Financial Fine Print Uncovering a Company’s True Value phần 10 pps

A Brief Walk through Qwest’s Fine Print
173
6. Lists depreciation rates for $19.3 billion in “other network
equipment” as 8 to 57 years, giving management wide dis-
cretion on depreciation. (Note 3, Property, Plant and Equip-
ment)
7. Increases both the discount rate and expected rate of
return on pension assets, which makes plan obligations
look smaller and plan returns look higher. (Note 6,
Employee Benefits)
8. Lists its effective tax rate as 164.3 percent, which is highly
unusual. It also gives numbers for 1999 taxes paid and tax
rate that differ substantially from those included in the
company’s 1999 10-K. (Note 7, Income Taxes)
9. Notes that its reported loss would have doubled if options
expenses has been factored in. (Note 8, Stockholder’s
Equity)
10. Outlines a “round-trip” deal with IBM Corp., where IBM
agrees to purchase $2.5 billion in telecommunications
services from Qwest and Qwest agrees to purchase $2.5 bil-
lion in equipment from IBM. (Note 9, Commitments and
Contingencies)
bapp02.qxd 7/15/03 10:55 AM Page 173
bapp02.qxd 7/15/03 10:55 AM Page 174
175
Chapter 1
1. Arthur Levitt with Paula Dwyer, Take on the Street: What Wall
Street and Corporate America Don’t Want You to Know (New York:
Pantheon Books, 2002), p. 155.
2. Ronald Fink, “The Fear of All Sums” and “Better Numbers?”
CFO: The Magazine for Senior Financial Executives, August 2002,

pp. 34–42.
3. “Stock Fund Managers Focus on Bonds, Accounting,”
Bloomberg News, March 19, 2002.
4. Tyco International, 8-K, December 30, 2002, p. 4.
5. Tyco International, 1998 annual report, p. 38.
Chapter 2
1. “Some Myths Continue on Wall Street,” Dow Jones News
Service, October 23, 2002.
2. “Skilling, Analyst Verbally Butt Heads,” Houston Chronicle, April
18, 2001.
NOTES
bnotes.qxd 7/15/03 10:56 AM Page 175
Notes
176
3. “AOL Time Warner Discloses SEC Probe,” Washington Post, July
25, 2002, p. A1.
4. U.S. Government Accounting Office, “Financial Statement
Restatements: Trends, Market Impacts, Regulatory Responses,
and Remaining Challenges,” October 4, 2002, p. 5.
5. Ibid., p. 17.
6. “Bristol-Myers Lowers Revenue by $2.5 Billion in Restatement,”
The New York Times, March 11, 2003, p. C1.
Chapter 3
1. “Damage Control: How Messier Kept Cash Crisis at Vivendi
Hidden for Months,” The Wall Street Journal, October 31, 2001,
p. A1.
2. Robert J. Bloomfield, “The Incomplete Revelation Hypothesis
and Financial Reporting,” Accounting Horizons, Vol. 16, No. 3,
September 2002, pp. 233–243.
3. “Footnote Trim Meets Mixed Response,” Austin-American

Statesman, October 22, 1995, p. G4.
4. Ibid.
5. Steven Milunovich, “TechStart Barometer,” Merrill Lynch,
April 26, 2002, pp. 5–6.
Chapter 4
1. “‘Pro Forma’ Financial Information: Tips for Investors,” U.S.
Securities and Exchange Commission, December 4, 2001.
bnotes.qxd 7/15/03 10:56 AM Page 176
Notes
177
2. Warren Buffett, annual letter to shareholders, Berkshire
Hathaway 2002 annual report, pp. 3-4.
3. “P&G to Stop Reporting Dual Sets of Results,” The New York
Times, December 13, 2003, p. C4.
4. Arthur Levitt, “The Numbers Game,” speech at New York
University, September 28, 1998.
5. Cynthia A. Glassman, speech to Financial Executives Inter-
national, 2002 annual conference, November 5, 2002.
6. “Ouch! Real Numbers,” Business Week, March 24, 2003, p. 72.
7. “Motorola’s Profit: ‘Special’ Again?” The Wall Street Journal,
October 15, 2002, p. C1.
8. T. J. Rodgers, “When Accountants Attack Profits: The GAAP
Accounting Exodus,” position paper based on speech to
Stanford Directors College, June 3, 2002.
9. “‘Goodwill’ Is Not an Option: Against Accounting Change,”
The Wall Street Journal, Manager’s Journal, March 4, 2003.
10. Russell Lundholm, Jeff Doyle, and Mark Soliman, “The
Predictive Value of Expenses Excluded from Pro Forma
Earnings,” University of Michigan Business School. Working
Paper, April 2002.

