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 Felix I. Lessambo
Financial Statements
Analysis and Reporting
Financial Statements
 Felix I. Lessambo

Financial Statements
Analysis and Reporting
Felix I. Lessambo
Central Connecticut State University
New Britain, CT, USA

ISBN 978-3-319-99983-8 ISBN 978-3-319-99984-5 (eBook)

https://doi.org/10.1007/978-3-319-99984-5

Library of Congress Control Number: 2018957071

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
Nature Switzerland AG, part of Springer Nature 2018
This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights
of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction
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now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and
information in this book are believed to be true and accurate at the date of publication.
Neither the publisher nor the authors or the editors give a warranty, express or implied,
with respect to the material contained herein or for any errors or omissions that may have
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Cover credit: MirageC/Getty Images

Cover design by Ran Shauli

This Palgrave Macmillan imprint is published by the registered company Springer Nature
Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
 Acknowledgements

Writing a book is always a challenge. But writing a book on Financial

Statements: Analysis and Reporting, geared to M.B.A. students, a more
daring intellectual exercise for twofold reasons: (i) because of the hard
choice of topics to cover, and (ii) financial analysis is part science and
part art.
I would like to express my gratitude to those who motivated me all
along the project, knowing my dedication to the subject, and thought
I am more than able to complete this project: Dr. Gordon Marsha, Dr.
Linda Sama, Fouad Sayegh, Esq., Jerry Izouele.
Several good friends provided me with needed guidance and materi-
als to complete this book, while others took from their busiest time to
review and comb the manuscript: Reverend Pastor Roland Dalo, Aline
Kabongo.

v
 Contents

Part I Overview of Financial Statements and the Statement

of Financial Position

1 Overview of Financial Statements 3

1.1 General 3
1.2 The International Accounting Standard Board: IFRS 4
1.3 European Financial Reporting Advisory Group
(EFRAG) 4
1.4 The USA: The FASB 5
1.5 The UK: Financial Reporting Council (FRC) 9
1.6 Japan: The Accounting Standard Board of Japan 11
1.7 Australia: The Australian Accounting Standard
Board 13
1.8 New Zealand: The New Zealand Accounting
Standards Board (NZASB) 15
1.9 India: The Council of the Institute of Chartered
Accountants of India (ICAI) 15
1.10 China: Accounting Standard for Business Enterprises 16
1.11 The Financial Statement Materials 16
1.11.1 The Proxy Statement 17
1.11.2 The Management Discussion & Analysis
(MD&A) 17

vii
viii    Contents

1.12 Interim Statements and Subsequent & Adjusting

Events 18
1.12.1 Interim Financial Statements 18
1.12.2 Subsequent Events 18
1.12.3 Adjusting Events 18
1.13 Users of Financial Statements 21

2 Cash and Cash Equivalents 23

2.1 General 23
2.2 Cash and Cash Equivalents 24
2.2.1 Bank Reconciliation 25
2.2.2 Bank Overdraft 27
2.2.3 Petty Cash 29
2.3 Marketable Equity Securities and Fair Value
Measurement 30
2.4 Accounting for Financial Instruments 32
2.5 Accounting for Derivatives 35
2.6 Accounting for Hedging 37

3 Short-Term Assets: Inventories 41

3.1 General 41
3.2 Inventory Methods 42
3.2.1 The Perpetual Inventory System 42
3.2.2 The Periodic Inventory System 43
3.3 Ownership Issues 46
3.4 Valuation of Inventory 46
3.5 The LIFO Reserve 47
3.6 LIFO Liquidation 48
3.7 Comprehensive Example 49
3.8 Restrictions on the Use of LIFO 51

4 Account Receivables 53
4.1 General 53
4.2 Cash Discount on Sales 54
4.2.1 The Gross Method 54
4.2.2 The Net Method 54
4.3 Bad Debts Concept 55
4.3.1 Rebates 55
 Contents    ix

4.3.2 Doubtful Accounts 56

4.3.3 Accounting for Bad Debts 56
4.4 Accounts Receivable Aging Method 57
4.5 Assignment of Accounts Receivable 58
4.6 Factoring of Accounts Receivable 60
4.6.1 Recourse vs Non-recourse Factoring 60
4.6.2 Factoring vs Loan 60
4.6.3 Factoring vs Assignment of Receivables 62
4.7 Securitization of Receivables 63
4.7.1 Sale Accounting Criteria 63
4.7.2 Secured Borrowing 66
4.8 Receivables—Troubled Debt Restructurings by
Creditors 66

5 Prepaid Expenses, Unearned Income,

and Other Current Assets 69
5.1 General 69
5.2 Prepaid Expenses 69
5.3 Unearned Income 72
5.4 Other Current Assets 73

6 Short-Term Liabilities and Working Capital 75

6.1 General 75
6.2 Accounts Payable 75
6.3 Notes Payable 76
6.4 Current Maturities of Long-Term Debt 77
6.5 Other Current Liabilities 77
6.6 Working Capital 77
6.6.1 Determinants of Working Capital 78
6.6.2 Financing of Working Capital 78
6.6.3 Computation of Working Capital: Example 79

7 Long-Term Assets: Plant, Property, and Equipment 81

7.1 General 81
7.2 Property, Plant, and Equipment 81
7.2.1 Acquisition of Property, Plant, and
Equipment 82
7.2.2 Cost of Land 83
x    Contents

7.2.3 Cost of Buildings 84

7.2.4 Cost of Equipment 84
7.3 Valuation of Property, Plant, and Equipment 84
7.4 Amortization, Depreciation, and Depletion 85
7.4.1 Straight-Line Method of Depreciation 85
7.4.2 Declining Balance Method of Depreciation 86
7.4.3 Double Declining Balance Depreciation
Method 87
7.4.4 Units of Production Method of Depreciation 88
7.4.5 Sum of the Years’ Digits Method of
Depreciation 89
7.5 Disposition of Property, Plant, and Equipment 91
7.5.1 Sale of Plant Assets 91
7.5.2 Involuntary Conversion 91
7.5.3 Miscellaneous Problems 92

8 Long-Term Assets: Intangibles 95

8.1 General 95
8.2 The Goodwill 96
8.2.1 Goodwill Impairment 97
8.3 Computer Software 101
8.3.1 Research and Development Costs of
Computer Software 101
8.3.2 Production Costs of Computer Software 101
8.3.3 Purchased Computer Software 102
8.3.4 Amortization of Capitalized Software Costs 102
8.3.5 Presentation and Disclosure
of Software Costs 103
8.3.6 Software Purchased Before Technological
Feasibility Established 103
8.3.7 Disclosure of Risks and Uncertainties
Related to Capitalized Software Costs 104

9 Long-Term Liabilities: Leases 105

9.1 General 105
9.2 Lease 105
9.2.1 Legal Definition of a Lease 105
9.2.2 Advantages and Disadvantages of Leasing 107
 Contents    xi

9.3 Types of Leases 107

9.3.1 Finance Lease 107
9.3.2 Operating Lease 109
9.4 Sale–Leaseback 110
9.4.1 Sale–Leaseback Advantages 111
9.4.2 Accounting Analysis 111
9.5 Short-Term Lease 113
9.6 Lease Disclosure 114
9.6.1 In the Balance Sheet 114
9.6.2 In the Statement of Cash Flows 114

