Research Topics: Financial Reporting Standards

Sample Accounting Profit and Loss Account Essays

It is said that accounting is the language of business because it communicates financial information about a business enterprise. Proper and correct communication of ideas, plans and facts are very important in business, where accounting plays a very important role by supplying financial information that is vital for the effective management and proper evaluation of any enterprise, as well as the communication and interaction of a business with external factors geared towards a profitable end. The users of accounting information are divided into two groups, the internal users and the external users. The internal users are those who own or are employed or who manage the business, as well as persons whose decisions affect the internal affairs of the business. Among them are the owners, managers, officers, and employees of the said business. The external users, on the other hand, are those outside the business who make decisions concerning their financial relationship with the said business. They are the investors, creditors, customers, suppliers, banks, and government agencies who have existing business relationships with the said business.             For example, for the information on the balance sheet, almost all of the information there are important particularly for the suppliers, investors, creditors, as well as banks. For the figures on the assets part, they examine them as well as on the equity’s part to assess the ability of the company to pay its loans and other debts on them. In case they are short on cash, they can take some of their assets, which they deemed to have enough value to cover their debts. An example is the figure on the total tangible/fixed assets (65200), particularly the buildings which is the most valued asset (55000).             They can also based their decisions on whether they will approve their loan or not, through the examination of the income statement. The reason here is to see if they are earning enough profits to pay for the interest and the cash they will be lending them. For Mr. Brown’s part, even though they are not earning much for the mean time (net loss of 492), it is still not reasonable for them to shut-down their business. They can still borrow some funds to make necessary adjustments to solve the problem. They still have enough assets to use for collaterals or for sale for their source of the needed fund. Creditors and other banks can still have the confidence on lending them money since they only have a current liability of 50 and they have enough cash to use for emergency situations (cash at hand of 195 and cash on bank of 5163). And if ever they will be short of cash, they still have enough assets to be converted into cash (total fixed assets of 65200).             For the investors, it will be their basis on whether they will invest on the said business or not. Through the income statement, particularly for the figure on net income, they will know if the said business is profitable or not, to judge if their investments are worth it, if it will earn enough for them to stay in that business. Question 3)             First is the Statements of Federal Financial Accounting Concepts number one (SFFAC 1), which is about the objectives of federal financial reporting. It says there that for general financial reporting purposes, federal financial reporters must consider the needs of both internal and external report users, as well as the decisions they make. Objectives are outlined for reported financial information that allows the Federal Government to demonstrate accountability, along with providing useful information to the public and Congress. This is also to help managers use financial information in management decisions.             The second one pertains to Statements of Federal Financial Accounting Standards (SFFAS 4) or the Managerial Cost Accounting Concepts and Standards. The aim of this statement is to provide reliable and timely information on the full cost of Federal Programs, their activities, and outputs. The concepts of managerial cost accounting contained in this statement describe the relationship among cost accounting, financial reporting, and budgeting.             The last concept was on Accounting for Revenue and other Financing Resources and Concepts for Reconciling Budgetary and Financial Accounting or SFFAS 7. Two separate parts are contained in this statement. The first part describes revenue and other financing sources. Revenue is defined as an inflow of resources that the Government demands, earns, or receives by donation. The second part amends SFFAC 2 by adding a new concept to satisfy users’ needs for information that reconciles budgetary and financial accounting. An implementation guide or SFAS 7 is available, which describes the content and presentation of the financial statements. Credit:ivythesis.typepad.com

Sample Accounting Profit and Loss Account Essays

It is said that accounting is the language of business because it communicates financial information about a business enterprise. Proper ...

Assessment of the Suitability of the International Financial Reporting Standards in Hong Kong SME

CHAPTER 1 INTRODUCTION Introduction 	One of the most important aspects in business industries is their ability to manage their financial resources. Having been able to realize the importance of financial reporting, different scholars have been able to provide more efficient financial reporting standards to be followed by various organizations. It was in 1973 when the setting for international standard has begun. This has been initiated by the agreement settled by the nine professional accountancy bodies all over the world. With this agreement, the International Accounting Standards Committee (IASC) has been established. Representatives from fourteen nations make up the IASC and served as the body for setting the international standards. The Financial Accounting Standards Board (FASB), the International Organization of Securities Commissions (IOSCO) as well as the European Commission on the other hand functioned as IASC’s observer members. Since its official operation, IASC was able to issue a number of exposure drafts, policies and standards (PricewaterhouseCoopers, 2002). Credit:ivythesis.typepad.com

Assessment of the Suitability of the International Financial Reporting Standards in Hong Kong SME

CHAPTER 1 INTRODUCTION Introduction One of the most important aspects in business industries is their ability to manage their financial ...

