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Capstone Project

The company was exercising a share based compensation plan for its top executives comprising of stock options. These were also not reflected in the financial statements. The company is planning to enter into partnership for which it requires presenting financial report to IFRS. Negative impact of the fraudulent activity on the company followed by recommendations to CFO The inventory write downs are often associated with various negative impacts on the organization. It negatively impacts the operating performance of the organizations. It has been seen that the extreme sales growth in companies lead to higher chances of experiencing future inventory write down as compared to the moderate growing firms. The inventory is an important portion in the financial statement of any organization. The cost of goods sold contains inventory portion, which an organization sells during an accounting period. The inventory stands out to be paramount for the business as it helps in the computation of the company’s gross profit indirectly. After the gross profit, the net income of the company is obtained by subtracting all the operating expenses from the gross profit figure. Thus, missing entire inventory value in the financial statement leads to misinterpretation of the growth profit as well as the net income of the company. Underestimation or overestimation of the cost of goods sold results in huge differences in the profit figure as well. The manipulation in the financial statements may lead to several consequences. The company might manipulate its financial data in order to hide the actual financial performance. The financial statement of any organization reflects its financial information based on which the stock prices are changed. This information assists the investors in making their investing decisions. The GAAP reflects true and fair view related to the financial information of any particular company. But many times it has been seen that the figures in the financial statements get manipulated by the managers of the organizations in such manner that it bears no resemblance with real performance of the company. This can also be termed as the creative accounting method. The manipulation in the real figures of the items presented in the financial statement has a negative impact on the stock prices in the financial market and due to which the values get deviated from the actual values. This displays a misleading picture for the market which in turn misleads the investor’s decisions. Many research studies in the past have reflected positive abnormal returns because of the changes made in the actual earnings of the organization. The returns get altered depending on the validity of alteration in the total earning gained. If the accounting process is conducted in fair manner then this statement becomes highly profitable for an organization. But in case if manipulations or alterations have been done on the actual earni ...Show more

Summary

Capstone Research Project Name of the of the Professor University Date Table of Contents Introduction 3 Negative impact of the fraudulent activity on the company followed by recommendations to CFO 3 Framework related to Inventory write downs 5 GAAP related to stock option accounting 5 GAAP and IFRS requirements for lease financing 6 Argument in favor of IFRS in terms of lease agreements 9 Major implications for SAS 99 12 Issues related to the material misstatement in financial statement 13 Recommendations 13 Economic effect of restatement of the financial statements on investors, employees, customers, and creditors 14 References 15 Introduction The research paper deals with discu…
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