11. “Earnings Purity and Stock Performance,” Baseline Financial
Services, April 2003, pp. 7–8.
12. “Pro Forma Earnings: A Critical Perspective,” Bear Stearns &
Co., September 2002, pp. 5-6.
Chapter 5
1. Kodak, 2001 10-K filing, footnote 18, p. 73. March 30, 2002.
2. Bear Stearns & Co., “Employee Stock Option Expense: Is the
Time Right for Change?” July 2002.
bnotes.qxd 7/15/03 10:56 AM Page 177
Notes
178
3. Yahoo! 2001 Annual Report, footnote 8, pp. 58–59.
4. Arthur Levitt with Paula Dwyer, Take on the Street: What Wall
Street and Corporate America Don’t Want You to Know (New York:
Pantheon Books, 2002), p. 11.
5. Warren Buffett, annual letter to shareholders, in Berkshire
Hathaway 1998 annual report, p. 12.
6. Warren Buffett, annual letter to shareholders, in Berkshire
Hathaway 2002 annual report, p. 20.
7. “Lawmakers Ask SEC to Evaluate Options Pricing Model,”
Dow Jones News Service, March 21, 2003.
8. “Senators Introduce Bill to Defer Stock-Option Expensing,”
Dow Jones News Service, April 29, 2003.
9. IBM Corp., 2003 proxy statement, pp. 31–32.
10. “Silicon Valley Fights Fiercely for Options,” San Francisco
Chronicle, November 10, 2002, p. G1.
11. Cisco, 10-Q, November 21, 2002, p. 8.
12. Citizens for Tax Justice, “Less than Zero: Enron’s Income Tax
Payments, 1996–2002,” January 2002.
13. M. Sullivan, “Let the Good Times Roll: Options and Tax-free

Profits,” Tax Notes, May 29, 2000, pp. 1185–1204.
14. Bear Stearns, “Employee Stock Option Expense,” p. 19.
15. FAS 148, “Accounting for Stock-Based Compensation—
Transition and Disclosure,” December 2002.
Chapter 6
1. HealthSouth, 2001 10-K, p. 64.
2. Enron Corp., 1999 annual report, p. 59.
3. FAS 57, “Related Party Disclosures,” March 1982.
4. Enron Corp., proxy statement, March 30, 1999, p. 27.
bnotes.qxd 7/15/03 10:56 AM Page 178
5. WorldCom, proxy statement, June 1, 2000, p. 16.
6. “SEC Charges Adelphia & Rigas Family with Massive
Financial Fraud,” SEC press release, July 24, 2002.
7. “Fallen Founder of Adelphia Tries to Explain,” The New York
Times, April 7, 2003, p. C1.
8. “The TSC Streetside Chat: Adelphia Watcher Oren Cohen,”
TheStreet.com, April 6, 2002.
9. “Family Affairs: Rite Aid Does Business with Firms Linked to
CEO Martin Grass,” The Wall Street Journal, January 29, 1999,
p. A1.
10. Rite Aid Corp., proxy statement, October 24, 2000, p. 31.
11. Tyco International, proxy statement, February 7, 2003, pp.
48–49.
12. HealthSouth, proxy statement, April 12, 2002, p. 13.
13. “My Big Fat Corporate Loan,” The Corporate Library,
December 2002.
14. Hewlett-Packard, 2002 10-K, p. 445.
15. “H-P Severance Curbs Get Holder Support,” The Wall Street
Journal, April 3, 2003, p. B5.
Chapter 7

