Files & Resources: youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-US-GAAP-vs-IFRS-Slides.pdf youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-US-GAAP-vs-IFRS.xlsx youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-EasyJet-Financial-Statements.pdf youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Vivendi-Key-Extracts.pdf youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Target-Financial-Statements.pdf youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Telstra-Financial-Statements.pdf youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Tencent-Financial-Statements.pdf Table of Contents: 0:00 Introduction 3:07 Part 1: Differences on the Financial Statements 8:14 Part 2: How to “Convert” IFRS Cash Flow Statements 14:45 Part 3: Leases, Valuation Multiples, and the DCF Analysis 21:31 Part 4: More Advanced Topics 23:33 Recap and Summary
i didn't get why operating lease is accounted just as an expense in the ASC 842 and not as depreciation & amortization (RoU)+ interest, because since 15 Dicember 2021, I think IFRS 16 and ASC 842 are very similar and in your video gonna change the entire speech.
I'm not sure what you're referring to because everything here reflects ASC 842 and IFRS 16, both of which went info effect for many companies in 2019. The treatment of leases is quite different *on the financial statements* because under U.S. GAAP, companies record the Operating Lease Expense as "Rent" or a simple straight-line expense on the Income Statement. But under IFRS, they split it into Interest and Depreciation elements, so effectively Operating Leases and Finance Leases are treated the same way. Feel free to verify this by looking at the statements of any U.S. vs. international company. Behind the scenes, off the financial statements, the ROU Asset and Lease Liability on U.S. GAAP financial statements *change* the same way, i.e., by calculating Lease Depreciation, Lease Interest, and Lease Principal Repayments, and carrying them through those Balance Sheet line items. But you do not see any of that directly on the statements, at least not for Operating Leases. Please see: mergersandinquisitions.com/lease-accounting/
Just to clarify, in US GAAP, if we consider operating lease in the WACC calculation, we could no longer use EBITDA in order to calculate enterprise value, but would need to use EBITDAR. Then deduct lease liability from enterprise value to get the fair market value of equity ? what would be the easiest way, to include lease liability or exclude from the debt structure ? thanks !
Yes, that is correct, but you are mixing and matching some concepts that don't really go together - if you're calculating WACC, you're valuing a company with a DCF, not with simple multiples. So this EBITDA vs. EBITDAR distinction doesn't really matter. The easiest method, by far, is to simply not count the lease liability in the bridge and not add it to Enterprise Value. That simplifies everything, makes WACC easier to calculate, and it means you can use normal EBITDA and EBITDA multiples. Treating leases as "capital" adds nothing and over-complicates the analysis for no gains.
it's hard to convert from direct to indirect method of cashflow in my country because the accounting policy is almost based on IFRS and most public companies don't provide reconciliation on financial statements. Any solutions?
Unfortunately, there are no great solutions if the companies do not provide reconciliations. The best you can do in that case is to make your own estimates based on the Balance Sheet (calculate the Change in WC manually based on the changes in each BS line item) and try to approximate the other items in Cash Flow from Operations like that. You will probably need some type of "plug" or "adjusting entry" to make everything line up.
It's because the company is adjusting CFO to reflect the net interest expense if it starts CFO with something like Operating Income rather than Net Income. Although interest if financial in nature, most companies do deduct it from their Cash Flow from Operations.
![Working Capital and the Change in Working Capital in Valuation and Financial Modeling [REVISED]](http://i.ytimg.com/vi/tMgty8jwmHI/mqdefault.jpg)
![Working Capital and the Change in Working Capital in Valuation and Financial Modeling [REVISED]](/img/tr.png)
![What is Free Cash Flow? [REVISED] Meaning, Calculations, Variations, and IFRS Differences](http://i.ytimg.com/vi/A1lS4KnANBw/mqdefault.jpg)
Files & Resources:
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-US-GAAP-vs-IFRS-Slides.pdf
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-US-GAAP-vs-IFRS.xlsx
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-EasyJet-Financial-Statements.pdf
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Vivendi-Key-Extracts.pdf
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Target-Financial-Statements.pdf
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Telstra-Financial-Statements.pdf
youtube-breakingintowallstreet-com.s3.amazonaws.com/105-25-Tencent-Financial-Statements.pdf
Table of Contents:
0:00 Introduction
3:07 Part 1: Differences on the Financial Statements
8:14 Part 2: How to “Convert” IFRS Cash Flow Statements
14:45 Part 3: Leases, Valuation Multiples, and the DCF Analysis
21:31 Part 4: More Advanced Topics
23:33 Recap and Summary
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This was excellent! And the supplemental materials also fantastic! 🙏
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Very good explained. İf possible can we have the Excel file for the download? Many thanks.
