Hello Ahmed in Misr,

An excellent question! Thanks for taking the time to ask it of me. Here I am going to share my opinion - recognize it is my opinion and not necessarily the opinion of CFA Institute. Me personally? I think accrual accounting is at least 75% reflective of reality. I also think that in order to really make use of it, that you need to study accounting so that you can learn the tricks that executives might use in order to skew reality in their favor. I had a professor in graduate school that would begin a class like this:

* It is 15 November, you are the controller at a publicly traded firm, your annual bonus is based on net income growing by 7% this year, currently it has only grown 6%, and your wife wants to go on an expensive vacation to Dubai. What do you do in order to make sure that you help your wife be happy?

To me this is the correct approach for analysts to learning accounting. Debits and credits are interesting, but when you combine accounting with contexts, motivations, and frailties then you get true insight. If you know how to get information out of financial statements then they are extremely helpful raw material in accurate valuations of businesses, in my opinion.

Yours, in service,

Jason

PS - My wife and I honeymooned in Misr, and it is our favorite country!