10 Long-Term Liabilities: Pension and Postretirement

Liabilities 117
10.1 General 117
10.2 Types of Pension Plans 118
10.2.1 Defined Contribution Plan 118
10.2.2 Defined Benefit Plan 120
10.3 Net Pension Asset/Liability 120
10.4 Projected Benefit Obligations 121
10.5 Plan Assets 121
10.6 Reporting Pensions Plans on Financial Statements 122
10.6.1 In the Statement of Income 122
10.6.2 In the Balance Sheet 124
10.7 Funded Status 124
10.8 Postretirement Benefits Other Than Pensions 126

11 Shareholders’ Equity 127

11.1 General 127
11.2 Common Stock 129
11.2.1 Par Value of Common Stock 130
11.2.2 Stated Value of a Common Stock 130
11.2.3 Authorized Capital 130
11.2.4 Issued Capital 130
11.2.5 Outstanding Capital 130
11.3 Issuance of Shares of Stock 131
11.3.1 Issuance of Par Value Stock 131
11.3.2 Issuance of No Par Stock 132
xii    Contents

11.4 Issuance of Shares for Non-cash Items 133

11.5 Lump-Sum Stock Issuance 134
11.6 Treasury Stock—Cost Method 135
11.7 Treasury Stock—Par Value Method 136
11.8 Stock Dividends 138
11.8.1 Small Stock Dividend 138
11.8.2 Large Stock Dividend 138
11.9 Employee Stock Options 139
11.9.1 Legal Understanding 139
11.9.2 Statement of Financial Accounting
Standard No. 123 140
11.9.3 Illustration 141
11.10 Stock Splits 142
11.11 Retained Earnings 143

Part II The Statement of Income

12 Analysis of the Statement of Income 149

12.1 General 149
12.2 The Single-Step Income Statement 149
12.3 Multiple-Step Income Statement 150
12.3.1 Analysis of the Multiple-Step Components 151
12.3.2 Format and Example 154
12.4 Holding Equity 155
12.5 Income from Discontinued Operations 157

13 Other Comprehensive Income 159

13.1 General 159
13.2 Presentation of the OCI 160
13.3 Accumulated OCI 161
13.3.1 Foreign Currency Accounting 161
13.3.2 Discontinued Operations 162
13.4 Reclassification Out of Accumulated Other
Comprehensive Income 165
13.4.1 Presentation on the Face of the Statement—
In Net Income 166
13.4.2 Presentation as a Separate Disclosure
in the Notes 167
 Contents    xiii

13.5 Earnings Per Share 169

13.5.1 The Computation of the Simple EPS 169
13.5.2 The Computation of the Diluted EPS 171

14 The Sub-Statement of Retained Earnings 175

14.1 General 175
14.2 Steps in Preparing the Statement
of Retained Earnings 175
14.3 Retained Earnings Formula 176
14.4 Changes in Retained Earnings 177
14.4.1 Accounting Changes
and Retained Earnings 177
14.4.2 Accounting Errors and Retained Earnings 179

15 The Computation of the Taxable Income 181

15.1 General 181
15.2 Differed Taxes and Assets 181
15.2.1 Temporary Differences for Revenue
and Expenses 182
15.2.2 Permanent Differences 184
15.3 Net Operating Losses 185
15.4 Undistributed Profits of Foreign Subsidiaries 186
15.5 APB 23 and Indefinitely Reinvested Earnings 188
15.6 ASC 740: Accounting for Uncertainty in Income
Taxes (Formerly FIN 48) 189
15.7 Financial Statement Reporting 191
15.7.1 Statement Reporting 191
15.7.2 Presentation 191
15.7.3 Disclosure 191

Part III The Statements of Cash Flows and Financial Ratios

16 Analysis of the Statements of Cash Flows 195

16.1 General 195
16.2 Classification of Cash Flows 196
16.2.1 Cash Flows from Operating Activities 196
16.2.2 Cash Flows from Investing Activities 197
16.2.3 Cash Flows from Financing Activities 198
xiv    Contents

16.3 Content and Form of the Statement of Cash Flows 200

16.3.1 Reporting Cash Flows from Operating
Activities 200
16.3.2 Quick Analysis of the Operating Cash Flows 203
16.4 Examples 203
16.4.1 Example of Operating Cash Flows 203
16.4.2 Example with Investing Cash Flows 204
16.4.3 Example with Financing Cash Flow
Activities 205
16.5 Noncash Investing and Financing Activities 205

17 Financial Ratios Analysis 207

17.1 General 207
17.2 Liquidity Measurement Ratios 207
17.3 Solvency Ratios 214
17.4 Profitability Indicator Ratios 217
17.5 Efficiency Ratios 223
17.6 Debt Ratios 227
17.7 Operating Performance Ratios 229
17.8 Cash Flow Indicator Ratios 232
17.9 Investment Valuation Ratios 234
17.10 Strategic Financial Ratios 238
17.11 Bankruptcy Ratios 244
17.11.1 Working Capital/Total Assets 244
17.11.2 Retained Earnings/Total Assets 245
17.11.3 Earnings Before Interest and Taxes/Total
Assets 245
17.11.4 Market Value of Equity/Book Value
of Total Debt 246
17.11.5 Sales/Total Assets 246
17.12 Limitations 247

Part IV Pro-Forma Financial Statements

18 Forecasting Financial Statements’ Analysis 251

18.1 General 251
18.2 The Forecasted Statement of Income 251
18.2.1 Sales Forecasting 252
 Contents    xv

18.2.2 Production and COGS Forecasting 252

18.2.3 Expenses’ Forecasting 252
18.3 The Forecasted Statement of Position 252
18.3.1 Making Assumptions 253
18.4 The Forecasted Statements of Cash Flows 255
18.4.1 Forecasting Operating Cash Flows 255
18.4.2 Forecasting Financing Cash Flow 256
18.4.3 Forecasting Investing Cash Flow 258

Part V Consolidated Financial Statements

19 Foreign Currency Accounting 261

19.1 General 261
19.2 Determination of the Functional Currency of the
Foreign Entity 261
19.2.1 Factors to Be Considered 262
19.2.2 Changing the Functional Currency 264
19.3 Translation Methods 264
19.3.1 Current/Noncurrent Method 264
19.3.2 Monetary/Nonmonetary Method 265
19.3.3 Temporal Method 265
19.3.4 Current Rate Method 266
19.4 Re-measurement into the Functional Currency 266
19.4.1 The Foreign Entity Does Not Book
or Record in Functional Currency 267
19.4.2 Highly Inflationary Economies—US GAAP 267
19.5 Hedging Balance Sheet and Forecasted Exposure 268

20 Consolidated Financial Statements 269

20.1 Overview 269
20.2 Purpose of Consolidation 270
20.3 Consolidation Methods 271
20.4 Consolidation Theories 272
20.4.1 Parent Company Theory 272
20.4.2 Contemporary/Entity Theory 272
20.4.3 Traditional/Hybrid Theory 272
20.5 The Consolidation Process 273
20.6 Pushdown Accounting 274
xvi    Contents