1. “FASB Members Get Input on Pension Accounting Rules,”
Dow Jones News Service, February 14, 2003.
2. “GM Outlines Objectives for 2003,” GM press release, January
9, 2003.
3. “Beware the Pension Monster,” Fortune, December 9, 2002, p.
99.
Notes
179
bnotes.qxd 7/15/03 10:56 AM Page 179
4. “The Quarterly Report: Second Quarter 2003,” Credit Suisse
First Boston, April 14, 2003, pp. 7–8.
5. “As Steel Industry Consolidates, Workers’ Benefits Begin to
Shift,” The Wall Street Journal, January 13, 2003, p. A3.
6. “Beware the Pension Monster,” Fortune, December 9, 2002, p.
99.
Chapter 8
1. Yahoo!, 2001 annual report, p. 2.
2. Ibid., p. 44.
3. U.S. Bankruptcy Court, Southern District of New York. In re:
Enron Corp. et al., “Second Interim Report of Neal Batson,
Court Appointed Examiner,” January 21, 2003, p. 47.
4. “Tales of the Tape: Expect Some Off-Balance Surprises,” Dow
Jones News Service, February 4, 2003.
5. Citigroup, 2002 10-K, p. 99.
6. GE Capital Corporate Aircraft group web site: www.cefcorp.com/
aircraft/offbalance.htm.
7. Lucent Technologies, 1999 10-K, p. 99.
8. Arthur Levitt with Paula Dwyer, Take on the Street: What Wall
Street and Corporate America Don’t Want You to Know (New York:
Pantheon Books, 2002), p. 149.

9. Lucent Technologies, 1999 10-K, p. 117.
Chapter 9
1. “Gap Grows Between Book and Tax Income,” The Wall Street
Journal, July 16, 2002, p. D4.
Notes
180
bnotes.qxd 7/15/03 10:56 AM Page 180
Notes
181
2. “Enron Cut Tax Bill by $2 Billion in Working Around IRS
Rules,” The Wall Street Journal, February 14, 2003, p. A2.
3. Enron Corp., 1999 annual report, p. 50.
4. General Electric, 2002 10-K, Notes to Consolidated Financial
Statements, p. F-45.
5. Indrani De Basak and Michelle R. Clayman, “Tax Rates and
Stock Returns: An Empirical Analysis of the Information
Content of Corporate Tax Rates,” New Amsterdam Partners
LLC., February 2003, p. 5.
6. Citigroup, 2002 10-K, Glossary of Terms, p. 60.
7. Warren Buffett, annual letter to shareholders, in Berkshire
Hathaway 2002 annual report, pp. 13–15.
8. Ibid.
9. “Divided on Derivatives; Greenspan, Buffett at Odds on Risks
of the Financial Instruments,” Washington Post, March 6,
2003, p. E1.
10. IBM, 2002 10-K, Consolidated Statement of Earnings, p. 64.
11. General Electric, 2002 10-K, Statement of Financial Position,
p. F33.
12. IBM, 2002 10-K, Management’s Discussion and Analysis, p. 52.
13. IBM, 2002 10-K, Notes to Consolidated Statements, Note S,

