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Accounting for Value (Columbia Business School Publishing) and over one million other books are available for Amazon Kindle. Learn more

Accounting for Value (Columbia Business School Publishing)

15 customer reviews
ISBN-13: 978-0231151184
ISBN-10: 0231151187
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Accounting for Value (Columbia Business School Publishing) + The Investment Checklist: The Art of In-Depth Research + The Manual of Ideas: The Proven Framework for Finding the Best Value Investments
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Editorial Reviews


Penman's book...contains gems on every page - to the point that no one who deals with the market in any capacity should pass by this text until they have committed to memory as many points therein as their limited, mark one, human brains, can hold.

(Anthony Harrington QFinance Blog)

I highly recommend the essential and fundamentals oriented book Accounting for Value by Stephen Penman, to anyone who is serious about investing in sound, fundamental stocks. This book will benefit the beginning or experienced investor, accountants, and anyone interested in the coupling of accounting with equity valuation.

(Blog Business World)

For a practical book that will help you understand the use of accounting in understanding stock valuation, Accounting for Value is the resource you are looking for you.

(Stocker Blog)


This book cleverly weaves together important but otherwise unreconciled themes, enhancing our conceptual understanding of the nature and usefulness of accounting in valuation. Stephen Penman also updates the Benjamin Graham school of investment thought by incorporating changes in the economy, accounting, and financial modeling.

(Stephen Ryan, New York University, Stern School of Business)|

Accounting for Value is a thoughtful yet widely accessible discourse on how accounting facilitates valuation. It is a gold mine of ideas for investors, academics, and market regulators and establishes Stephen Penman as the modern day standard bearer of the Graham School of Fundamental Investing. Anyone who cares about the role of accounting in this increasingly complex world should read this book.

(Charles M. C. Lee, Joseph McDonald Professor of Accounting, Stanford University)|

In his latest book, Stephen Penman displays his mastery of the language of accounting through an integrated view of the interactions of company balance sheets and income statements. This approach allows an investor to more effectively 'account for value' and identify opportunities in the capital markets.

(Mitchell R. Julis, cochairman and co-CEO, Canyon Partners, LLC)

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Product Details

  • Series: Columbia Business School Publishing
  • Hardcover: 264 pages
  • Publisher: Columbia University Press (December 30, 2010)
  • Language: English
  • ISBN-10: 0231151187
  • ISBN-13: 978-0231151184
  • Product Dimensions: 1 x 6.2 x 9.2 inches
  • Shipping Weight: 1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (15 customer reviews)
  • Amazon Best Sellers Rank: #163,521 in Books (See Top 100 in Books)

More About the Author

Stephen Penman is George O. May Professor of Accounting at the Columbia Business School. He is the author of "Financial Statement Analysis and Security Valuation", for which he received a Wildman Medal Award, and an editor of the Review of Accounting Studies.

(Photo by Lynn Saville)

Customer Reviews

Most Helpful Customer Reviews

64 of 65 people found the following review helpful By David Merkel on March 21, 2012
Format: Hardcover
I have never taken a course in accounting. But I have had to do accounting for most of my working life, including doing financial reporting inside life insurers, which is the most complex industry for accounting. I have even opined on 10+ financial accounting standards over time. And Aleph Blog is a leading accounting website as a user of accounting. (Dubious distinction, I know, but when you are a blogger, you take what you can get. ;) )

As a value investor, I have taken a skeptical view toward the accounting of the companies that I invest in. Cash entries can be trusted; accrual entries are less trustworthy in proportion to the length of time and uncertainty to the collection of cash.

This book relates accounting principles to value investing principles, and it is uncanny as to how they overlap. It also attempts to connect it to Modern Portfolio Theory [MPT] concepts where it makes sense, but with less success. (No surprise, because value investing has a decent theory behind it and MPT doesn't.)

The cornerstone of this book is return on net operating assets [RNOA]. The idea is to split the company in two, and separate operating results from financing results. Give little value to financing results, which are likely no repeatable, and give significant value to operating results.