21 Segment and Intermediary Financial Statements 277

21.1 General 277
21.2 Segment Statements 277
21.2.1 Reportable Segments 278
21.2.2 Identification of Additional Segment 280
21.2.3 Disclosure Requirements 282
21.2.4 Measurement 283
21.2.5 Entity-Wide Information 286
21.2.6 Goodwill Considerations 289
21.3 Intermediary Statements 289
21.3.1 Accounting Principles and Practices 289
21.3.2 Revenue 289
21.3.3 Costs and Expenses 290
21.3.4 Costs Associated with Revenue 290
21.3.5 All Other Costs and Expenses 291
21.3.6 Seasonal Revenue, Costs, or Expenses 292
21.3.7 Extraordinary Items, Unusual and
Infrequent Items, and Disposals of
Components 293
21.3.8 Accounting Changes in Interim Periods 293
21.3.9 Adjustments Related to Prior Interim
Periods of the Current Fiscal Year 294
21.3.10 Guidelines for Preparing Interim
Statements 294
21.3.11 SEC Materials: Regulation S-X Rule 10-01,
Interim Financial Statements 297

22 IFRS and GAAP 299

22.1 General 299
22.2 Principles-Based vs Rules-Based 300
22.3 Selected International Accounting Standards 301
22.3.1 IAS 1—Presentation of Financial Statement 301
22.3.2 IAS 2—Inventories 303
22.3.3 IAS 5—Non-Current Assets Held for Sale
and Discontinued Operations 303
22.3.4 IAS 7-Statements of Cash Flows 304
22.3.5 IAS16—Leases 307
22.3.6 IAS 24 Related Disclosures 309
22.3.7 IAS 27—Consolidated Financial Statements 311
 Contents    xvii

22.3.8 IAS 32, Financial Instrument—

Presentation 316
22.3.9 IAS 33—Earnings Per Shares 318
22.3.10 IAS 34—Interim Financial Reporting 320

Part VI Case Study

23 Apple and Microsoft Case Study 331

23.1 Industry Analysis 331
23.2 Apple 332
23.2.1 Overview 332
23.2.2 Business Strategy 333
23.2.3 Financial Statements 334
23.3 Microsoft 337
23.3.1 Overview 337
23.3.2 Business Strategy 340
23.3.3 Microsoft Financial Statements 340
23.4 Financial Analysis 342
23.4.1 Common-Size Income Statement Analysis 342
23.4.2 Common-Size Balance Sheet Analysis 345
23.4.3 Comparative Common-Size Analysis 347
23.4.4 Financial Ratio Analysis 347
23.4.5 Comparative Financial Ratio Analysis 351

Glossary 353

Bibliography 361

Index 365
 Abbreviations

ABS Asset-Backed Security

AIA American Institute of Accountants
AICPA American Institute of Certified Public Accountants
ARM Accrual Reversal Method
ASC Accounting Standard Committee
ASU Accounting Standard Update
COGS Cost of Goods Sold
EBITDA Earnings Before Interest Tax Depreciation and Amortization
EFRAG European Financial Reporting Advisory Group
EITF Emerging Issues Task Force
EPS Earnings per Share
ESOs Employee Stock Options
FASB Financial Accounting Standard Board
FIFO First-in, First-out
FRC Financial Reporting Council
GAAP Generally Accepted Accounting Principles
GASB Governmental Accounting Standards Board
IAS International Accounting Standard
ICAI Institute of Chartered Accountant of India
IFRS International Financial Reporting Standards
ISOs Incentive Stock Options
LIFO Last-in, First-out
MBS Mortgage-Backed Security
MD&A Management Discussion & Analysis
NZASB New Zealand Accounting Standards Board
OCI Other Comprehensive Income

xix
xx    Abbreviations

PBO Projected Benefit Obligation

PCAOB Public Company Accounting Oversight Board
PPE Plants, Property, Equipment
ROA Return on Assets
ROI Return on Investment
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standard
 List of Tables

Table 8.1 Starbucks (2014): Changes in the carrying amount

of goodwill 98
Table 13.1 Walmart (2014): Currency translation 161
Table 13.2 Walmart (2014): Basic and Diluted Income
per Common Share 174
Table 15.1 Starbucks (2014): Tax effect of temporary
differences and carryforward 192
Table 16.1 PepsiCo (2014): Consolidated statements of cash flows 199
Table 23.1 Apple—Consolidated statement of income 335
Table 23.2 Apple—Consolidated balance sheet 335
Table 23.3 Apple—Consolidated statement of shareholders’ equity 336
Table 23.4 Apple—Consolidated statement of cash flows 337
Table 23.5 Microsoft—Consolidated statement of income 341
Table 23.6 Microsoft—Consolidated balance sheet 342
Table 23.7 Microsoft—Consolidated statement of shareholders’ equity 343
Table 23.8 Microsoft—Consolidated statement of cash flows 344
Table 23.9 Apple—Common-sized income statement 345
Table 23.10 Microsoft—Common-sized income statement 345
Table 23.11 Apple—Common-sized balance sheet 346
Table 23.12 Microsoft—Common-sized balance sheet 347

xxi
 Disclaimer

While the author has made every effort to ensure that the information in
this book is correct at the time of publication, he does not assume and
hereby disclaims any liability to any party for any loss, damage, or dis-
ruption caused by errors or omissions, whether such errors or omissions
result from negligence, accident, or any other cause.
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold on the
understanding that the publisher is not engaged in rendering profes-
sional services. If professional advice or other expert assistance is needed,
the services of a competent professional should be sought.

xxiii
 PART I

Overview of Financial Statements and the

Statement of Financial Position

In the USA, financial statements are prepared and presented in accord-

ance with the GAAP. However, correspondence between accounting
numbers and the events/transactions those numbers purport to repre-
sent is far from giving the real picture.1 Despite these inherent flaws, the
statements as delivered to its readers still deserve considerable amount of
scrutiny and analysis.
ASC 210-10 provides a general overview of the aspects of the bal-
ance sheet, which is also commonly referred to as a statement of financial
position. The balance sheets of most entities show separate classifications
of

• Current assets and current liabilities;

• Long-term assets and long-term;
• Shareholders’ equity.

ASC 210-20 describes the concept of offsetting assets and liabilities in

the balance sheet and notes the limited circumstances when it is allowed.
ASC 210-20 includes the overview of the Subtopic.
This Subtopic provides criteria for offsetting amounts related to cer-
tain contracts and provides guidance on presentation. It is a general
principle of accounting that the offsetting of assets and liabilities in the

1 Lawrence Revsine (1991): “The Selective Financial Misrepresentation Hypothesis,”

Accounting Horizons, pp. 16–27.

2 PART I: OVERVIEW OF FINANCIAL STATEMENTS …

balance sheet is improper except if a right of setoff exists. The general

principle that the offsetting of assets and liabilities is improper except
where a right of setoff exists is usually thought of in the context of
unconditional receivables from and payables to another party. That gen-
eral principle also applies to conditional amounts recognized for con-
tracts under which the amounts to be received or paid or items to be
exchanged in the future depend on future interest rates, future exchange
rates, future commodity prices, or other factors.
 CHAPTER 1

Overview of Financial Statements

1.1  General
Financial reporting is essentially a way of following standard practices to
give to the readers of the financial statements an accurate depiction of
a firm’s finances, including its revenues, expenses, profits, capital, cash
flows. Financial reporting is also a building block of a market-based
monitoring of companies, which allows shareholders and the public
at large to assess management performance.1 In the wake of the inter-
national financial crisis of the 1990s, the international community
embarked on a range of initiatives to strengthen the international finan-
cial architecture.2 Financial reporting plays a crucial role in supporting
the efficient functioning of the capital markets. Robust financial report-
ing increases investors’ confidence, which in turn leads to better capital
allocation decisions and economic growth.

