Total compliance in financial reporting, but was it misleading?

(Mar 18): Last week, I talked about how it can be difficult to interpret published financial statements because of overly ambitious objectives of the accounting profession, evolving reporting standards and the resulting vagaries that could sometimes translate into risky propositions for those relying on them to make investing decisions. This is made worse as financial instruments get more complex, so too their accounting treatments.

Singapore-listed Hyflux, I believe, is one good example where a deeper understanding of the accounting behind its reported earnings and perhaps a different way of presenting the numbers could have warned investors of impending troubles.

Its financial woes are now clear for all to see and investors-creditors are facing huge losses under the proposed restructuring plan. It was a stunning fall from grace for a company that was once called the “poster child of entrepreneurship”. The company had a compelling narrative for investors and what appeared to be a solid track record.