Subsection E, p. 91.
14. IBM, 2000 10-K, Management’s Discussion and Analysis, p. 57.
15. “Altria Verdict Unnerves Market with Possible Bankruptcy
Filing,” The Wall Street Journal, April 1, 2003.
16. Boeing, 2002 10-K, Notes to Consolidated Financial
Statements, pp. 81–82.
17. Sun Microsystems, 2003 fiscal first quarter 10-Q, p. 13.
18. Caterpillar Corp., 2002 10-K, Notes to Consolidated Financial
Statements, p. A-24.
bnotes.qxd 7/15/03 10:56 AM Page 181
Chapter 10
1. Remarks on signing the Sarbanes-Oxley Act of 2002. Cited in
“Weekly Compilation of Presidential Documents,” August 5,
2002.
2. “Scrushy Tape Played in Court During Hearing,” Reuters,
April 10, 2003.
3. “Do We Really Want to Trash All of That?” The Wall Street
Journal, April 12, 2003. Partial transcript of tape-recorded
conversation between Richard Scrushy and William Owens.
4. “Better Numbers,” CFO: The Magazine for Senior Financial
Executives, August 2002, p. 38.
5. PricewaterhouseCoopers Management Barometer, March 24,
2003.
6. “HealthSouth Ex-Executive Is Charged,” The New York Times,
April 9, 2003, p. C1.
7. HealthSouth, 2002 proxy, p. 7.
8. Ibid., p. 5.
9. Ibid., p. 21.
10. Securities and Exchange Commission, Division of Corpor-
ation Finance, “Summary by the Division of Corporation

Finance of Significant Issues Addressed in the Review of the
Periodic Reports of the Fortune 500 Companies,” February
27, 2003.
11. Paul S. Atkins, speech before the Council of Institutional
Investors, March 27, 2003.
12. Arthur Levitt with Paula Dwyer, Take on the Street: What Wall
Street and Corporate America Don’t Want You to Know (New York:
Pantheon Books, 2002), p. 237.
Notes
182
bnotes.qxd 7/15/03 10:56 AM Page 182
183
Accountants, xii, 8, 12, 131, 147,
154
Accounting:
aggressive, xi, 15–16, 25, 30–33,
113, 135, 163, 166
for goodwill, 16, 61–62
for leases, 28, 125–128
for off-balance sheet obligations,
see Debt, off-balance sheet
for options, see Options, stock,
accounting for
for pensions, see Pensions,
accounting for
rules, see Generally Accepted
Accounting Principles
scandals, xi–xiii, 8–9, 12, 33
taxes, see Footnotes, taxes
Accounting Standards Board,

154, 161
Adelphia Communications, xi,
39, 85, 91–96, 101
Alice’s Adventures in
Wonderland, 103
Airlines, 111, 120–123. See also
specific airlines
Altria Corp., 150
Amazon.com, 54
American Electronics Association,
78
AMR Corp., 111
Analysts, see Stock market,
analysts
Analysts Accounting Observer, 41,
127
Annual reports, 9, 125, 163
AOL Time Warner, 29–30, 61,
134
Apple Computer, 81–82
Arthur Anderson & Co., xii, 32,
170
Association pour la Defense des
Actionaires Minoritaires
(ADAM), 37
Atkins, Paul S., 160
AT&T, 53, 56, 107
Audit committee, 156
183
INDEX

bindex.qxd 7/15/03 10:57 AM Page 183
Bank One, 72–73
Bankruptcy, 111
Bear Stearns & Co., 64, 72, 82,
101, 110
Behind the Numbers, 34, 138
Bemis Co., 89
Berkshire Hathaway, 52, 114, 145
Bethlehem Steel, 111
Black-Scholes model, 72–73,
79–80
Bloomfield, Robert J., 41
Boards of Directors, 2–3
audit committee of, 156
Boeing Corp., 78, 107, 151
Boxer, Barbara, 77
Bradenton Herald, 1
Bristol-Myers Squibb, 32, 159
Brocade Communications, 83
Brooks, Brace, 158
Buffett, Warren, xiii, 52, 76, 79,
106, 114, 124, 145, 164
Burgess, Deanna Oxender, 9
Bush, George W., 154
Cablevision Systems, 93
Capellas, Michael D., 102
Carcache, Bill, 110
Cardinal Health, 55–56
Carnival Corp., 89
Caterpillar Corp., 152