1 UNCTD (2004): International Accounting Reporting Issues, Chapter 3, p. 54, par. 2.

2 UNCTD (2004): International Accounting Reporting Issues, Chapter 3, p. 59.

© The Author(s) 2018 3

F. I. Lessambo, Financial Statements,
https://doi.org/10.1007/978-3-319-99984-5_1
4 F. I. LESSAMBO

1.2  The International
Accounting Standard Board: IFRS
The concept of convergence first arose in the late 1950s in response
to post-World War II economic integration and related increases in
cross-border capital flows. Initially, the focus was put on harmoni-
zation. That is, reducing differences among the accounting princi-
ples used in major capital markets around the world. By the 1990s,
the notion of harmonization was replaced by the concept of conver-
gence. The International Accounting Standards Committee, formed in
1973, was the first international standards-setting body. It was reorgan-
ized in 2001 and became an independent international standard setter,
the International Accounting Standards Board (IASB). As of 2013, the
European Union and more than 100 other countries either require or
permit the use of international financial reporting standards (IFRSs)
issued by the IASB or a local variant of them. By 2016, approximately
120 countries and jurisdictions, including Hong Kong, Egypt, Canada,
Australia, and the countries in the European Union, require or permit
the use of IFRS or a local variant of IFRS.
The FASB and the IASB have been working together since 2002 to
improve and converge USA generally accepted accounting principles
(GAAP) and IFRS. As of 2013, Japan and China were also working
to converge their standards with IFRSs. The Securities and Exchange
Commission (SEC) consistently has supported convergence of global
accounting standards. However, the Commission has not yet decided
whether to incorporate IFRSs into the US financial reporting system.
The Commission staff issued its final report on the issue in July 2012
without making a recommendation.

1.3  European Financial
Reporting Advisory Group (EFRAG)
EFRAG is an advisory body that participates in the European endorse-
ment process of IFRS Standards. The European Union (EU) is not a
single jurisdiction but, rather, an economic and political partnership
between 28 European countries that together cover much of the con-
tinent of Europe. With respect to accounting, the European Union has
enacted some laws, known as (“Directives”) that all EU and EEA mem-
bers must comply with. Some of those Directives address accounting
 1 OVERVIEW OF FINANCIAL STATEMENTS 5

issues. The most notable is Directive 2013/34/EU of the European

Parliament and of the Council of June 26, 2013 on the annual financial
statements, consolidated financial statements, and related reports. EU
and EEA member states may enact additional accounting laws and reg-
ulations that add to the requirements of the Directives, but they cannot
override the requirements of the Directives.
EFRAG serves the European public interest by developing and pro-
moting European views in the field of financial reporting and ensuring
these views are properly considered in the IASB standard-setting pro-
cess and in related international debates. EFRAG ultimately provides
advice to the European Commission on whether newly issued or revised
IFRS meet the criteria in the IAS Regulation for endorsement for use
in the EU, including whether endorsement would be conducive to the
European public good. EFRAG seeks input from all stakeholders, and
obtains evidence about specific European circumstances, throughout the
standard-setting process and in providing our endorsement advice. The
EFRAG is recognized as the European Voice in financial reporting.

1.4  The USA: The FASB

The FASB is an independent, private-sector organization that oper-
ates under the oversight of the Financial Accounting Foundation
(FAF) and the US Securities and Exchange Commission (“SEC” or
“Commission”). For nearly 40 years, the FASB has established stand-
ards of financial accounting and reporting for non-governmental entities,
including both businesses (public and private) and not-for-profit organi-
zations. Those standards—US GAAP—are recognized as authoritative by
the SEC for public companies and by the American Institute of Certified
Public Accountants (AICPA) for other non-governmental entities.
US GAAP is essential to the efficient functioning of the US economy
because investors, creditors, donors, and other users of financial reports
rely heavily on credible, transparent, comparable, and unbiased financial
information. In today’s dynamic financial markets, the need for integrity,
transparency, and objectivity in financial reporting is increasingly critical
to ensure the strength of US capital markets and provide investors with
accurate and timely information.
In 2002, the US Congress enacted the Sarbanes–Oxley Act, which
included provisions protecting the integrity of the FASB’s accounting
standards-setting process. The legislation provided the FASB with an
6 F. I. LESSAMBO

independent, stable source of funding. The legislation established an

ongoing source of funding for the FASB from annual accounting sup-
port fees collected from issuers of securities, as those issuers are defined
in the Sarbanes–Oxley Act.
It is important to note that although the FASB has the responsibil-
ity to set accounting standards, it does not have the authority to enforce
them. Officers and directors of a company are responsible for prepar-
ing financial reports in accordance with accounting standards. Auditors
provide an opinion about whether those officers and directors appropri-
ately applied accounting standards. The Public Company Accounting
Oversight Board (“PCAOB”) is charged with ensuring that auditors
of public companies have performed an audit in accordance with the
auditing standards of the PCAOB, which includes an auditor’s analysis
of whether a public company has complied with appropriate accounting
standards. The SEC has the ultimate authority to determine whether
public companies have complied with accounting standards.

• The Mission of the FASB

The FASB’s mission is to establish and improve standards of financial

accounting and reporting that foster financial reporting by non-gov-
ernmental entities that provides useful decision-making information to
investors and other users of financial reports. That mission is accom-
plished through a comprehensive and independent process that encour-
ages broad participation, objectively considers all stakeholders’ views,
and is subject to oversight by the FAF’s Board of Trustees. To accom-
plish its mission, the FASB acts to:

1. Improve the usefulness of financial reporting by focusing on the

primary characteristics of relevance and reliability and on the quali-
ties of comparability and consistency.
2. Keep standards current to reflect changes in methods of doing
business and changes in the economic environment.
3. Consider promptly any significant areas of deficiency in financial
reporting that might be addressed through the standards-setting
process.
4. Improve the common understanding of the nature and purpose of
information contained in financial reports.
 1 OVERVIEW OF FINANCIAL STATEMENTS 7

As it works to develop accounting standards for financial reporting, the

FASB is committed to following an open, orderly process that considers
the interests of the many who rely on financial information.

