A Deep Dive Into Earnings Quality with Columbia Professor Doron Nissim
Excess Returns
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The Intangible Intensity of the Income Statement
FASB has been increasingly setting standards that emphasize measurement of assets and liabilities on the balance sheet over reporting sustainable profits in the income statement. We also have much more impermanent tests these days than we used to have in the past, he says. These trends make earnings more volatile and therefore less sustainable. But it's not just volatility; intangibles introduce distortion into the financial statements as companies invest organically in research and development.
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