Corporate Finance & FP&A
FP&A failures are the quiet ones — a sign convention, an effective-versus-cash-rate slip, a lease profile from the wrong framework, a permanent difference treated as if it reverses. Individually small, they propagate through the three statements, and because each step reads as internally consistent, the error is hard to catch downstream of where it was made.
Cash-flow-statement construction
MechanismAn increase in an operating asset is a use of cash; an increase in an operating liability is a source.
ConsequenceCFO is wrong by twice the working-capital swing, and the sign error compounds downstream.
MechanismIFRS permits interest paid in operating or financing; US GAAP fixes it in operating.
ConsequenceCFO is not comparable across the two frameworks without normalization.
Working capital
MechanismCash flow reflects the period change in working capital, not its level.
ConsequenceA large but stable working-capital balance is wrongly treated as a recurring cash drain.
MechanismReverse factoring can mask financing as trade payables, flattering CFO and understating debt.
ConsequenceOverstates operating cash generation and understates leverage.
Lease accounting (IFRS 16 / ASC 842)
MechanismIFRS 16 brings nearly all leases on-balance-sheet as a right-of-use asset and a lease liability.
ConsequenceUnderstates assets, debt, and leverage.
MechanismASC 842 operating leases keep a single straight-line expense; IFRS 16 splits into amortization plus front-loaded interest.
ConsequenceMisstates EBIT, EBITDA, and interest across the two frameworks.
Deferred & current tax
MechanismThe P&L effective rate includes deferred tax; cash flow needs the cash tax actually paid.
ConsequenceMisstates free cash flow by the deferred component.
MechanismA DTA is carried only to the extent future taxable profit makes it recoverable; otherwise a valuation allowance reduces it.
ConsequenceOverstates assets and understates the effective rate.
The full bank contains additional items not published here. The taxonomy is a living artifact, derived from practice — versioned, dated, and never claimed to be exhaustive.