LIABILITIES OR OVERSTATED ASSETS, HIDDEN IN BROAD DAYLIGHT?
Who really understands how much puffery exists in financial statements and their presentation, although most are legally and GAAP permissible? Think of why quality of earnings audits are so popular, and expensive.
The real danger is that people start drinking the Kool-Aid. This results in poor or catastrophic business decisions. Consider an autopsy of the not-all-that-long-ago Toyota brake fiasco, in creating a checklist to apply to newer potential embarrassed names such as Toshiba, Petrobras or Volkswagen. You will be surprised how often some of that history still resonates.
A contrarian viewpoint of the Toyota brake reserve fiasco may provide useful information for what could assail your organisation. This way, there still is time to identify and resolve these multi-million-dollar blind spots, before you wind up on the front page of local or national publications because of a preventable operational or financial million-dollar blind spot.
Whether your organisation is small or middle-market, or even a major international institution, how many far-too-optimistically, dramatically undervalued liabilities (or unrealistically, overvalued assets) distort crucial financial and operational information needed to make the best business decisions?
This article examines the financial aspects of the Toyota recalls and breaks discussion into three primary points: (i) how soft, squishy accounting numbers may have helped lead to Toyota’s bad management decisions; (ii) how often other organisations can be similarly afflicted; and (iii) how to profit from Toyota’s embarrassment and lessons learned to create tools and form best practices to accelerate personal and corporate opportunities while limiting risks.
Jul-Sep 2016 Issue