• The Standards-Setting Process

An independent standards-setting process is paramount to produc-

ing high-quality accounting standards because it relies on the collective
judgment of experts who are informed by the input of all interested par-
ties through a deliberate process. The FASB sets accounting standards
through processes that are thorough and open, accord due process to
all interested parties, and allow for extensive input from all stakeholders.
Such extensive due process is required by the Rules of Procedure, set by
the Board within the parameters of the FAF’s bylaws. The FASB process
is similar to the Administrative Procedure Act process used by federal
agencies for rulemakings but provides far more opportunities for interac-
tion with all interested parties.
In short, the FASB actively seeks input from all of its stakeholders on
proposals and processes. Wide consultation provides the opportunity for
all stakeholders to be heard and considered, the identification of unin-
tended consequences, and, ultimately, broad acceptance of the standards
that are adopted. The Board’s wide consultation also helps it to assess
whether the benefits to users of improved information from proposed
changes outweigh the costs of the changes to preparers and others.
The FASB meets regularly with the staff of the SEC and the PCAOB.
Additionally, because banking regulators have a keen interest in US
GAAP financial statements as a starting point in assessing the safety and
soundness of financial institutions, the Board meets with them on a quar-
terly basis and otherwise, as appropriate. The FASB conducts outreach
on a frequent and regular basis with the FASB’s various advisory groups.
The primary role of advisory group members is to share their views and
experience with the Board on matters related to practice and implemen-
tation of new standards, projects on the Board’s agenda, possible new
agenda items, and strategic and other matters.
In addition to the FASB’s various advisory groups, the Emerging
Issues Task Force (“EITF”) assists the FASB in improving financial
reporting through the timely identification, discussion, and resolution of
financial accounting issues relating to US GAAP. The EITF was designed
8 F. I. LESSAMBO

to promulgate implementation guidance for accounting standards

to reduce diversity in accounting practice on a timely basis. The EITF
assists the FASB in addressing implementation, application, or other
emerging issues that can be analyzed within existing US GAAP. Task
Force members are drawn from a cross section of the FASB’s stakehold-
ers, including auditors, preparers, and users of financial statements. The
chief accountant or the deputy chief accountant of the SEC attends Task
Force meetings regularly as an observer with the privilege of the floor.
The membership of the EITF is designed to include persons who are in
a position to project emerging issues before they become widespread and
before divergent practices become entrenched.

• Oversight of FASB

The FASB’s accountability derives from oversight at two levels. First,

the Board is overseen by the independent Board of Trustees of the FAF.
Organized in 1972, the FAF is an independent, private-sector, not-for-
profit organization. The FAF exercises its authority by having respon-
sibility for oversight, administration, and finances of the FASB and its
sister organization the Governmental Accounting Standards Board
(“GASB”). The FAF’s responsibilities consist of:

1. Selecting the members of the FASB, the GASB, and their respec-
tive Advisory Councils.
2. Overseeing the FASB’s and the GASB’s Advisory Councils (includ-
ing their administration and finances).
3. Overseeing the effectiveness of the FASB’s and the GASB’s stand-
ards-setting processes and hold the Boards accountable for those
processes.
4. Protecting the independence and integrity of the standards-setting
process.
5. Educating stakeholders about those standards.

Second, the FASB is subject to oversight by the SEC with respect to

standards setting for public companies. The SEC has the statutory
authority to establish financial accounting and reporting standards for
public entities. At the time of FASB’s formation in 1973, the SEC for-
mally recognized the FASB’s pronouncements that establish and amend
accounting principles and standards as “authoritative” in the absence
 1 OVERVIEW OF FINANCIAL STATEMENTS 9

of any contrary determination by the Commission. In 2003, the SEC

issued a Policy Statement that affirms the FASB’s status as a designated,
private-sector standards setter.

1.5  The UK: Financial Reporting Council (FRC)

In the UK Accounting standards derive from a number of sources.
The chief standard-setter is the Accounting Standards Board (ASB),
which issues standards called Financial Reporting Standards (FRS). The
ASB is part of the FRC, an independent regulator funded by a levy on
listed companies, and it replaced the Accounting Standards Committee
(ASC), which was disbanded in 1990 following a number of criticisms
of its work. To the extent that the ASC’s pronouncements, known as
Statements of Standard Accounting Practice (SSAPs), have not been
replaced by FRS, they remain in force. In 2015, the UK’s FRC pub-
lished a set of new reporting standards collectively known as the New
UK GAAP. These new standards applied to all accounting periods start-
ing on or after January 1, 2016. The Board comprises the Chairman,
the Deputy Chairman, the Chief Executive, the Chair of the Codes
and Standards Committee, the Chair of the Conduct Committee, and
other non-executive directors (including the Chairs of the Corporate
Reporting and Actuarial Councils). The Chairman and Deputy
Chairman are appointed by the Secretary of State for Business, Energy &
Industrial Strategy (BEIS).
The UK’s FRC published five standards which together form the
basis of the new UK regime. The Financial Reporting Standard for
Smaller Entities will continue to be available for those that qualify to use
it and will remain fundamentally unaltered for the time being. In March
2013 the FRC (now responsible for issuing accounting standards in
the UK) issued FRS 102, The Financial Reporting Standard Applicable
in the UK and Republic of Ireland. This followed the issue of FRS 100
Application of Financial Reporting Requirements and FRS 101—The
Reduced Disclosure Framework in November 2012. Together these
standards make up what is commonly being referred to by accountants
as New UK GAAP, which takes mandatory effect for accounting periods
commencing on or after January 1, 2015. The introduction of the New
UK GAAP aimed to make financial reporting both easier and cheaper,
while creating a more unified, coherent and succinct set of standards.
Compared to the old standards, the New UK GAAP:
Another random document with
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no haze la merced tu voluntad. Si
lo consientes iuzgandome
desagradecido porque no me
contento con el bien que me
heziste en darme causa de tan
ufano pensamiento, no me
culpes, que avnque la voluntad se
satisfaze, el sentimiento se
querella. Si te plaze porque nunca
te hize seruizio, no pude sobir los
seruizios á la alteza de lo que
mereces; que quando todas estas
cosas y otras muchas pienso
hallome que dexas de hazer lo
que te suplico porque me puse en
cosa que no pude merecer. Lo
qual yo no niego; pero atreuime á
ello pensando que me harias
merced no segund quien la pedia
mas segund tú que la auies de
dar. Y tambien pense que para
ello me ayudadaran virtud y
compasion y piedad porque son
acetas á tu condicion, que quando
los que con los poderosos
negocian para alcançar su gracia,
primero ganan las voluntades de
sus familiares; y pareceme que en
nada hallé remedio. Busqué
ayudadores para contigo y
hallélos por cierto leales y firmes
y todos te suplican que me ayas
merced; el alma por lo que sufre,
la vida por lo que padece, el
coraçon por lo que pasa, el
sentido por lo que siente. Pues no
niegues galardon á tantos que
con ansia te lo piden y con razon
te lo merecen. Yo soy el más sin
ventura de los más
desauenturados. Las aguas
reuerdecen la tierra y mis
lagrimas nunca tu esperança la
qual cabe en los canpos y en las
yeruas y arboles y no puede
caber en tu coraçon.
Desesperado auria segund lo que
siento si alguna vez me hallase
solo, pero como siempre me
acompañan el pensamiento que
me das y el deseo que me
ordenas y la contemplacion que
me causas, viendo que lo vo á
hazer consuelanme acordandome
que me tienen conpañia de tu
parte, de manera que quien causa
las desesperaciones me tiene que
no desespere. Si todavia te plaze
que muera, hazmelo saber, que
gran bien harás á la vida pues no
será desdichada del todo. Lo
primero della se pasó en
inocencia y lo del conocimiento en
dolor; a lo menos el fin será en
descanso porque tú lo das, el
qual, si ver no me quieres, será
forçado que veas.

EL AUCTOR
Con mucha pena recibio Laureola
la carta de Leriano y por
despedirse dél onestamente
respondiole desta manera, con
determinacion de iamas recebir
enbaxada suya.

