I really like the Christmas season it’s a holiday season it provides a nice time
a holiday season it provides a nice time
a holiday season it provides a nice time to reflect on what’s gone on over the
to reflect on what’s gone on over the
to reflect on what’s gone on over the past year it’s a nice way to enjoy our
past year it’s a nice way to enjoy our
past year it’s a nice way to enjoy our friends and relax with them and it’s a
friends and relax with them and it’s a
friends and relax with them and it’s a time where we can at least try to enjoy
time where we can at least try to enjoy
time where we can at least try to enjoy time with our families there’s usually
time with our families there’s usually
time with our families there’s usually gorgeous displays in the windows at
gorgeous displays in the windows at
gorgeous displays in the windows at Macy’s in New York City same in London
Macy’s in New York City same in London
Macy’s in New York City same in London here in here in London at Harrods as
here in here in London at Harrods as
here in here in London at Harrods as beautiful windows that remind us of the
beautiful windows that remind us of the
beautiful windows that remind us of the fantasies of Christmas and even the
fantasies of Christmas and even the
fantasies of Christmas and even the National Christmas tree in Washington DC
National Christmas tree in Washington DC
National Christmas tree in Washington DC against the Capitol building provides us
against the Capitol building provides us
against the Capitol building provides us an modicum of hope in these troubled
an modicum of hope in these troubled
an modicum of hope in these troubled times Christmas the holiday season can
times Christmas the holiday season can
times Christmas the holiday season can be really lovely one other aspect I
be really lovely one other aspect I
be really lovely one other aspect I really like about the holiday season
really like about the holiday season
really like about the holiday season though our Christmas cards I enjoy
though our Christmas cards I enjoy
though our Christmas cards I enjoy getting Christmas cards from family and
getting Christmas cards from family and
getting Christmas cards from family and friends all over the world it’s nice to
friends all over the world it’s nice to
friends all over the world it’s nice to reconnect with people’s whose lives I’ve
reconnect with people’s whose lives I’ve
reconnect with people’s whose lives I’ve intersected with at least at some point
intersected with at least at some point
intersected with at least at some point but something happened in the 1990s we
but something happened in the 1990s we
but something happened in the 1990s we all got personal computers and we also
all got personal computers and we also
all got personal computers and we also got printers so now we have instead of
got printers so now we have instead of
got printers so now we have instead of having to handwrite all of our Christmas
having to handwrite all of our Christmas
having to handwrite all of our Christmas cards at least in the United States what
cards at least in the United States what
cards at least in the United States what a lot of people have done is done tailor
a lot of people have done is done tailor
a lot of people have done is done tailor made letters to provide greetings for
made letters to provide greetings for
made letters to provide greetings for the holiday season and I refer to these
the holiday season and I refer to these
the holiday season and I refer to these as Christmas letters okay Christmas
as Christmas letters okay Christmas
as Christmas letters okay Christmas letters when they come in the mail you
letters when they come in the mail you
letters when they come in the mail you can spot them a mile away because
can spot them a mile away because
can spot them a mile away because they’re usually in a nice brightly
they’re usually in a nice brightly
they’re usually in a nice brightly colored envelope they have perfectly
colored envelope they have perfectly
colored envelope they have perfectly calligraphy addresses on them they have
calligraphy addresses on them they have
calligraphy addresses on them they have little stickers to separate them and
little stickers to separate them and
little stickers to separate them and seasonal postage up in the right-hand
seasonal postage up in the right-hand
seasonal postage up in the right-hand corner they look beautiful when they
corner they look beautiful when they
corner they look beautiful when they come and what’s the first thing you see
come and what’s the first thing you see
come and what’s the first thing you see when you open one of these letters the
when you open one of these letters the
when you open one of these letters the family photo okay
family photo okay
family photo okay don’t they all look happy do you think
don’t they all look happy do you think
don’t they all look happy do you think do you think all seven count them seven
do you think all seven count them seven
do you think all seven count them seven of these people are this happy all year
of these people are this happy all year
of these people are this happy all year long
do you think they wear those cute little
do you think they wear those cute little dresses and those cute little suits with
