The financial deals and agreements will have a positive material effect on the company. They will be not presented in the balance sheet because they do not affect the borrowing capacity and these activities hide a certain amount of liability. Variable-Interest Entities: It is a concept which is introduced in the US Financial Accounting Standards in FIN 46 which refers to the entity (investee) in which the investors holds a certain amount of controlling interests which is not based on majority of the voting rights. It is almost synonymous to the concept of the special purpose entity. It is subject to the consolidation of certain financial conditions related to the variable interests. It is the primary beneficiary of the 7E which is defined as the person with a company with a majority of variable interest (Madura, 2007). Non controlling Interest: Non controlling interest refers to the ownership stake in a corporation in which the required position gives the investor the chance to understand the way the company operates. Majority of the positions held by the investors are deemed to be non controlling interests because their ownership stake is very much insignificant relative to the total outstanding shares. Disclosure: Off balance sheet transactions, Variable-Interest Entities, and Non controlling Interest Off balance sheet transactions: The Company engages in varied financial transactions which should comply with the US GAAP principles that are not recorded in the company financial statements. These financial transactions involve the varying degrees, credit, interest rate, elements of credit and liquidity risk. These transactions are used to manage the request of customers in the form of funding, letters of credit and loan commitments. Firstly, to know what are the elements in the off balance sheet transactions, critically analyze them and their arrangements. Secondly, to assess the likelihood of the occurrences of an unknown trend, commitment, demand and any event or uncertainty that could affect the off balance sheet arrangement and thirdly, the assessment would be required to conclude about the management trend. This would help in assessment of the uncertainty of the variables and would also help in arrangement of the off balance sheet elements and variables. The following items are necessary for the disclosure of certain items like: The nature and the business purpose if the company’s off balance sheet arrangement for the variables (Groppelli & Nikbakht, 2006). The importance of the company’s off balance sheet arrangement of the variables with respect to the liquidity, capital resources, credit risk, market risk and the support of some benefits (Hall, 2007). The amount and nature of the interests retained, issues securities other form of indebtedness that is incurred by the company in connection with the arrangements The amount and nature of any amount of obligation or liabilities of the company that arise out of the arrangements that are likely to become material Any known event, demand , uncertainty that will result in the termination of or reduction of material benefits that the company has proposed Variable-Interest Entities The variable entity model does not apply because the enterprise is being evaluated or consolidated for the traditional operating entity. As per the Accounting Standards Codifications
Financial Statement Presentation and Disclosures Name of Student University Introduction: Off balance sheet transactions, Variable-Interest Entities, and Non controlling Interest Off Balance Sheet Transactions: It is a form of financing method where the large capital expenditures are not disclosed in the balance sheet presentation through varied classification methods…
It clearly sets out the presentation, guidelines with regard to structure and the minimum requirements of financial statements. More precisely, these are expounded on under IAS 1.1. IAS 1.1 states that a complete financial statements’ set has to contain statement of equity changes in a given period, cash flow statement for the period, financial position statement in the period’s balance sheet, comprehensive income statement and the notes which include a summary of explanatory notes and the accounting policies.
The company needs to focus on adherence of disclosures of identifiable intangible assets, impairment testing on cash generating units, calculation of discount rates and growth rates, and sensitivity analysis to changes in key assumptions. According to the reporting standards, identifiable intangible assets should be recognized as during business formation and should be on the basis of their fair-values and cost approaches.
Some of these variances in presentation can be seen in the comprehensive income statement presentation. There are several examples to illustrate this. IFRS 5, for example, requires that post-tax loss/income be part of the disclosures in the statement of comprehensive income or be put in another income statement’s contents where this is applicable.
fixed or variable) have an effect on fair presentation of financial statements? 9 Findings of the Study 10 Research Question 2: Does directors’ remuneration either of its components (fixed or variable) have an effect on overall organizational performance?
Therefore, after identifying the potential users of statements, it assesses the qualities essential for financial statements reporting and evaluates the importance of financial statements formats and technology in the process of accounting and financial reporting.
This particular standard has been periodically amended from time to time either to bring in more transparency in the way the financial reports are presented or to bring it in line with other IASs as a result of amendment in other IAS. Various amendments and reformatting brought about at various points of time were critically analyzed from their utility and ease of use by various stakeholders.
The research conducts investigation by examining the annual reports of these banks and present important findings regarding the accounting principles and treatment of different elements of financial statements. The role of management and disclosures made by the banks on internal controls and corporate governance will be compared to form an opinion.
According to the discussion information needs to be relevant to the needs of users in order to serve its purpose. However, there are also other fundamental qualities that financial statements need to have. These qualities include comparability, faithful representation, consistency, completeness, understandability and reliability.
This also increased the risk of development of mutually inconsistent standards that violated the main objective behind preparation of financial statements. To meet the need of robustness and consistency in the financial statements, the conceptual framework was
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