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Nikhil Bhagia, Research Associate, Multi Act

Quality of Earnings

Taking Management Estimates with a Pinch of Salt

By | Quality of Earnings | No Comments
Though much of the financial statement reporting is governed by prevailing accounting standards, the management of a company has certain leeway in terms of making certain assumptions and discretion’s, which does have a bearing on reported fundamentals.

One such management discretion or estimation is with respect to the useful life of an asset which would have a bearing on Depreciation & Amortization expense reported in the income statement, and can thus impact the reported profits.

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