IFRS WITHOUT WARNINGS

IFRS WITHOUT WARNINGS

Al Rosen

? How often will a government state: “We are not intending to tax a large chunk of your ‘reported income’ before income tax?” Rarely? Yet, such happens every day when the reported “income” is based on IFRS’ reporting requirements.

Nevertheless, too many investors ignore the vital message sent from the tax assessors; and, the investors foolishly accept the reported IFRS “income” when evaluating what price to pay for acquiring a public company’s stock. How do we know? Just look at the stock market prices for various marijuana companies over the past five years. Today, look at the financial statements of renters of apartments or of office towers.

In short, many governments believe that IFRS’ reported “income” is “not real;” and therefore not taxable. Why? Evidence, such as absent cash receipts do NOT support calling managements “estimates” as constituting adequate “income” evidence. Hence, government advice to yourself should be: “Follow the cash trail.” No cash trail? Invest elsewhere!

However, government assistance to investors for peculiar IFRS apparently stops at the income tax level.

So, why do investors/savers continue to ignore the tax authorities and their screaming-out signs/signals that IFRS, especially, is not reporting “reality?” Some possibilities are:

*??????Advertising nonsense claims about becoming a billionaire if “you invest with us” are strangely being believed?

*??????Education of investors has actually become a dismal failure over the past 20-25 years?

*??????Governments are, in essence, encouraging the actions of the swindlers, by letting them tell their unwarranted lies, freely?

*??????Securities regulators have become close to being inept?

*??????The country’s ethics have dropped to being corrupt?; too many people involved (such as corporate managers, some investment advisers, and many more) are benefitting from financial dirty tricks, and do not want changes?

*??????The financial mess has become too difficult to correct? Leadership for improvements is missing.

Those who disagree with the above possible reasons are now invited to offer their wisdom, with reasons and evidence. What lacks credibility are any of their comments that in effect say, “nothing has changed in the past 10-20 years.” Such types of remarks display unawareness, or ignorance, such as for example caused by IFRS reporting (giving extensive authority to corporate management to invent “income,” and non-cash-based assertions “values”).

Equally pathetic writings would include assertions that “experienced valuators” have been engaged to verify “fair market values” that are/were utilized in financial statements. (How many “valuators” came anywhere close, a few years ago, to predicting and then utilizing dollar figure drops as were seen in stock and real estate transactions during much of 2022? Valuators can easily make a series of unsupportable assumptions.)

In short, who honestly can support a claim that Canada, for example, does not have an out-of-control financial reporting mess, which helps to swindle investors (including those depending upon appropriate pensions in a few years)? Denial and procrastination will definitely make a now serious problem that much worse.

Show, other than by false words, that Canada has more than an adequate investor protection system. Unsupported words will not attract investment that will then create needed jobs. Explain why corporate collapses in Canada, with the swindled money now being offshore, (e.g. Sino-Forest) might add to Canada’s image as being an “unsafe” place to invest. The alternative is to pretend otherwise, which has been an empty stance of the past dozen years.

For too many years the financial tricksters have invented a series of alleged “replacements” for GAAP’s income figures. Mainly, these manipulations have been directed at arriving at a much higher “income” figure than is, or has been, produced by GAAP. Studies have shown that stock market prices are seriously influenced by reported “income.” As a consequence, swindlers advocate income “increases,” extensively.

Some of the popular “gimmick” proposals have (or are) EBITDA (earnings before interest, taxes, depreciation and amortization); adjusted EBITDA, EBIT and their several variations.

What has been a common response from securities regulators, you might ask? Several regulators have required the reporting usage of these terms (such as “adjusted EBITDA”) only on the condition that their usage be accompanied by words such as” “adjusted EBITDA is not a GAAP term;” or a “similar” non-acceptance. Yes, that’s the regulator’s usual response.

Now comes the huge shock. Given that the adjusted EBITDA family is nowhere near the extreme in its effects (say on “income’) as is IFRS, we have significant follow-up questions.

Why do the regulators (considering IFRS’ major flaws ) not impose, or require, a major note accompany IFRS financial statements? IFRS clearly can inflict much more financial damage to investors’ finances than can “IBIT” figures, or similar. Strong warning notes must accompany usage of IFRS, to be consistent with what has occurred for the EBIT family.

The inconsistency of reaction of governments and regulators between IFRS usage and other “EBIT-like income enhancers” is monstrous.

Have you ever seen a warning phrase accompanying IFRS financial statements that, in effect, says: “Warning: These IFRS financial statements are not prepared in accordance with (reality, or GAAP, or similar phrasing)?” Such a warning was required in Canada when the EBIT “family” of “income enhancers” appeared. Who in Canada is now protecting against the dangerous IFRS? Why? A serious investigation is long overdue to address deep deficiencies.

Silence about IFRS and its fictional numbers raises many concerns about the extent of large biases and various swindles. Also, problems are lobbyist tactics by IFRS supporters, government silencing, long-term consequences, the overall investment reputation of Canada, investor losses, suicides, and more (including mere “slaps on the wrist pretences for swindlers”). Referring to IFRS as being dangerous is simply being “too polite,” and likely being “ill informed.”

IFRS usage over a dozen years, unaccompanied by serious required written warnings, clearly calls out for prompt banning of IFRS usage. A whole new financial regulatory system clearly is urgently-needed. The present IFRS system is under the control of the wrong “leaders,” obviously being inappropriate, biased, people. Their leadership is dangerous to investors and pension plan managers. Government excuses in Canada for not acting are consequently beyond pathetic.