Cendant Corp., 33–34, 54–56,
86–87
Certain relationships/transac-
tions, see Related party trans-
actions
CFO Magazine, 13, 155
Chanos, Jim, 18–22, 24–25,
27–28, 40, 113
Charges:
restructuring, 57–58
special, 34, 49–56, 60–65
Chief executive officers (CEOs),
85, 154
Chief financial officers (CFOs),
57, 108, 124, 147, 154–156
Ciesielski, Jack, 41, 126
Cisco Systems, 28, 79–80
Citigroup, 134, 144, 146
Citizens for Tax Justice, 81
Clayman, Michelle, 144
Cohen, Oren, 96
Commitments and contingencies,
125–127, 134, 149–150. See
also Debt, off-balance sheet
Communication Workers of
America, 118
Compaq Computers, 62, 102
Conference calls, 21
Congress, U.S., xii, 77–78, 84,
130, 135

Continental Airlines, 121–123
Corporate Library, 88, 90, 100
Corporations:
accounting policies, 30–31, 110
earnings of, 3–4, 10
improving disclosure, 9, 11–14,
42–44, 120, 128–129, 146,
148–149, 158, 163
letter to shareholders, 2, 125
manipulating earnings, 15–16,
67
Index
184
bindex.qxd 7/15/03 10:57 AM Page 184
press releases of, 3, 53
Costco Wholesale, 56, 89
Credit Suisse First Boston (CSFB),
108, 110–111, 114, 124
Cypress Semiconductor, 60
David Tice & Associates, 34
Davis, Evelyn Y., 159–160
Debt:
as liability, 111, 125, 130,
137–138
in footnotes, 137–138
off-balance sheet, 125–136, 158,
166
Dell Computers, 106
Deloitte & Touche, 129
Delta Air Lines, 82, 111

Depreciation, 30–31
Derivatives contracts, 106,
144–146
Devine, John, 120
Directors, corporate, see Boards
of Directors
Disclosures:
in footnotes, xi, 11–12, 43, 68,
128–129, 134–135, 148–150,
166–168
confusing, 11, 67, 46, 51,
53–55, 58, 62, 65, 67–68, 88,
125–126, 157, 164
Dow Jones & Co., 159
Dow 30, 13–14, 67
Durbin, Patrick C., 84
Earnings:
clarity of, 63–64
diluted, 69–70, 75, 80
estimates of, 50, 124
operating, 9, 49, 63
per share (EPS), 82
pro forma, 4, 9, 40, 49–54, 57,
60, 68
as reported, 49–50, 74–75
restating of, 8, 31–32, 98
Eastman Kodak, 56, 67–68, 117
Ebbers, Bernard, 99
EBITDA, 4
Edison International, 56

Employees:
salaries of, 69, 76
stock options of, 69–70, 76
Enron Corp.:
accounting scandal, 9, 19, 32,
39, 45
bankruptcy of, 12, 19
footnotes and, 11–12, 18, 20,
22–25, 28–29, 89, 135
pension obligations, 26
proxy, 25, 90–91
reforms stemming from,
127–130, 149
related party transactions,
xi–xii, 24–25, 90–91
short sellers, 18–21, 24
taxes, 81, 142
Ensign, John, 77
Federated Investors, 13
FedEx, 119
Fender, Liz, 27, 82, 84
Fidelity Investments, 40
Index
185
bindex.qxd 7/15/03 10:57 AM Page 185
FIN 46, see also Debt, off-balance
sheet
Financial Accounting Standard
(FAS), 87. See also Financial
Accounting Standards Board

(FASB), pensions
Financial Accounting Standards
Board (FASB):
options, 68, 76, 78–79, 84, 158
pensions, 103, 115, 122
related party transactions,
88–90, 127–128, 130–131, 158
Financial press, 50, 53, 64. See also
specific publications
Financial statements:
audited, 3, 17–18
balance sheet, 18, 109,
125–126, 129, 134
cash flow statement, 18
income statement, 31, 76, 103,
105
understanding, xii
First Call, see Thomson Financial,
First Call
Footnotes, see also Disclosures, in
footnotes; Pensions, footnotes
elimination of, 42
hidden meanings in, 1–3, 5, 10,
12, 16–18, 51, 125
related party transactions, 86,
158
segment breakdown, 151–152
significant accounting policies,
30–31, 46
stock options, 75, 78