CARTA DE LAUREOLA Á
LERIANO
El pesar que tengo de tus males
te seria satisfacion dellos mismos
si creyeses quanto es grande, y él
solo tomarias por galardon sin
que otro pidieses, avnque fuese
poca paga segund lo que tienes
merecido, la qual yo te daria
como deuo si la quisieses de mi
hazienda y no de mi onrra. No
respondere á todas las cosas de
tu carta porque en saber que te
escriuo me huye la sangre del
coraçon y la razon del iuycio.
Ninguna causa de las que dizes
me haze consentir tu mal sino
sola mi bondad, porque cierto no
estó dudosa del, porque el
estrecho á que llegaste fue testigo
de lo que sofriste. Dizes que
nunca me hiziste seruicio. Lo que
por mi has hecho me obliga á
nunca oluidallo y sienpre desear
satisfacerlo, no segund tu deseo
mas segund mi onestad. La virtud
y piedad y conpasion que
pensaste que te ayudarian para
comigo, aunque son aceptas á mi
condicion, para en tu caso son
enemigas de mi fama y por esto
las hallaste contrarias. Quando
estaua presa saluaste mi vida y
agora que estó libre quieres
condenalla. Pues tanto me
quieres, antes devrias querer tu
pena con mi onrra que tu remedio
con mi culpa; no creas que tan
sanamente biuen las gentes, que
sabido que te hablé, iuzgasen
nuestras linpias intenciones,
porque tenemos tienpo tan malo
que antes se afea la bondad que
se alaba la virtud; assi que es
escusada tu demanda porque
ninguna esperança hallarás en
ella aunque la muerte que dizes
te viese recebir, auiendo por
mejor la crueldad onesta que la
piedad culpada. Dirás oyendo tal
desesperança que só mouible
porque te comence á hazer
merced en escreuirte y agora
determino de no remediarte. Bien
sabes tú quan sanamente lo hize
y puesto que en ello uviera otra
cosa, tan conuenible es la
mudança en las cosas dañosas
como la firmeza en las onestas.
Mucho te ruego que te esfuerces
como fuerte y te remedies como
discreto. No pongas en peligro tu
vida y en disputa mi onrra, pues
tanto la deseas, que se dirá
muriendo tú que galardono los
seruicios quitando las vidas, lo
que si al rey venço de dias se dirá
al reues. Ternas en el reyno toda
la parte que quisieres, crecere tu
onrra, doblaré tu renta, sobiré tu
estado, ninguna cosa ordenarás
que reuocada te sea, assi que
biuiendo causarás que me
iuzguen agradecida y muriendo
que me tengan por mal
acondicionada. Avnque por otra
cosa no te esforçases, sino por el
cuydado que tu pena me da lo
devrias hazer. No quiero mas
dezirte porque no digas que me
pides esperança y te do conseio.
Plugiere á Dios que fuera tu
demanda iusta, por que vieras
que como te aconseió en lo vno te
satisfiziera en lo otro; y assi
acabo para sienpre de más
responderte ni oyrte.

EL AUCTOR
Cuando Laureola vuo escrito
dixome con proposito
determinado que aquella fuese la
postrimera vez que pareciese en
su presencia porque ya de mis
pláticas andaua mucha sospecha
y porque en mis ydas auia mas
peligro para ella que esperança
para mi despacho. Pues vista su
determinada voluntad,
pareciendome que de mi trabaio
sacaua pena para mí y no
remedio para Leriano, despedime
della con mas lágrimas que
palabras y despues de besalle las
manos salime de palacio con vn
nudo en la garganta que pense
ahogarme, por encobrir la pasion
que sacaua, y salido de la cibdad,
como me vi solo, tan fuertemente
comence á llorar que de dar
bozes no me podía contener. Por
cierto yo tuuiera por meior quedar
muerto en Macedonia que venir
biuo á Castilla; lo que deseaua
con razon pues la mala ventura
se acaba con la muerte y se
acrecienta con la vida. Nunca por
todo el camino sospiros y
gemidos me fallecieron, y quando
llegué á Leriano dile la carta, y
como acabó de leella dixele que
ni se esforçase, ni se alegrase, ni
recibiese consuelo pues tanta
razon auia para que deuiese
morir. El qual me respondió que
más que hasta alli me tenia por
suyo porque le aconseiaua lo
propio, y con boz y color mortal
començo a condolerse. Ni
culpaua su flaqueça, ni
avergonçaua su desfallecimiento;
todo lo que podie acabar su vida
alabaua, mostrauase amigo de
los dolores, recreaua con los
tormentos, amaua las tristezas;
aquellos llamaua sus bienes por
ser mensaieros de Laureola y
porque fuesen tratados segund de
cuya parte venian, aposentólos en
el coraçon, festeiólos con el
sentimiento, convidólos con la
memoria, rogauales que
acabasen presto lo que venian a
hazer porque Laureola fuese
seruida. Y desconfiando ya de
ningun bien ni esperança,
aquexado de mortales males, no
podiendo sustenerse ni sofrirse
vuo de venir á la cama, donde ni
quiso comer ni beuer ni ayudarse
de cosa de las que sustentan la
vida, llamandose sienpre
bienauenturado porque era
venido á sazon de hazer seruicio
á Laureola quitandola de enoios.
Pues como por la corte y todo el
reyno se publicase que Leriano se
dexaua morir, ybanle a ueer todos
sus amigos y parientes y para
desuialle su proposito dezianle
todas las cosas en que pensauan
prouecho, y como aquella
enfermedad se auia de curar con
sabias razones, cada uno
aguzaua el seso lo meior que
podia; y como vn cauallero
llamado Tefeo[276] fuese grande
amigo de Leriano viendo que su
mal era de enamorada pasion
puesto que quien la causaua él ni
nadie lo sabia dixole infinitos
males de las mugeres y para
fauorecer su habla truxo todas las
razones que en disfamia dellas
pudo pensar, creyendo por alli
restituylle la vida. Lo qual oyendo
Leriano, acordandose que era
muger Laureola, afeó mucho á
Tefeo porque tal cosa hablaua y
puesto que su disposicion no le
consintiese mucho hablar,
esforçando la lengua con la
pasion de la saña començo a
contradezille en esta manera.

