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Financial literacy for lawyers and directors

Course objective

This 1-day seminar is designed to give lawyers and company directors a clear understanding of the language and meaning of corporate and organisational finance

Every participant will receive a copy of ‘Financial literacy for Lawyers and Directors’ by Andrew McRobert and Ronnie Hoffman, published by Thomson-Reuters

Why is this seminar needed?
A significant proportion of a corporate financial statement relies on the judgement of an accountant. It is important to know how, when where and why that judgement is exercised.

Directors

    1. If directors of a company cannot understand financial statements and reports, how can they be considered to be able to monitor the performance and position of the company?
    2. If directors of a company cannot understand financial statements and reports, how can they know if the company is drifting towards insolvency?
    3. If the company becomes insolvent, directors can (and often are) held personally liable for debts incurred by the company after the date that the state of insolvency started

Lawyers

    1. Lawyers are almost all proprietors of businesses. Points 1-3 apply to them also.
    2. Lawyers are frequently appointed non-executive directors of companies. Points 1-3 apply to them also.
    3. There are occasions when lawyers are retained to advise company directors on the management of a deteriorating financial position.
    4. Lawyers are also frequently responsible for drafting or reviewing loan and associated documents. If they do not understand the financial terminology, how can they draft or review effective loan covenants?

What does the seminar cover?
There are three elements to understanding financial statements:

    1. Element 1 - Understanding how financial statements are assembled; what are the underlying concepts; how these concepts translate into accounting policies; how the accounting policies affect figures in the 3 key documents; what are the 3 key documents - the balance sheet, the income statement and the cash flow statement?
    2. Element 2 - Extracting detailed financial understanding from the financial statements by ratio analysis and cash flow analysis
    3. Element 3 - Understanding precisely what the financial statements are saying – and not saying through interpretation of the ratios, the three key financial statements and the readers’ knowledge of the industry.

This seminar addresses elements 1 & 3, on the assumption that readers will have somebody who can carry out element 2 on their behalf. However, the seminar provides enough information and understanding to enable participants to undertake element 2 after completion of the seminar.

The material is presented through a combination of formal presentation, interactive discussion and group work. During the course of the seminar, participants will work through the 2010 financial statements of an Australian publicly listed company.

The seminar will make reference to the current International Financial reporting Standards (‘IFRS’) and the Australian application of IFRS. However, participants from non-IFRS countries can also participate, because Element 1 is designed to enable participants to understand the purpose of accounting concepts and policies, regardless of the actual level of sophistication of those policies in their respective countries.

Course content
Demystifying the 3 critical documents:

    1. Balance sheet
    2. Income Statement ( or P&L account)
    3. Cash flow statement

A walk through the basic accounting concepts.

Applying these concepts to accounting principles – an overview.

A closer examination of the Income Statement including:

    1. Statutory profit
    2. Profit after capital charge
    3. Defined operating profit
    4. Sustainable operating profit

A walk through the Balance Sheet:

    1. Current assets
    2. Noncurrent assets
    3. Current liabilities
    4. Noncurrent liabilities
    5. Shareholders’ funds

A walk through the cash flow statement:

    1. The cash flow statement required by accounting standards
    2. A better form of cash flow analysis
    3. Sustainable operating cash flow

Is there anything of interest in the notes?

What indicators of financial performance and financial position are readers of financials looking for?

    1. Gearing (leverage)
    2. Liquidity
    3. Performance
    4. Asset & liability quality
    5. Market indicators
    6. Cash flow indicators

A brief look at some common forms of cosmetic accounting.

contact details

South Africa: +27 82 447 4256

Australia: +61 402 048 326

E-mail: amra@amcrobertandassocs.com.au