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Financial Reporting - An Ethical Perspective
Finance & Accounting
Pages 4 (1004 words)
The Valuation of Assets (and/or Liabilities) in Financial Reporting – An Ethical Question Throughout history financial statements have been used to evaluate the financial performance of companies to present others, as well as internal stakeholders, a firm analysis of where the company stands and what potential strengths and weaknesses it poses for the future.
Both of these perspectives will be analyzed and elaborated upon within this brief analysis as a means of impressing upon the reader which ethical perspective is the most ethical and why it should be pursued. As such, the two perspectives which will be discussed are whether it is ethical and appropriate to allow management of the firm to present financial information in a “flexible” manner so that the “dips” and “lows” of a business are not directly translated via each and every market pressure. The rationale behind this is that without such an approach a freely floating publicly traded firm could quickly lose the trust of its investors and see an overnight loss of a very large percentage of its overall assets merely due to the fact that the stakeholders inferred that the company was somehow troubled; whether an understanding was legitimate or not (Mitra et al 159). Similarly, perspective two is much simpler and merely states that firms should use a conservative accounting approach so that the “highs” of a firm are minimized in favor of presenting a more moderate expectation of profits or growth; regardless of the scenario or outcome. ...
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