Note: this means that there is no way of evaluating financial companies under this rubric, but that's a common problem. Financial companies are a bag of accruals; value is difficult to discern. That is why I spend most of my time analyzing the management teams of financial companies to see if they are conservative or not.

The book offers two measures of accounting quality, the Q-score and the S-score.
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10 of 12 people found the following review helpful By investingbythebooks on January 12, 2013
Format: Hardcover
I read this book a year ago and have thought about it since then. It felt like I had missed something important and that I needed to re-read it. I'm happy I did. The Business Professors at Columbia University have done it again. Accounting for Value is another truly interesting valuation book from the center of valuation excellence. But the underlying topic of the book is a bit surprising to an initial doubter. Accounting?

Accounting for value, the Penman way, is far more value added than it sounds. I will still use the Greenwald approach as my base valuation technique. But I have to agree with Penman that most valuation approaches are built on lots of guesstimates. That goes for the Greenwald approach as well, even though there are less of them compared to DCF techniques like Copeland's. The main advantage with Penman's approach is that it separates what we "know" from accounting from speculations about the future. I have started to use "Accounting for value" as a reality check to my "Greenwald Fair Values". For screeners, the Penman approach using accounting data for real valuation calculations is most probably better than simple key ratios like P/E, Price/Book etc.

Like Ben Graham, Penman's focus is to fight the animal spirits of Mr. Market by being careful of paying for more than accounting certainties. His starting base is the level and rate of change in book value of equity. Be really skeptical of paying for growth. Profitable growth is scarce. And never pay for returns created by leverage. Beware of using stock prices in determining fair values. Instead use Mr. Markets pricing to understand expectations. All of Penman's adjustments to true returns and growth are a delight to view.
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4 of 4 people found the following review helpful By Jackal on November 22, 2012
Format: Hardcover Verified Purchase
This is an interesting complement to Valuation: Measuring and Managing the Value of Companies, 5th Edition (Wiley Finance), which presents a finance perspective on valuation (read cash flow). The current book presents an accounting perspective on valuation. The writing style is not totally clear and I've seen some articles in Financial Analysts Journal by the same author that are more clearly written. Still this book will give you a lot of interesting ideas if you are professional engaged in valuation of mostly listed companies.
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8 of 10 people found the following review helpful By Alejandro Sanz on July 3, 2011
Format: Hardcover Verified Purchase
It is a very good practical book. Far better than any valuation text book that teaches you theoretical models that yield extremely bad results in real life. The author does a great job at explaining why to do things. It also has thoughtful discussions around value investmenting versus other philosophies, truly getting to the heart of what this investment philosophy is about (much more than buying low price-to-book stocks).

A very good read!
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4 of 5 people found the following review helpful By James East VINE VOICE on September 4, 2013
Format: Hardcover
With this new effort coming out of the Columbia Business School, I have the belief that Benjamin Graham would be pleased with the achievement. From an investor that uses Graham's work on nearly a daily basis, this is a nice addition to the library shelve.

Chapter 3 on Challenging Market Prices With Fundamentals is surely required reading for any value investor worth his/her salt. When a price-to-book value exceeds 1.0, it has to do with uncertainty and it is uncertainty that is of particular concern for the equity investor. One should be very cognizant of what the excess price to book value means as Graham reminds us to never pay up for growth irrespective of how convinced or promising the premise.

The author also challenges conventional wisdom of cash flow models (among others) and how the accounting convention that a company may use because of its sector blows the whole model up. For example, the technology sector uses a very conservative accounting convention to expense all research. Sounds good, but the research asset is now left off the balance sheet that has a resulting higher return on equity calculation. Is this why so many investors love tech, 'Hey, Company XYZ has a ROE or 25%'. That return may or may not be reality as the accounting, though accurate, skews reality if not corrected in your own analysis.

In all, a very nice addition to the value investor's library along with these other recommendations.

The Aggressive Conservative Investor (Wiley Investment Classics) by Martin Whitman
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