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The Mirandolan

Essays and research, newest first

  1. XVIII 6 May 2024 Deferred Tax Assets and Liabilities, an Invested Capital Adjustment Deferred tax accounts arise because of differences in how firms and the government account for taxes. For example, whereas the government uses accelerated depreciation to calculate taxes owed,…
  2. XVII 6 May 2024 Asset Write-Downs, an Invested Capital Adjustment To reverse the adulterating impact of asset write-downs, I add back cumulative after-tax asset write-downs to my calculation of invested capital. Given the computational difficulties of doing so…
  3. XVI 6 May 2024 Accumulated Other Comprehensive Income (OCI), an Invested Capital Adjustment Accumulated other comprehensive income (OCI) is a sea into which various unrecognized gains and losses are poured. In the United States, largely consists of currency adjustments, unrealized gains…
  4. XV 6 May 2024 Discontinued Operations, an Invested Capital Adjustment The logic of discontinued operations is that they are not a component of core operations and therefore, not only do their earnings not belong in a calculation of…
  5. XIV 6 May 2024 Off-Balance Sheet Reserves, an Invested Capital Adjustment Companies create reserves in anticipation of probable future costs or losses whose amounts can be reasonably estimated, as happens with inventory reserves and loan-loss provisions, or, in order…
  6. XIII 3 May 2024 Non-Operating Taxes, a NOPAT Adjustment Taxes incorporate operating, non-operating and financing items. One wants to assess the core operations of a business, free of any financing effects, in order to estimate net operating…
  7. XII 2 May 2024 Foreign Currency Exchange Losses and Gains, a NOPAT Adjustment These are the result of currency revaluations or devaluations and do not appear on the face of the income statement. These currency fluctuations force firms to assume non-recurring…
  8. XI 2 May 2024 Reported Net Non-Operating Charges and Gains, a NOPAT Adjustment Reported net non-operating charges and gains are those non-operating items reported on the face of the income statement. According to the paper, “Core Earnings: New Data and Evidence”…
  9. X 2 May 2024 Employee Stock Option Costs and Goodwill Amortisation, a NOPAT Adjustment The Financial Accounting Standards Board (FASB) eliminated goodwill amortisation from 2002 and the International Accounting Standards Board (IASB) followed in 2005. Before that, goodwill, the capitalised value of…
  10. IX 2 May 2024 Income and Loss from Discontinued Operations, a NOPAT Adjustment Under both IFRS and US GAAP, assets and liabilities held for sale are reported separately on the balance sheet and their income and loss from them, or the…
  11. VIII 2 May 2024 Change in Reserves, a NOPAT Adjustment While operational excellence should be the lodestar guiding managers, there is a great temptation to use reserves to manage earnings. In order to ward off the effects of…
  12. VII 1 May 2024 Pension Plan Costs, a NOPAT Adjustment Firms, in order to attract and retain talent, offer one of two kinds of retirement plans for their workers, the defined benefit plan, and defined contribution plan. A…
  13. VI 30 April 2024 Non-Operating Income Hidden in Operating Earnings, a NOPAT Adjustment Non-operating income is the complement of non-operating expenses, and are special items and one-time earnings that are not reported on the face of the income statement, and are…
  14. V 30 April 2024 Non-Operating Expenses Hidden in Operating Earnings, a NOPAT Adjustment Non-operating expenses, such as asset write-downs, which I discussed in a separate post, are special items and one-time charges that are not reported on the face of the…
  15. IV 30 April 2024 Asset Write-Downs, a NOPAT Adjustment Asset write-downs are nothing short of shareholder destruction. If wealth, as I contend, tends toward destruction in the long run, an investor has two choices: not to invest,…
  16. III 30 April 2024 Operating, Variable and Not-Yet Commenced Leases, and their NOPAT and Invested Capital Adjustments The reader should read this post in conjunction with a Google spreadsheet I have created on Meta Platforms' operating, variable, and not-yet commenced leases. If wealth, as I…
  17. II 24 April 2024 Uncertainty, Information and Digital Firms: a Framework for Understanding Meta Platforms and its Peers What follows is a framework for understanding digital firms, a framework that emerged as I edited an article on Meta Platforms, an article to be posted next week…
  18. I 10 November 2023 The Nature of Risk Risk is inextricably bound up with wealth destruction, and yet, risk measures are agnostic, treating risk as if investors are indifferent to gains and losses. This tortured contradiction…