After re-reading the ACCT11059 Chapters 2 and 3 Study Guides, for the purpose of doing Assessment 1, I have come to doubt my way of looking at annual reports.
I accidentally wrote my ideas, reactions and reflections on sections 3.3 and 3.4, because I didn’t read the assessment instructions properly. Oops! I didn’t submit them though.
Over the final days of doing Assessment 1, I have had second thoughts and new doubts.
I said in my blog post What I look at in an Annual Report that I categorise what I look at into primary important and secondary important. I now think that perhaps I should not be doing this. My secondary important areas were:
the company’s purpose, normal business activities, direction, present key challenges, future strategy, plans and projects, and its present identified risks and capital commitments.
I feel that by making these areas ‘secondary’, I may be missing out on being able to really connect to the economic and business realities of a firm. Perhaps I need to stop separating these elements, being the financial from the general business information, and start to look at them together more closely, in order to see a better picture. Perhaps I need to stop looking at the mere numbers and thinking I see ‘the answers’ and start to have more of a concern for the actual business with its interconnected realities.
After my second reading of the study guides, I started to doubt my own selective ways of analysing financial statements. I begun to question myself if I really am looking for the right things. I came to the conclusion that while I read and look at the finances well and can accurately comment on them, I think I may be neglecting the economic and business realities and what future value they might add. I put this down to a lack of education in this area.
The last 2 paragraphs of the sub-section called ‘Just do what ‘works’’ (3.3.2) had a big impact on me. I have great faith in the judgments made by the author, Dr Martin Turner, in the text. He is extremely educated, a doctor of accounting, and someone who I esteem and trust. He has obviously done the research and is simply commenting on the findings. He concludes that we can only “gain a lot of practical wisdom and ‘good sense’ from experienced practitioners, particularly if they combine their experience with the ability to explain and communicate their insights well.” I found the named recommended writings of Benjamin Graham, David Dodd and Warren Buffett valuable, as these men actually have the ability to use financial statements to gain insights into the economic and business realities of a firm.
I had continued doubts while reading section 3.4, about seeking to determine the value of equity based on future expected cash flow relating to the dividends.
I feel that I have actually learnt something very special when contrasting the thoughts of the text with my own established understanding and way of analysing. And all brought about because of my mistake in not properly reading the assessment instructions. I’m now looking forward to learning how to truly understand and connect to the economic and business realities of a firm and how to see if they will bring any future value.
I understand that learning must connect with our prior knowledge and experiences, even if it means overturning long-held views and foundations. Sometimes we have to challenge our current views in light of better understandings. Sometimes we have to ‘unlearn’ things in order to learn new things. I also know we need other people to assist in our learning journey because different judgments will contribute to how we see things in reality. Therefore, I hope this blog post will be of good help to my readers, in contributing to their learning journey in studying accounting.
Well, I still have a lot to learn. Nevertheless, I’m loving my journey!