Media Accounting Analysis Is an Important Step

¶ … Media Accounting analysis is an important step in determining the overall health and well being of a particular business organization. Accounting practices must be correctly aligned with the larger, overall business strategy as laid out by the leadership of the organization. Accounting analysis feeds into the larger financial picture of the company and provides a means to audit and improve the often difficult task of keeping track of the many exchanges and trades.

To successfully analyze Fairfax media, is ultimately necessary to perform a solid accounting analysis on the company's practices. This being an external evaluation, requires a certain amount of circumstantial inference to help fully describe the implied accounting methods used in this large company. Fairfax must incorporate four important financial documents to fully gain an understanding of their accounting practices. The income statement, the balance sheet, the cash flow statement and the statement of changes in equity must all be fully vetted and combed over for errors and mistakes.

Fairfax's most recent income statement, like all of income statements, gives a snapshot of the overall financial performance of the company. Fairfax's reported net income was $391,000,000 for last year. This is an excellent starting point to bounce other numbers and figures off of to help determine of things are truly adding up to the reports. Fairfax's last reported balance sheet reported that their total assets were $6,701,000,000 and their total liabilities were $2,262,000,000.

These two figures also are helpful in understanding how the company's methods are being incorporated within the larger framework of the overall business strategy that should aim at increasing a competitive advantage within the media industry and continue this company's growth and evolution. A cursory, external analysis of these important financial documents demonstrate that Fairfax has practiced solid and reputable methods. Fairfax has laid out its transactions in a clear and concise package that is very transparent and honest.

Numerical errors are to be expected in some situations, but an overall audit of the accounting system itself, provides a better way to understand how Fairfax truly stands in the competitive and growing media market and entertainment industry. 7. The subjective nature of human interaction and work, would suggest that some distortion of objective truth may arise in the financial and accounting analysis practices of any company or organization that is looking to take advantage and capitalize on the opportunities that are present in the market.

The accounting quality is therefore very important in determining the best path for continued growth. There are essentially six steps that can help minimize the distortion and allow for an honest and applicable audit: 1. Identify key accounting policies. 2. Assess accounting flexibility. 3. Evaluate accounting strategy. 4. Evaluate the quality of disclosure. 5. Identify potential red flags. 6. Undo accounting distortions. Accounting is essentially an art that must incorporate some intuition and experience into the processes of understanding what the numbers are actually saying.

Numbers are abstract and very malleable symbols that can be molded into a cohesive and just picture when the right balance is struck and applied. Numbers must sometimes be restated to reduce distortion and paint a clearer picture of the environment. In Fairfax's case, the numbers and their distortion qualities cannot be fully eliminated using outside information and data. More details about operations and the quality of the efforts that these resources are being used for can help reveal so much more about the company's more genuine impacts.

The cash flow statements and other published financial information in Fairfax's case has provided a keyhole view into their practices and demonstrate that a true effort has been applied to minimize the confusion and help key investors stay knowledgeable about their financial practices and maximize their potential through a sustained and driven competitive advantage. Essentially a balance must be struck once again from the hard data that is presented on the published financial data and the different subjective approaches that go into any analysis.

Practicing this system will minimize common mistakes in accounting analysis by relying to heavy on one side or the other. Not all businesses are the same and some creativity is certainly necessary to remain competitive. Understanding accounting as an art form assists those in leadership positions to maneuver the business strategy in the correct alignment and build upon success and experience. 8. Financial industry analysis can help shed some light on how things are really operating within the closed doors of Fairfax.

The recent history of this company has shown how the reduction in print media has hurt them like many others in the industry. Fairfax has transformed itself into a more digital profile in recent times to help remain competitive. King (2013) reported on Fairfax's most recent adventures. He wrote "embattled media.