dresses and those cute little suits with
dresses and those cute little suits with their ties every day no well in addition
their ties every day no well in addition
their ties every day no well in addition to this beautiful picture there’s also
to this beautiful picture there’s also
to this beautiful picture there’s also the letter hey read along with me for
the letter hey read along with me for
the letter hey read along with me for one of the letters well what these
one of the letters well what these
one of the letters well what these letters are like dear beloved friends
letters are like dear beloved friends
letters are like dear beloved friends things are going smashingly on all
things are going smashingly on all
things are going smashingly on all fronts for our family the children of
fronts for our family the children of
fronts for our family the children of course continued to be the highlights of
course continued to be the highlights of
course continued to be the highlights of the story this would be a book if I
the story this would be a book if I
the story this would be a book if I listed all their accomplishments so I’ll
listed all their accomplishments so I’ll
listed all their accomplishments so I’ll just give you the highlights and then
just give you the highlights and then
just give you the highlights and then they go on to tell us about little
they go on to tell us about little
they go on to tell us about little Dalton okay little Dalton is now 17 he’s
Dalton okay little Dalton is now 17 he’s
Dalton okay little Dalton is now 17 he’s finished all of his college applications
finished all of his college applications
finished all of his college applications for early decision and he’s just
for early decision and he’s just
for early decision and he’s just fretting over whether how to choose
fretting over whether how to choose
fretting over whether how to choose between MIT and Princeton what a dilemma
between MIT and Princeton what a dilemma
between MIT and Princeton what a dilemma and his little sister Astrid 15 is
and his little sister Astrid 15 is
and his little sister Astrid 15 is apparently turning into quite the beauty
apparently turning into quite the beauty
apparently turning into quite the beauty ready to compete in the Miss America
ready to compete in the Miss America
ready to compete in the Miss America contest so we need to stay tuned to see
contest so we need to stay tuned to see
contest so we need to stay tuned to see if she’s there next year even though
if she’s there next year even though
if she’s there next year even though she’s a little underage but you know
she’s a little underage but you know
she’s a little underage but you know she’s perfect and then goes on to talk
she’s perfect and then goes on to talk
she’s perfect and then goes on to talk about this my husband I’ve had
about this my husband I’ve had
about this my husband I’ve had outstanding years of work we never knew
outstanding years of work we never knew
outstanding years of work we never knew bonuses could be so big okay in addition
bonuses could be so big okay in addition
bonuses could be so big okay in addition to my charity work in Sierra Leone my
to my charity work in Sierra Leone my
to my charity work in Sierra Leone my fundraising my organic garden yoga
fundraising my organic garden yoga
fundraising my organic garden yoga classes and beekeeping I still find time
classes and beekeeping I still find time
classes and beekeeping I still find time to be president of the PTA
to be president of the PTA
to be president of the PTA treasurer for the local National Rifle
treasurer for the local National Rifle
treasurer for the local National Rifle Association and secretary of the gated
Association and secretary of the gated
Association and secretary of the gated community security committee hmm we had
community security committee hmm we had
community security committee hmm we had to say goodbye to my husband’s mother
to say goodbye to my husband’s mother
to say goodbye to my husband’s mother but we just rejoiced in the long life
but we just rejoiced in the long life
but we just rejoiced in the long life that she lived so from our home to yours
that she lived so from our home to yours
that she lived so from our home to yours have a blessed holiday season we’ll be
have a blessed holiday season we’ll be
have a blessed holiday season we’ll be praying for you miss miss so when I read
praying for you miss miss so when I read
praying for you miss miss so when I read these letters I don’t always believe
these letters I don’t always believe
these letters I don’t always believe everything that I read in them I mean
everything that I read in them I mean
everything that I read in them I mean did Dalton really apply early decision
did Dalton really apply early decision
did Dalton really apply early decision for all those colleges does he have a
for all those colleges does he have a
for all those colleges does he have a realistic chance of having
realistic chance of having
realistic chance of having to choose between Princeton and MIT is a
to choose between Princeton and MIT is a
to choose between Princeton and MIT is a stood really that good-looking what the
stood really that good-looking what the