Compare and contrast the mechanisms for regulating and enforcing financial reporting

The Mechanisms on Financial Reporting An assessment of the use of accounting standards reflects in the financial reporting and auditing practices. The standards in financial reporting are an advantage of every company identify the financial constraints such as losses of the company. In relation, it also tells the financial position of the business. It suggests a strong strategy on how the business will acquire, gain, and improve their financial status especially when the economic situation affects the business’s performance. Moreover, it is best practice in the field where there is no personal interests among the practitioner. The corporate entities and financial auditing is part of the overall regulation and enforcement that strengthens the governmental framework of the company. The presented financial statement might not fully satisfy the information of the company performance and this is a reason for the stakeholders to push the enforcement of auditing in the firm. The implication of the changes will be only proved if the company allows their book to be open. There is an improvement in the quality of financial reporting from the past years which qualifies the company to enhance their credit allowance, which consequently means to loose their cost of capital.  Furthermore, the financial reporting regulation and enforcement accepted the general auditing procedures that are unbiased and well developed. The alignment of the corporate financial holdings may, at some point, affect their performance. In addition to the financial reporting, the corporate auditors are fueled by the corporate ethics and professional conducts for the accountants. The important mechanism and process for conducting the quality control is a cause of a serious concern, potentially compromising the robustness of the financial reporting. With the respect to the regulations of conducting the financial reporting the endorsement of the accounting profession creates a licensing system where it enables the business leaders to understand the elements and relationship enclosed in the financial reporting.   The financial reporting also recommends in establish an independent and strong mechanism that can ensure the financial accountants and auditors to fulfill their responsibility and obligations in promoting the common good for the company. Fulfilling their assigned duty properly sets a great advantage in the internal negotiation of the company with their possible stakeholders and financing source. The enforcement capacity of the financial reporters is anticipated to be improved to give the further strength in monitoring and improving the proactive role on compliance with the financial reporting requirements. The increased capacity of enforcing the financial reporting requirements is the mirror of having the capacity to improve the financial awareness of the corporate world. The growing sophistication and complexity of the financial reporting standards is recommends the strong need for the regulation and enforcement of financial reporting and their standards. Mechanism of the Regulations Every financial report is guided by the scheduled and adopted method where the corporation can base the computations of their financial standing. The functions should be set first and the qualification of the financial accountants and auditors should pass the board of the company. Added to that is settling the professional related standards will help the entire company correlates with the flow of the financial status. The regulatory agencies have the capacity for enforcing the financial reporting requirements and therefore, should be increased. The regulations is fueled through their in depth analysis among the resources available and the corporate financial statements, conducts, and reviews are regulated as part of the resources. Mechanism of the Enforcement Enforcing the financial reporting is not in the matter on how to set the professional standards but it should be in the part of the corporate strategy. Enforcing the standards through the inspection and disciplinary proceeding are the natural phase of financing reporting. The practitioners are expected to maintain their communication and/or coordination with their advisors. These will allow the assurance of the auditors that there are no personal interests inflicted among the accounting practitioners where the functions can be carried out and will gain the protection against the misstated financial information. The increased capacity for enforcing the financial reporting requirements can help enhance the supervision over it. Conclusion Enforcing the accounting and auditing standards is connected with the regulation upon the compliance of the financial reporting and it continues the need of strengthening.  If the regulation will establish a great impact on enforcing the financial reporting over the corporate financing, the company will meet the great anticipated will out come. Credit:ivythesis.typepad.com

Compare and contrast the mechanisms for regulating and enforcing financial reporting

The Mechanisms on Financial Reporting An assessment of the use of accounting standards reflects in the financial reporting and auditing ...