LERIANO CONTRA TEFEO

Y TODOS LOS QUE DIZEN MAL
DE MUGERES
Tefeo, para que recibieras la pena
que merece tu culpa, onbre que te
tuuiera menos amor te auie de
contradezir, que las razones mias
mas te seran en exenplo para que
calles que castigo para que
penes. En lo qual sigo la
condicion de verdadera amistad,
porque pudiera ser, si yo no te
mostrara por biuas causas tu
cargo, que en qualquiera plaça te
deslenguaras como aqui has
hecho; asi que te será mas
prouechoso emendarte por mi
contradicion que auergonçarte por
tu perseverança. El fin de tu habla
fue segund amigo, que bien noté
que la dexiste porque aborreciese
la que me tiene qual vees,
diziendo mal de todas mugeres, y
como quiera que tu intencion no
fue por remediarme, por la via
que me causaste remedio tú por
cierto me lo as dado, porque tanto
me lastimaste con tus feas
palabras, por ser muger quien me
pena, que de pasion de auerte
oydo beuire menos de lo que
creya, en lo qual señalado bien
recebi, que pena tan lastimada
meior es acaballa presto que
sostenella más; assi que me
truxiste alivio para el padecer y
dulce descanso para ella acabar.
Porque las postrimeras palabras
mias sean en alabança de las
mugeres, porque crea mi fe la que
tuuo merecer para causalla y no
voluntad para satisfazella.
Y dando comienço á la intencion
tomada, quiero mostrar quinze
causas porque yerran los que en
esta nacion ponen lengua, y
veynte razones porque les somos
los onbres obligados, y diuersos
enxenplos de su bondad. Y
quanto a lo primero que es
proceder por las causas que
hazen yerro los que mal las
tratan, fundo la primera por tal
razon. Todas las cosas hechas
por la mano de Dios son buenas
necesariamente, que segun el
obrador han de ser las obras;
pues siendo las mugeres sus
criaturas, no solamente á ellas
ofende quien las afea, mas
blasfema de las obras del mismo
Dios. La segunda causa es
porque delante dél y de los
onbres no ay pecado más
abominable ni más graue de
perdonar quel desconocimiento;
¿pues quál lo puede ser mayor
que desconocer el bien que por
Nuestra Señora nos vino y nos
viene? Ella nos libró de pena y
nos hizo merecer la gloria; ella
nos salua, ella nos sostiene, ella
nos defiende, ella nos guia, ella
nos alumbra, por ella que fue
muger merecen todas las otras
corona de alabança. La tercera es
porque a todo onbre es defendido
segund virtud mostrarse fuerte
contra lo flaco, que si por ventura
los que con ellas se deslenguan
pensasen recebir contradicion de
manos, podria ser que tuuiesen
menos libertad en la lengua. La
quarta es porque no puede
ninguno dezir mal dellas sin que a
si mismo se desonrre, porque fue
criado y traydo en entrañas de
muger y es de su misma
sustancia, y despues desto, por el
acatamiento y reuerencia que a
las madres deuen los hijos. La
quinta es por la desobediencia de
Dios, que dixo por su boca que el
padre y la madre fuesen onrrados
y acatados, de cuya causa los
que en las otras tocan merecen
pena. La sesta es porque todo
noble es obligado a ocuparse en
autos virtuosos assi en los hechos
como en las hablas; pues si las
palabras torpes ensusian la
linpieza, muy a peligro de infamia
tienen la onrra de los que en tales
platicas gastan su vida. La setima
es porque quando se establecio la
caualleria, entre las otras cosas
que era tenudo a guardar el que
se armaua cauallero era vna que
a las mugeres guardase toda
reuerencia y onestad, por donde
se conosce que quiebra la ley de
nobleza quien vsa el contrario
della. La otaua es por quitar de
peligro la onrra; los antiguos
nobles tanto adelgazauan las
cosas de bondad y en tanto la
tenian que no auian mayor miedo
de cosa que de memoria culpada;
lo que no me parece que guardan
los que anteponen la fealdad de
la virtud poniendo macula con su
lengua en su fama, que
qualquiera se iuzga lo que es en
lo que habla. La nouena y muy
principal es por la condenacion
del alma. Todas las cosas
tomadas se pueden satisfazer y la
fama robada tiene dudosa la
satisfacion, lo que más
conplidamente determina nuestra
fé. La dezena es por escusar
enemistad. Los que en ofensa de
las mugeres despienden el tiempo
hazense enemigos dellas y no
menos de los virtuosos, que como
la virtud y la desmesura
diferencian la propiedad no
pueden estar sin enemiga. La
onzena es por los daños que de
tal auto malicioso se recrecian,
que como las palabras tienen
licencia de llegar á los oydos
rudos tanbien como a los
discretos, oyendo los que poco
alcançan las fealdades dichas de
las mugeres, arrepentidos de
auerse casado danles mala vida o
vanse dellas, o por ventura las
matan. La dozena es por las
murmuraciones, que mucho se
deuen temer, siendo vn onbre
infamado por disfamador en las
plaças y en las casas y en los
canpos y donde quiera es
retratado su vicio. La trezena es
por razon del peligro, que quando
los maldizientes que son auidos
por tales tan odiosos son a
todos[277] que qualquier les es
mas contrario, y algunas por
satisffazer a sus amigos, puesto
que ellas no lo pidan ni lo
quieran[278], ponen las manos en
los que en todas ponen la lengua.
La catorzena es por la hermosura
que tienen, la qual es de tanta
ecelencia que avnque copiesen
en ellas todas las cosas que los
deslenguados les ponen, más ay
en vna que loar con verdad que
no en todas que afear con
malicia. La quinzena es por las
grandes cosas de que han sido
causa. Dellas nacieron onbres
virtuosos que hizieron hazañas de
dina alabança, dellas procedieron
sabios que alcançaron a conocer
qué cosa era Dios en cuya fé
somos saluos; dellas vinieron los
inuentiuos que hizieron cibdades
y fuerças y edeficios de perpetual
ecelencia; por ellas vuo tan
sotyles varones que buscaron
todas las cosas necesarias para
sustentacion del linage vmanal.