stood really that good-looking what the hell is she doing in Sierra Leone I have
hell is she doing in Sierra Leone I have
hell is she doing in Sierra Leone I have no idea so say what is going on with
no idea so say what is going on with
no idea so say what is going on with this letter so I just sort of file all
this letter so I just sort of file all
this letter so I just sort of file all that stuff in the back of my head and
that stuff in the back of my head and
that stuff in the back of my head and then the Christmas season winds down the
then the Christmas season winds down the
then the Christmas season winds down the Christmas tree kind of fades and I put
Christmas tree kind of fades and I put
Christmas tree kind of fades and I put away Christmas ornaments and I take
away Christmas ornaments and I take
away Christmas ornaments and I take these letters and put somewhere I think
these letters and put somewhere I think
these letters and put somewhere I think they belong and then the New Year comes
they belong and then the New Year comes
they belong and then the New Year comes upon us and everything starts fresh
upon us and everything starts fresh
upon us and everything starts fresh again but no this whole Christmas letter
again but no this whole Christmas letter
again but no this whole Christmas letter thing starts happening again how does
thing starts happening again how does
thing starts happening again how does this happen again
this happen again
this happen again well usually around the end of January I
well usually around the end of January I
well usually around the end of January I started getting annual reports from all
started getting annual reports from all
started getting annual reports from all the companies in which I own some stock
the companies in which I own some stock
the companies in which I own some stock now being an accountant I like annual
now being an accountant I like annual
now being an accountant I like annual reports I like to take a look at the
reports I like to take a look at the
reports I like to take a look at the information that’s contained in them so
information that’s contained in them so
information that’s contained in them so I’m very happy to look at a balance
I’m very happy to look at a balance
I’m very happy to look at a balance sheet and income statement statement of
sheet and income statement statement of
sheet and income statement statement of cash flows and a statement of
cash flows and a statement of
cash flows and a statement of stockholders equity and since I’m an
stockholders equity and since I’m an
stockholders equity and since I’m an accountant I know the language of GAAP
accountant I know the language of GAAP
accountant I know the language of GAAP generally accepted accounting principles
generally accepted accounting principles
generally accepted accounting principles so I’m very happy to read something in
so I’m very happy to read something in
so I’m very happy to read something in my language okay
my language okay
my language okay so let’s start with this balance sheet
so let’s start with this balance sheet
so let’s start with this balance sheet for a minute a balance sheet is a
for a minute a balance sheet is a
for a minute a balance sheet is a snapshot of a company at a single point
snapshot of a company at a single point
snapshot of a company at a single point in time one single moment in time and it
in time one single moment in time and it
in time one single moment in time and it provides sort of an example of the
provides sort of an example of the
provides sort of an example of the resources and obligations of a company
resources and obligations of a company
resources and obligations of a company at one point in time and then usually
at one point in time and then usually
at one point in time and then usually you get a comparative balance sheet so
you get a comparative balance sheet so
you get a comparative balance sheet so that you can compare the company at two
that you can compare the company at two
that you can compare the company at two very distinct points in time usually
very distinct points in time usually
very distinct points in time usually you’re apart well guess what that’s kind
you’re apart well guess what that’s kind
you’re apart well guess what that’s kind of like the family picture last year and
of like the family picture last year and
of like the family picture last year and the family picture this year something’s
the family picture this year something’s
the family picture this year something’s changed right because they’re not
changed right because they’re not
changed right because they’re not exactly identical but you don’t know
exactly identical but you don’t know
exactly identical but you don’t know what’s changed well if you look at
what’s changed well if you look at
what’s changed well if you look at balance sheets if you’re trying to
balance sheets if you’re trying to
balance sheets if you’re trying to interpret what’s happened between two
interpret what’s happened between two
interpret what’s happened between two balance sheet dates you look at the
balance sheet dates you look at the
balance sheet dates you look at the income statement the income statement is
income statement the income statement is
income statement the income statement is a summary of what’s