taxes, 140–144
tips on reading, 15, 27–29, 51,
70, 87, 105, 129, 165–168
Ford Motors, 107, 112
Fortune magazine, 107
Fortune 500, 157
Fortune 1000, 61
Gateway Computers, 87
Generally Accepted Accounting
Principles (GAAP):
assumptions, 10, 15–18, 33, 60
criticism of, 60
defined, 15
individual investors and, 16
manipulation of, 53, 67–68,
140–144
reliability of, 3–4, 15–16, 51
General Accounting Office,
31–32
General Electric Corp., 12, 42,
45, 106–107, 118, 135, 143,
146–147, 159
General Motors Corp., 11, 46,
104, 106–107, 110, 112–113,
115, 123–124
General Re Securities, 145
Gilbertson, Robert, 78
Glassman, Cynthia A., 58, 65
Global Crossing, 143–144
Golden Funding Corp., see

McDonald’s Corp.
Goldman Sachs, 39
Goodwill, 16, 61–62
Grass, Alex, 97
Grass, Martin L., 97
Index
186
bindex.qxd 7/15/03 10:57 AM Page 186
Great Depression, 107
Green Eyeshade Report, 29
Greenspan, Alan, 76
Grubman, Richard, 21
Gulliver, Bruce, 50
Halford, Dave, 47, 118, 124,
127–128
Harrah’s Entertainment, 56
HCA Inc., 55–56, 89
Healthcare costs, 112
HealthSouth Corp:
accounting scandal, xi, 39–40,
85, 154–156
related party transactions, 88,
99, 156–157
Herz, Robert H., 103, 108
Hewlett-Packard, 62, 102
Highfields Capital Management,
21
Hodgson, Paul, 90, 102
Home Depot, 28, 100, 102
Income:

net, 4, 104, 116–117, 130, 166
operating, 50, 104, 116,
118–119
other, 147–149
pro forma, see Earnings, pro
forma
In Focus, 21, 53, 62, 72–73,
78–79, 83, 112, 120–121, 136
Inktomi, 136
Internal Revenue Service (IRS),
140–142
International Accounting
Standards Board, 84
International Business Machines
(IBM), 71, 77, 106–107, 110,
118, 146–149
International Employee Stock
Option Coalition, 80
Investors, individual:
ignoring warning signs, xi–xii,
4, 12, 40, 50, 54–55, 90, 157
new, 3, 8–9
reading SEC filings, 15–17, 22,
34–35, 40, 46–47, 88–89,
151–152, 156–157, 165–168
researching stocks, xiii, 4–10,
20, 40–44, 61–62
skepticism of, xi, 8–9, 65,
155–157
trading online of, 3–4, 7

Investors, institutional:
ignoring footnotes, 12–13, 92
pairing with individual
investors, 38, 77, 118
reading footnotes, 10, 13,
17–19, 82, 92, 105
researching stocks, 34–35, 55,
134–135
Jefferson Research, 50
JP Morgan Chase, 146
Key Florida Bank, 1–3
King, Alfred, 62
Kodak, see Eastman Kodak
Kozlowski, Dennis, 86–87, 99
Kraft Foods Inc., 150
Index
187
bindex.qxd 7/15/03 10:57 AM Page 187
Kroger Co., 55–56
Kynikos Associates, 20
Lalla, Bakul, 44
Lamont, Owen A., 21
Lay, Kenneth, 91
Lay, Sharon, 91
Leisenring, Jim, 68, 75–76, 78–79,
84
Levin, Carl, 79
Levitt, Arthur, 10, 57, 76, 138, 161
Lieberman, Joseph, 78
Lockheed Martin, 107, 117