DA LERIANO VEYNTE
RAZONES PORQUE
LOS ONBRES SON OBLIGADOS
Á LAS MUGERES
Tefeo, pues as oydo las causas
porque soys culpados tú y todos
lo que opinion tan errada seguis,
dexada toda prolixidad, oye
veynte razones por donde proferí
a prouar que los onbres á las
mugeres somos obligados. De las
quales la primera es porque á los
sinples y rudos disponen para
alcançar la virtud de la prudencia
y no solamente á los torpes hazen
discretos mas á los mismos
discretos mas sotyles, porque si
de la enamorada pasion se
catyuan, tanto estudian su libertad
que abiuando con el dolor el
saber dizen razones tan dulces y
tan concertadas que alguna vez
de compasion que les an se libran
della: y los sinples de su natural
inocentes quando en amar se
ponen entran con rudeza y hallan
el estudio del sentimiento tan
agudo que diuersas vezes salen
sabios, de manera que suplen las
mugeres lo que naturaleza en
ellos faltó. La segunda razon es
porque de la virtud de la iusticia
tanbien nos hazen suficientes,
que los penados de amor, aunque
desygual tormento reciben, hanlo
por descanso iustificandose
porque iustamente padecen: y no
por sola esta causa nos hazen
goçar desta virtud mas por otra
tan natural: los firmes
enamorados para abonarse con
las que siruen buscan todas las
formas que pueden, de cuyo
deseo biuen iustificadamente sin
eceder en cosa de toda ygualdad
por no infamarse de malas
costunbres. La tercera porque de
la tenplança nos hazen dinos, que
por no selles aborrecibles para
venir á ser desamados somos
templados en el comer y en el
beuer y en todas las otras cosas
que andan con esta virtud. Somos
tenplados en la habla, somos
templados en la mesura, somos
templados en las obras, sin que
vn punto salgamos de la onestad.
La quarta es porque al que fallece
fortaleza gela dan, y al que la
tiene gela acrecientan. Hacennos
fuertes para sofrir, causan osadia
para cometer, ponen coraçon
para esperar; quando á los
amantes se les ofrece peligro se
les apareia la gloria, tienen las
afrentas por vicio, estiman mas ell
alabança del amiga quel precio
del largo beuir. Por ellas se
comiençan y acaban hechos muy
hazañosos, ponen la fortaleza en
el estado que merece. Si les
somos obligados aqui se puede
iuzgar. La quinta razon es porque
no menos nos dotan de las
virtudes teologales que de las
cardinales dichas. Y tratando de
la primera ques la fé, avnque
algunos en ella dudasen, siendo
puestos en pensamiento
enamorado creerian en Dios y
alabarian su poder porque pudo
hazer á aquella que de tanta
ecelencia y hermosura les parece.
Iunto con esto los amadores tanto
acostumbran y sostienen la fe que
de vsalla en el coraçon conocen y
creen con más firmeza la de Dios,
y porque no sea sabido de quien
los pena que son malos
cristianos, ques vna mala señal
en el onbre, son tan deuotos
católicos que ningun apostol les
hizo ventaia. La sesta razon es
porque nos crian en el alma la
virtud del esperança, que puesto
que los sugetos á esta ley de
amores mucho penen, siempre
esperan en su fé, esperan en su
firmeza, esperan en la piedad de
quien los pena, esperan en la
condicion de quien los destruye,
esperan en la ventura; ¿pues
quien tiene esperança donde
recibe pasion, como no la terná
en Dios que le promete
descanso? Sin duda haziendonos
mal nos apareian el camino del
bien como por esperiencia de lo
dicho parece. La setena razon es
porque nos hazen merecer la
caridad, la propiedad de la qual
es amor. Esta tenemos en la
voluntad, esta ponemos en el
pensamiento, esta traemos en la
memoria, esta firmamos en el
coraçon, y como quiera que los
que amamos la vsemos por el
prouecho de nuestro fin, dél nos
redunda que con biua contricion
la tengamos para con Dios,
porque trayendonos amor á
estrecho de muerte hazemos
lymosnas, mandamos dezir
misas, ocupamosnos en
caritatiuas obras porque nos libre
de nuestros crueles
pensamientos: y como ellas de su
natural son deuotas, participando
con ellas es forçado que hagamos
las obras que hazen. La otaua
razon, porque nos hazen
contenplatiuos: que tanto nos
damos á la contemplacion de la
hermosura y gracias de quien
amamos y tanto pensamos en
nuestras pasiones, que quando
queremos contenplar la de Dios,
tan tiernos y quebrantados
tenemos los coraçones, que sus
llagas y tormentos parece que
recebimos en nosotros mismos;
por donde se conosce que
tanbien por aquí nos ayudan para
alcançar la perdurable holgança.
La nouena razon es porque nos
hazen contritos, que como siendo
penados pedimos con lagrimas y
sospiros nuestro remedio
acostunbrado en aquello, yendo á
confesar nuestras culpas assi
gemimos y lloramos quel perdon
dellas merecemos. La dezena es
por el buen consejo que sienpre
nos dan, que á las vezes acaece
hallar en su presto acordar, lo que
nosotros con[279] largo estudio y
diligencias buscamos. Son sus
conseios pacificos sin ningund
escandalo, quitan muchas
muertes, conseruan las pazes,
refrenan la yra y aplacan la saña;
sienpre es muy sano su parecer.
La onzena es porque nos hazen
onrrados: con ellas se alcançan
grandes casamientos, muchas
haziendas y rentas. Y porque
alguno podria responderme que la
onrra está en la virtud y no en la
riqueza, digo que tanbien causan
lo vno como lo otro. Ponen nos
presunciones tan virtuosas que
sacamos dellas las grandes
onrras y alabanças que
deseamos; por ellas estimamos
más la verguença que la vida; por
ellas estudiamos todas las obras
de nobleza, por ellas las ponemos
en la cunbre que merecen. La
dozena razon es porque
apartandonos del auaricia nos
iuntan con la libertad, de cuya
obra ganamos las voluntades de
todos; que como largamente nos
hazen despender lo que tenemos,
somos alabados y tenidos en
mucho amor, y en qualquier
necesidad que nos sobrevenga
recebimos ayuda y seruizio; y no
solo nos aprouechan en hazernos
usar la franqueza como deuemos,
mas ponen lo nuestro en mucho
recaudo porque no ay lugar
donde la hazienda esté mas
segura que en la voluntad de las
gentes. La trezena es porque
acrecientan y guardan nuestros
averes y rentas, las quales
alcanzan los onbres por ventura y
conseruanlas ellas con diligencia.
La catorzena es por la limpieça
que nos procuran asi en la
persona, como en el vestir, como
en el comer, como en todas las
cosas que tratamos. La quinzena
es por la buena criança que nos
ponen, vna de las principales
cosas de que los onbres tienen
necesidad. Siendo bien criados
vsamos la cortesya y esquiuamos
la pesadumbre, sabemos onrrar
los pequeños, sabemos tratar los
mayores; y no solamente nos
hazen bien criados mas bien
quistos, porque como tratamos á
cada vno como merece, cada vno
nos da lo que merecemos. La
razon desiseys es porque nos
hazen ser galanes. Por ellas nos
desuelamos en el vestir, por ellas
estudiamos en el traer, por ellas
nos atauiamos de manera que
ponemos por industria en
nuestras personas la buena
disposicion que naturaleza
algunos negó. Por artificio se
endereçan los cuerpos
pidiendo [280] las ropas con
agudeza y por el mismo se pone
cabello donde fallece y se
adelgazan ó engordan las piernas
si conuiene hazello; por las
mugeres se inuentan los galanes
entretales, las discretas
bordaduras, las nueuas
inuenciones; de grandes bienes
por cierto son causa. La dezisiete
razon es porque nos conciertan la
musica y nos hazen gozar de las
dulcedumbres della: ¿por quién
se asuenan las dulces canciones?
¿por quién se cantan los lindos
romances? ¿por quién se
acuerdan las bozes? ¿porquién
se adelgazan y sotilizan todas las
cosas que en el canto consisten?
La dizeochena es porque crecen
las fuerças á los braceros, y la
maña á los luchadores, y la
ligereza á los que boltean y
corren y saltan y hazen otras
cosas semeiantes. La dezinueue
razon es porque afinan las
gracias. Los que como es dicho
tañen y cantan por ellas, se
desuelan tanto que suben á lo
mas perfeto que en aquella gracia
se alcança. Los trobadores ponen
por ellas tanto estudio en lo que
troban que lo bien dicho hazen
parecer meior, y en tanta manera
se adelgazan que propiamente lo
que sienten en el coraçon ponen
por nueuo y galan estilo en la
cancion ó inuencion ó copla que
quieren hazer. La veyntena y
postrimera razon es porque
somos hijos de mugeres, de cuyo
respeto les somos mas obligados
que por ninguna razon de las
dichas ni de quantas se puedan
dezir. Diuersas razones auía para
mostrar lo mucho que á esta
nacion somos los onbres en
cargo, pero la disposicion mia no
me da lugar á que todas las diga.
Por ellas se ordenaron las reales
iustas y los ponposos torneos y
las alegres fiestas, por ellas
aprouechan las gracias y se
acaban y comiençan todas las
cosas de gentileza; no sé causa
porque de nosotros deuan ser
afeadas. ¡O culpa merecedora de
graue castigo, que porque
algunas ayan piedad de los que
por ellas penan les dan tal
galardon! ¿A qué muger deste