a summary of what’s
a summary of what’s and during the year it’s like the movie
and during the year it’s like the movie
and during the year it’s like the movie of the family during the year a state
of the family during the year a state
of the family during the year a state income statement usually summarizes
income statement usually summarizes
income statement usually summarizes revenues and expenses and then reports
revenues and expenses and then reports
revenues and expenses and then reports profits but you know what that’s like
profits but you know what that’s like
profits but you know what that’s like it’s like the letter it’s like the
it’s like the letter it’s like the
it’s like the letter it’s like the Christmas letter that we opened and then
Christmas letter that we opened and then
Christmas letter that we opened and then there’s this statement of cash flows the
there’s this statement of cash flows the
there’s this statement of cash flows the statement of cash flows kind of zeroes
statement of cash flows kind of zeroes
statement of cash flows kind of zeroes in on one of the most important assets a
in on one of the most important assets a
in on one of the most important assets a company owns which is its cash okay and
company owns which is its cash okay and
company owns which is its cash okay and it provides us some information about
it provides us some information about
it provides us some information about how cash flows in and out of the company
how cash flows in and out of the company
how cash flows in and out of the company well isn’t that what that Christmas
well isn’t that what that Christmas
well isn’t that what that Christmas letter said that the children were the
letter said that the children were the
letter said that the children were the stars of the show and then finally the
stars of the show and then finally the
stars of the show and then finally the statement of stockholders equity this is
statement of stockholders equity this is
statement of stockholders equity this is something that reports transactions
something that reports transactions
something that reports transactions between the owners of a company and the
between the owners of a company and the
between the owners of a company and the company itself so if a company issues
company itself so if a company issues
company itself so if a company issues new stock capital flows into the company
new stock capital flows into the company
new stock capital flows into the company if the company pays a dividend cash
if the company pays a dividend cash
if the company pays a dividend cash flows out of the company well I look at
flows out of the company well I look at
flows out of the company well I look at this and think you know what that’s kind
this and think you know what that’s kind
this and think you know what that’s kind of like the family tree and the capital
of like the family tree and the capital
of like the family tree and the capital flowing into the company are the new
flowing into the company are the new
flowing into the company are the new additions and the capital flowing out of
additions and the capital flowing out of
additions and the capital flowing out of the company is grandma okay so I look at
the company is grandma okay so I look at
the company is grandma okay so I look at this and saying you know I I sort of had
this and saying you know I I sort of had
this and saying you know I I sort of had some questions when I read my Christmas
some questions when I read my Christmas
some questions when I read my Christmas letters just a few weeks ago
letters just a few weeks ago
letters just a few weeks ago I wonder if annual reports are kind of
I wonder if annual reports are kind of
I wonder if annual reports are kind of doing the same thing I wonder if they’re
doing the same thing I wonder if they’re
doing the same thing I wonder if they’re sort of overstating accomplishments and
sort of overstating accomplishments and
sort of overstating accomplishments and maybe painting a picture that’s just a
maybe painting a picture that’s just a
maybe painting a picture that’s just a little too beautiful okay
little too beautiful okay
little too beautiful okay so here’s an example can you guess this
so here’s an example can you guess this
so here’s an example can you guess this company try to guess this company I’m
company try to guess this company I’m
company try to guess this company I’m going to give you some quotes that came
going to give you some quotes that came
going to give you some quotes that came from an actual annual report okay the
from an actual annual report okay the
from an actual annual report okay the company’s net income reached a record
company’s net income reached a record
company’s net income reached a record 1.3 billion we continued our record of
1.3 billion we continued our record of
1.3 billion we continued our record of strong returns recurring earnings per
strong returns recurring earnings per
strong returns recurring earnings per share of increased steadily nobody’s
share of increased steadily nobody’s
share of increased steadily nobody’s eyes are glazing over yet with these
eyes are glazing over yet with these
eyes are glazing over yet with these accounting terms so I’m happy about that
