‘let my silences become more eloquent’

you should never expect your end of year financial statements to be an accurate depiction of your business performance especially if they were prepared as part of the tax fight each year.

Let me point out some very obvious problems with ‘tax accounts’:

1. tax values permeate right through these reports in terms of stock values, depreciation rates, special deductions etc

2. the accounts inherently try to use every means possible to minimize net profit [ within the law] to reduce the consequential tax cost

3. Balance Sheets do not reflect market or realistic current values for assets

Even where ‘reconciliation statements’ are prepared you return to concepts such as accounting profits which often have been ‘doctored’ to suit special purposes such as transferring profits to lower taxing jurisdictions, depreciating assets at rates which suit the end user [ such as banks, investors and various suitors].

Try telling a due diligence team to rely on the financial statements only during the forensic analysis of a business !! You would be laughed out of the room.

Lots of important things are never disclosed in financial reports such as:

1. quality of contracts

2. quality of staff

3. business culture and repute

4. product offering

5. competition

6. opportunities for growth

7. unspoken legal liabilities

The list of ‘unmeasured’ assets and liabilities is long indeed…..don’t be fooled by silence.