Continuing with the series on the comprehensive investment checklist adapted from Michael Sheen’s book “The Investment Checklist”, this section looks into the questions asked regarding the distribution of earnings and cash flows. You can find sections one through five in the links appended below. Part One – click HERE. Part Two – click HERE. Part Three – click HERE. Part Four – click HERE. Part Five – click HERE. 27. Are the accounting standards that management uses conservative or liberal? Accounting standards can make a big difference in how revenue and/or expenses are recognised in the income statement. In particular, revenue recognition techniques allow some leeway on how companies should recognise revenue. Conservative methods generally try to play down revenue recognition and ensure proper recognition of expenses, and are a hallmark of prudent accounting. The liberal use of the same standards results in aggressive and early recognition of revenue or gains and downplays expenses and costs. Here’s the rub....