accounting terms so I’m happy about that
accounting terms so I’m happy about that the great fun here will be for all of us
the great fun here will be for all of us
the great fun here will be for all of us to discover just how great we are how
to discover just how great we are how
to discover just how great we are how good we can really be
good we can really be
good we can really be and then a comparison of the company’s
and then a comparison of the company’s
and then a comparison of the company’s return versus the S&P 500 this company
return versus the S&P 500 this company
return versus the S&P 500 this company looks like it’s doing really well
looks like it’s doing really well
looks like it’s doing really well doesn’t it any idea what company this is
doesn’t it any idea what company this is
doesn’t it any idea what company this is on April 2nd 2001 they released their
on April 2nd 2001 they released their
on April 2nd 2001 they released their annual report for the year 2000 very
annual report for the year 2000 very
annual report for the year 2000 very good six months later they said they had
good six months later they said they had
good six months later they said they had to restate everything because it was all
to restate everything because it was all
to restate everything because it was all a lie
a lie
a lie okay but their annual report was
okay but their annual report was
okay but their annual report was beautiful very colorful full of glossy
beautiful very colorful full of glossy
beautiful very colorful full of glossy pictures yeah so what what kind of
pictures yeah so what what kind of
pictures yeah so what what kind of tricks do companies have to to write
tricks do companies have to to write
tricks do companies have to to write their own Christmas letters well it
their own Christmas letters well it
their own Christmas letters well it falls into kind of two broad categories
falls into kind of two broad categories
falls into kind of two broad categories one are what I call real decisions
one are what I call real decisions
one are what I call real decisions that’s where you sort of alter the
that’s where you sort of alter the
that’s where you sort of alter the physical the physical nature of a
physical the physical nature of a
physical the physical nature of a transaction so that when it gets
transaction so that when it gets
transaction so that when it gets reported it looks different and here’s
reported it looks different and here’s
reported it looks different and here’s an example of one Diamond Foods which is
an example of one Diamond Foods which is
an example of one Diamond Foods which is a producer of canned nuts shifted
a producer of canned nuts shifted
a producer of canned nuts shifted payments to their wallet growers until
payments to their wallet growers until
payments to their wallet growers until later periods so it looked like they
later periods so it looked like they
later periods so it looked like they were more profitable in a year when they
were more profitable in a year when they
were more profitable in a year when they were in negotiations for a merger with
were in negotiations for a merger with
were in negotiations for a merger with Procter and Gamble so they use that real
Procter and Gamble so they use that real
Procter and Gamble so they use that real decision of delaying payments to make it
decision of delaying payments to make it
decision of delaying payments to make it look more profitable in the current year
look more profitable in the current year
look more profitable in the current year another example is that companies can
another example is that companies can
another example is that companies can play fast and loose with some accounting
play fast and loose with some accounting
play fast and loose with some accounting rules for example
rules for example
rules for example WorldCom used its cash flow statement to
WorldCom used its cash flow statement to
WorldCom used its cash flow statement to part some expenses instead of expensing
part some expenses instead of expensing
part some expenses instead of expensing them on the income statement and making
them on the income statement and making
them on the income statement and making the income and the profit look lower the
the income and the profit look lower the
the income and the profit look lower the company instead regarded those as a
company instead regarded those as a
company instead regarded those as a capital expenditure and kind of left
capital expenditure and kind of left
capital expenditure and kind of left them off the income statement at least
them off the income statement at least
them off the income statement at least temporarily okay so that was an
temporarily okay so that was an
temporarily okay so that was an accounting decision that helped
accounting decision that helped
accounting decision that helped influence what earnings look like okay
influence what earnings look like okay
influence what earnings look like okay some companies prefer to interpret
some companies prefer to interpret
some companies prefer to interpret things the way they want to interpret
things the way they want to interpret
things the way they want to interpret them I mentioned earlier that the
them I mentioned earlier that the
