divested unit. The amount of operating cash flow generated by that company prior to its disposal was not disclosed in the IBM annual report. In the absence of such a disclosure, calculating it. | The Financial Numbers Game been reported in the investing section of the cash-flow statement operating cash flow in 1999 would have been billion or 16 higher than the billion reported. Excluded from this discussion of the tax effects of the gain on sale is the fact that operating cash flow for the years 1997 1998 and 1999 actually include the cash provided by operations of the divested unit. The amount of operating cash flow generated by that company prior to its disposal was not disclosed in the IBM annual report. In the absence of such a disclosure calculating it would not be practical. When gains are reported on transactions that are not part of operations operating cash flow is reduced by any income taxes paid on the gains. The situation is reversed when losses are recognized on nonoperating transactions. Here income tax benefits serve to bolster operating cash flow. For example a loss on the sale of investments or fixed assets would be removed from net income on a pretax basis in calculating operating cash flow. The proceeds from sale would be included with cash flow from investing activities. The tax savings from the loss would increase operating cash flow by reducing income taxes paid. In 1999 Federal Mogul Corp. recorded an after-tax loss on the early retirement of debt in the amount of million. That year the company correctly reported the loss as an extraordinary item on its income statement. On its statement of cash flow the pretax loss was added back to net income in calculating cash provided by operating activities. That pretax loss million indicates that the debt retirement transaction saved the company million in income taxes paid during the year million pretax gain less million after-tax gain . That million in income tax savings boosted operating cash flow for the year by approximately 7 million in tax savings as a percentage of operating cash flow before the tax savings of million .15 Adjusting .