Loan guarantees, xi, 85, 87,
99–101
Longnecker, Mel, 43
Lott, Ronald, 130–132
LTV Corp., 111
Lucent Technologies, 26, 33, 107,
137–138, 160
Lundholm, Russell, J., 63
Madden, J. Thomas, 13
Madison Investment Advisors, 46,
118, 127
Materiality, 88, 97
McConnell, Pat, 31, 72, 110, 116
McDonald’s Corp., 106, 132–134
Meadwestvaco, 117
Mergers and acquisitions, 16, 52
Merrill Lynch, 45, 82
Messier, Jean-Paul, 39
Microsoft Corp., 73, 81
Milunovich, Steve, 45
Millionaire Next Door, xiii
Middleswart, Jeff, 34, 138
Moody’s, 111, 126
Morgan Stanley, 160
Mosaic Fund Group, 46, 118, 127
Motorola, 55, 60
Mountain, Jim, 129
Mulligan, Tim, 29
Munger, Charlie, 145
Nardelli, Robert, 100

National Automatic Sprinker
Industry Pension Plan, 77
National Steel, 110
Navistar International, 113
New Amsterdam Partners,
143–144
Newell Rubbermaid, 56
Neuville, Colette, 37–40, 46
Northrup Grumman, 117
Notes to Consolidated
Statements, see Footnotes
Numbers Game speech, 57–58
Office of Thrift Supervision, 2–3
Oglove, Thornton “Ted,” xi–xiii,
15, 25, 105, 141–142
Olstein, Robert, 25–27, 35, 81,
113, 140–144, 146, 148, 162
One-time charges, see Special
charges
Online trading, 3–4
Operating income, see Income,
operating
Index
188
bindex.qxd 7/15/03 10:57 AM Page 188
Operating leases, see Accounting,
for leases
Options, stock:
accounting for, 68–69, 72–74,
79–80, 166

debate over expensing, 68–69,
76–79, 158
defined, 69
earnings dilution, 69–70, 75,
80–82
footnotes, 75, 78
reforms, 68, 84
Six months and a day rule, 83
stock market bubble, 76
tax benefits of, 69, 80–81
underwater, 82–83
Other income, 147–149
Other post-employee benefits
(OPEB), 112
Owens, William T., 155
Palmetto Savings and Loan, 1
Peck, Jeff, 80
Pension Benefit Guaranty Corp.
(PBGC), 110
Pensions:
accounting for, 26–27, 103–106,
108–111, 115–116, 118,
120–123, 167
benefits, 106
Enron, 26
footnotes and, 15, 26–27,
104–105, 120–123
net income, 116–117
operating income, 118–119
overfunded, 110

rate of return, 104, 113–115,
119, 123–124
reforms, 103, 108
shareholder resolutions, 118
tax benefits of, 104, 110
underfunded, 108–111,
122–123
Perez, Ronald, 64
Pfizer, 28
Phillip Morris Cos., 150
Powell, Dennis, 79
Price to earnings ratio (P/E), 55
PricewaterhouseCoopers, 156
Proctor & Gamble, 57, 99
Pro forma accounting standards
board, 60
Prospectus, 44
Profit and loss statement, 18
Proxy statements, 12, 156, 165,
168
Quality of earnings, xii–xiii, 15, 25
Qwest Communications:
earnings assumptions, 33
pro forma earnings, 4, 53
10-K form, 4, 33, 53, 169–173
Raytheon Corp., 91, 117
Red flags, 20, 24, 26, 31, 54, 55,
74, 90, 91, 93, 97, 116, 132,
143, 145, 148, 151
Related party transactions:

at Adelphia, 92–95
Index
189
bindex.qxd 7/15/03 10:57 AM Page 189
arm’s-length transactions, 86,
88–90
bigger deals, 90–91
defined, 85–86, 88–90
at Enron, xi–xii, 24–25, 90–91
footnotes, 86, 158
at HealthSouth, 88, 99, 156
proxy statements, in, 86–87, 89
at Rite Aid, 97–99
self-dealing, 91–92, 156–157
at Tyco, 99–100
at Worldcom, 91, 99–100
Research and development, 28,
128, 135
Restructuring charges, 57–58
Revenue recognition, 29–32, 167
Rigas, Ellen, 94
Rigas, John J., 92–94
Rigas, Michael J., 94
Rigas, Timothy, 94
Rigas, James P., 94
Rite Aid Corp, 88, 97–99
Roberts, Bert C., 91
Rodgers, T.J., 60
Ryan Labs, 107–108
Ryan, Ron, 107–108