them I mentioned earlier that the language of accounting is GAAP generally
language of accounting is GAAP generally
language of accounting is GAAP generally accepted accounting principles and the
accepted accounting principles and the
accepted accounting principles and the Tesla company poor Elon Musk he’s
Tesla company poor Elon Musk he’s
Tesla company poor Elon Musk he’s already been slammed once here I guess
already been slammed once here I guess
already been slammed once here I guess he’s gonna get slammed again they
he’s gonna get slammed again they
he’s gonna get slammed again they reported their
reported their
reported their a net loss per share the net loss per
a net loss per share the net loss per
a net loss per share the net loss per share according to the rules of
share according to the rules of
share according to the rules of accounting but then they also provided
accounting but then they also provided
accounting but then they also provided this adjustment for to remove stock
this adjustment for to remove stock
this adjustment for to remove stock based compensation so that this new
based compensation so that this new
based compensation so that this new measure of earnings looks better than
measure of earnings looks better than
measure of earnings looks better than the gap measure of earnings they label
the gap measure of earnings they label
the gap measure of earnings they label it you know they show us that it’s got
it you know they show us that it’s got
it you know they show us that it’s got the non-gaap but but they are at least
the non-gaap but but they are at least
the non-gaap but but they are at least trying to alter the rules under which
trying to alter the rules under which
trying to alter the rules under which they report things and in their annual
they report things and in their annual
they report things and in their annual report in their quarterly report before
report in their quarterly report before
report in their quarterly report before this particular quarter based they
this particular quarter based they
this particular quarter based they boasted that their net loss had narrowed
boasted that their net loss had narrowed
boasted that their net loss had narrowed hey we’re still not doing well but at
hey we’re still not doing well but at
hey we’re still not doing well but at least we’re not doing as bad as we were
least we’re not doing as bad as we were
least we’re not doing as bad as we were before that’s the good news
before that’s the good news
before that’s the good news okay so what can you do when you look at
okay so what can you do when you look at
okay so what can you do when you look at these annual reports from companies well
these annual reports from companies well
these annual reports from companies well I think you can hold on to the same
I think you can hold on to the same
I think you can hold on to the same skepticism that you use when you look at
skepticism that you use when you look at
skepticism that you use when you look at these Christmas letters there’s usually
these Christmas letters there’s usually
these Christmas letters there’s usually a lot of hyperbole and overstatement
a lot of hyperbole and overstatement
a lot of hyperbole and overstatement that I think is worthy of a little bit
that I think is worthy of a little bit
that I think is worthy of a little bit of scrutiny you should keep your mind
of scrutiny you should keep your mind
of scrutiny you should keep your mind open for the different ways that
open for the different ways that
open for the different ways that companies can alter their results at
companies can alter their results at
companies can alter their results at least on paper and the most important
least on paper and the most important
least on paper and the most important part and it’s a part that most people
part and it’s a part that most people
part and it’s a part that most people neglect to do is to look at those boring
neglect to do is to look at those boring
neglect to do is to look at those boring notes in the back of a set of financial
notes in the back of a set of financial
notes in the back of a set of financial statements that’s where the dirt is
statements that’s where the dirt is
statements that’s where the dirt is that’s where you find the stuff that you
that’s where you find the stuff that you
that’s where you find the stuff that you can tie back to the financial statements
can tie back to the financial statements
can tie back to the financial statements and try to convince yourself of what the
and try to convince yourself of what the
and try to convince yourself of what the real story is so when you get your aunt
real story is so when you get your aunt
real story is so when you get your aunt your Christmas cards this year I hope
your Christmas cards this year I hope
your Christmas cards this year I hope you think of annual reports and if you
you think of annual reports and if you
you think of annual reports and if you ever get any annual reports I hope
ever get any annual reports I hope
ever get any annual reports I hope you’ll remember your Christmas cards
you’ll remember your Christmas cards
you’ll remember your Christmas cards thank you very much
thank you very much
thank you very much [Applause]
”
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