Thanks. If you click "Show More" under the video and follow the links, you can get the files.
i didn't get why operating lease is accounted just as an expense in the ASC 842 and not as depreciation & amortization (RoU)+ interest, because since 15 Dicember 2021, I think IFRS 16 and ASC 842 are very similar and in your video gonna change the entire speech.
I'm not sure what you're referring to because everything here reflects ASC 842 and IFRS 16, both of which went info effect for many companies in 2019.
The treatment of leases is quite different *on the financial statements* because under U.S. GAAP, companies record the Operating Lease Expense as "Rent" or a simple straight-line expense on the Income Statement. But under IFRS, they split it into Interest and Depreciation elements, so effectively Operating Leases and Finance Leases are treated the same way. Feel free to verify this by looking at the statements of any U.S. vs. international company.
Behind the scenes, off the financial statements, the ROU Asset and Lease Liability on U.S. GAAP financial statements *change* the same way, i.e., by calculating Lease Depreciation, Lease Interest, and Lease Principal Repayments, and carrying them through those Balance Sheet line items. But you do not see any of that directly on the statements, at least not for Operating Leases. Please see:
mergersandinquisitions.com/lease-accounting/
@@financialmodeling oh Sorry, I gotcha just now, thank you!
Just to clarify, in US GAAP, if we consider operating lease in the WACC calculation, we could no longer use EBITDA in order to calculate enterprise value, but would need to use EBITDAR. Then deduct lease liability from enterprise value to get the fair market value of equity ? what would be the easiest way, to include lease liability or exclude from the debt structure ? thanks !
Yes, that is correct, but you are mixing and matching some concepts that don't really go together - if you're calculating WACC, you're valuing a company with a DCF, not with simple multiples. So this EBITDA vs. EBITDAR distinction doesn't really matter.
The easiest method, by far, is to simply not count the lease liability in the bridge and not add it to Enterprise Value. That simplifies everything, makes WACC easier to calculate, and it means you can use normal EBITDA and EBITDA multiples. Treating leases as "capital" adds nothing and over-complicates the analysis for no gains.
it's hard to convert from direct to indirect method of cashflow in my country because the accounting policy is almost based on IFRS and most public companies don't provide reconciliation on financial statements. Any solutions?
Unfortunately, there are no great solutions if the companies do not provide reconciliations. The best you can do in that case is to make your own estimates based on the Balance Sheet (calculate the Change in WC manually based on the changes in each BS line item) and try to approximate the other items in Cash Flow from Operations like that. You will probably need some type of "plug" or "adjusting entry" to make everything line up.
watching it :)
Thanks for watching!
Do u Have any website for downloading the supporting excel sheets used in ur videos? Ur work is enlightening. Keep it Up!
Click "Show More" and scroll down to click the links and download the Excel files.
I try to find documents about US GAAP. Could you please share or give a help?
Sorry, not sure what you are asking for... you can do Google searches to find documents from the Big 4 accounting firms.
Tell me please, why interest expense and other income from non-core business activity is a part of CFO?
is it operating activity?
It's because the company is adjusting CFO to reflect the net interest expense if it starts CFO with something like Operating Income rather than Net Income. Although interest if financial in nature, most companies do deduct it from their Cash Flow from Operations.
You will know why if your investing universe are debt intensive companies.....
could you please share the excel file in your video?
Click "Show More" and click the links.
@@financialmodeling thank you