Sarbanes-Oxley Law, 58, 87, 100,
130–131, 154–157
Savings and loan crisis, 1
Scrushy, Richard, 99, 154–156
Search tips, 51, 70, 87, 105, 129,
137, 141, 147, 149
SBC Communications, 107
Securities and Exchange
Commission (SEC):
commissioners, 58, 65, 160
Corporation Finance Division,
59, 157
criminal charges, 16
enforcement actions, 30, 32, 92
EDGAR database, 165
Enron and, 127
individual investors and, 42,
109
investigations and, 30, 154–155
new rules, 51, 130–131, 158
pro forma earnings, 52, 64–65
shareholder proposals, 77, 160
special charges, 58–59, 64
web site, 17, 165
10-K form, see 10-K form
10-Q form, see 10-Q form
Semel, Terry, 125
Shareholders:
equity of, 110, 120–123
resolutions, 42, 77, 102, 118,

159–161
Short selling, 20–22, 27
Skilling, Jeffrey, xii–xiii, 19–20
Spacek, Leonard, xii
Special charges, 34, 49–56, 60–65
Special purpose entities, 25,
127–129, 158
Standard & Poor’s rating service,
111, 126, 135
Standard & Poor’s 500, 61–62,
72, 106, 110, 113–114, 124,
143
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Stanley, Carol, 59
Steel industry, 111
Strable, Gerard, 43
Stock market:
analysts, 3, 8, 10, 12, 40, 50, 56,
84, 115, 152
bubble of, xii, 3, 7–8, 43, 54,
74–76, 108, 125–126, 135–136
returns and, 63, 104, 106, 113
Strong Opportunity Fund, 13, 16,
151, 158
SunBeam, 143
Sun Microsystems, 42, 56, 106, 151
Swartz, Stephen, 86–87, 99
Synthetic lease, see Debt, off-

balance sheet
System Capital Corp., see
McDonald’s Corp.
Taxes, see Footnotes, taxes
10-K form, 1, 9
availability of, 9–10, 17, 50–51,
165
comparing competitors, 28, 93
complexity of, 4–5, 16–17,
44–45, 129
individual investors, 17, 40,
109, 129, 163–164, 167
Management’s Discussion and
Analysis, 10, 46, 109, 120,
129, 131, 148–149
Notes to Consolidated
Statements, xi–xii, 10, 12–14,
17, 42–44
tracking changes, 28–29, 44–45,
129, 132–134, 166
10KWizard.com, 17, 165
10-Q form, 1, 9–10, 16–17, 129,
165–166
TIAA-CREF, 27
Third Avenue Value Fund, 28,
156
Thomson Financial
Baseline, 52, 63–64
First Call, 50, 124
Tice & Associates, 34

TRW, 117
T. Rowe Price, 158
Turner, Lynn, 12, 30, 41, 45,
61–62, 135, 146, 153–154, 157
Tyco International:
accounting scandal, 16, 39, 85,
101
aggressive accounting, xi, 16,
28, 58, 88
criminal charges against, 86–87
footnotes, 43–44,
special charges, 56
United Airlines, 111
US Air, 111
Valuation Research, 61–62
Variable interest entities,
129–130, 158
Verizon, 107, 117
Vivendi Universal, 37–39
Warning signs, 15
Wall Street Journal, 53, 98, 112,
159
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Waste Management, 32, 56
Weiss, Dick, 13, 16, 40, 151–152,
158
Weyerhauser, 56, 117, 119
Whitman, Marty, 17–18, 28, 30,

35, 156
Winn-Dixie Stores, 78
WorldCom, 53
accounting scandal, xi, 9, 39,
58, 85, 101
footnotes, 44
one-time charges, 61
related party transactions, 91,
101
Yahoo!, 55, 74, 125–126, 134, 136
Young, Beth, 88, 91
Zacks Investment Research, 55
Zacks, Mitch, 55
Zion, David, 110–111, 124
Index
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