Advanced Financial Accounting_IFRS for Private Entities

Financial reporting Financial reporting reveals to the educated eye how managers think about the prospects of their companies and industries and how they perceive opportunities and risks. And it is the slate on which corporate managers mark their own grades and strive for personal advantages, including various forms of compensation. The need for rules of conduct for accountants and for standards of financial reporting has been recognized, at least by some, for more than three-quarters of a century (Riper 1994). Rules of conduct generally are regarded as belonging within the self-disciplinary purview of professional associations, but talk of rules or standards for financial reporting often gives rise to concern that because such rules affect something loosely called the public interest, their formulation should not be entrusted to the private sector. Partisans of the private sector, however, fear the rigidity of governmental agencies and their susceptibility to political influence and manipulation. The cost of applying standards for financial reporting has long been a concern of the corporate preparers of financial information, a concern that traditionally has been expressed in demands that those who promulgate standards pay closer attention to the cost-benefit ratio (Riper 1994). Financial reports show the short and long term condition of a business.  To be effective financial reports need to be reliable, understandable and relevant.  The need for better financial reporting systems paved the way for the International Financial Reporting Standards.  Not all people in private institutions believe that the International Financial Reporting Standards will help them provide better financial reports.   International Financial Reporting Standards Accompanying the development of accounting rules within national jurisdictions has been the emergence, growth and influence of ‘international’ accounting standards. These have been issued by the International Accounting Standards Board (IASB) which was established in 1973 with a membership comprising national accounting bodies. The IASB has issued over 40 International Financial Reporting Standards which have exerted influence on accounting practice in a variety of ways: being adopted as national requirements without modification, providing the basis for development of national standards, as an international benchmark in countries that develop their own accounting standards, through the endorsement of regulatory authorities and stock exchanges, and by application by individual companies.  The internationalization of accounting rules has drawn its rationale from a claimed need for accounting practices to be consistent across national boundaries (West 2003).   Accounting practices carrying only the imprimatur of convention have been enshrined in formally sanctioned documents, obligations to comply with the provisions of those documents have been imposed, and the bodies responsible for issuing accounting rules have been periodically changed in name, structure and status (West 2003). Accounting rules can only function to protect the users of accounting information when their development proceeds as a technical task overseen by those with relevant expertise. An intention to rely on professional authority as the primary means of disciplining the quality of accounting information is evident in the law relating to companies. Traditionally such legislation has specified the general nature of financial reports that must be prepared but not the detailed technical accounting procedures to be applied in their preparation (Luciano & Mayes 2005).However, with its authority derived principally from social rather than epistemic factors and armed with technical practices carrying only the imprimatur of convention, the accounting profession has struggled to discharge its mandate. Financial reporting failures were the inevitable result and precipitated calls for formally stated accounting rules. Present accounting rules do not, as has often been represented, have their genesis in failures in the market for accounting information. The accounting profession’s continued failure to enforce effectively that general qualitative standard and instead persist with its conventional technical practices lies behind the present proliferation of accounting rules. These conventional practices defy the requirements of a serviceable system of financial instrumentation (Luciano & Mayes 2005).  IFRS are known to be the set of standards that are principles based because they establish broad rules. IFRS dictate certain treatments to procedures. IFRS was known by its older name of International Accounting Standards (IAS).  The board of the International Accounting Standards Committee (IASC) issued IAS between 1973 and 2001. In April 2001 the IASB developed IAS and continued its development then called it IFRS. The financial statements of IFRS contains a balance sheet, the income statement, either a statement of changes in equity (SOCE) or a statement of recognized income or expense (SORIE), a cash flow statement  and notes.   The Pros and Cons of IFRS Financial reporting aims to provide information to actual and potential contracting partners of an enterprise and to the public. The information shows the results of management’s stewardship and should be seen as supporting well-founded decisions. Very often, the concept of decision usefulness is explicitly mentioned in the framework for financial reporting standards. Such a framework typically exists in countries with non codified law on financial reporting and sets out the concepts that underlie the preparation and presentation of financial statements.  It provides important guidelines for the standard-setter who sets financial reporting standards. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions (Hopwood, Leuz & Pfaff 2004). To avoid the problems of informing investors about an ambitious wealth or income figure, other objectives of financial reporting have been formulated. The economic decisions that are taken by users of financial statements require an evaluation of the ability of an enterprise to generate cash and cash equivalents and of the timing and certainty of their generation (Hopwood, Leuz & Pfaff 2004).    The problem inherent in a prediction of cash flows using financial statements is that there is no discussion of how people can learn about the timing and uncertainty characteristics of the cash generation. Assets and liabilities contain no explicit information about the time structure of future cash flows. Of course, if the user of financial statements looks at inventories, he or she expects cash inflows that are near to the period of the current financial statements (Hopwood, Leuz & Pfaff 2004). Financial statements are expected to represent a true and fair view of the company’s financial position and the results of its operations. Although assets may be valued upward, historical cost is the basis generally used for asset valuation. Should assets be revalued upward the corresponding credit is made to an appraisal increase account. The straight-line basis is the usual method for depreciation of assets Inventory values are set at cost with the common methods being first-in first-out, actual, average and retail. A loss is booked when the net realizable value of an asset falls below cost on a permanent basis. Leases are normally accounted for in consonance with IFRS. That is, finance leases, those where ownership risks and rewards are owned by the lessee, are accounted for as though purchased with subsequent depreciation taken into profit and loss accounts. Payments for operating leases are recognized in the accounting period when the cash is paid or received (Garner, Mckee, DL & Mckee, Y 2000). Financial statements and reports would not gain truthful information without the IFRS. The IFRS sets the rules and regulations on how a financial report would be constructed; it provides guidance on how computation should be done on a given situation.  The problem with IFRS is its limited guidance on interpretation. The difference in interpretation creates varying actions that affect the result of a financial report. Another problem on IFRS is the different interpretation of its rules and procedures this creates confusion and financial statements that have varying result.   References Garner, DE & Mckee, DL & Mckee, Y 2000, Offshore financial centers, accounting services and the global economy, Quorum Books, Westport, CT.   Hopwood, A, Leuz, C & Pfaff, D (eds.) 2004, The economics and politics of accounting: International perspectives on research trends, policy, and practice, Oxford University Press, Oxford.   Luciano, B & Mayes, DG (eds.) 2005, New Zealand and Europe: Connections and comparisons, Rodopi, Amsterdam.   Riper, R 1994, Setting standards for financial reporting: FASB and the struggle for control of a critical process, Quorum Books, Westport, CT.   West, BP 2003, Professionalism and accounting rules, Routledge, New York. Credit:ivythesis.typepad.com

Advanced Financial Accounting_IFRS for Private Entities

Financial reporting Financial reporting reveals to the educated eye how managers think about the prospects of their companies and industr...

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