StudentShare solutions
Triangle menu

Finance and accounting : Advanced financial reporting & regulation - Assignment Example

Extract of sample
Finance and accounting : Advanced financial reporting & regulation

11 PSA Peugeot and Vodafone cases……………………………………………… 14 References……………………………………………………………………… 17 Question 1: A common technique to manage earnings is to ‘stuff the channels’, that is, to ship prematurely to dealers and customers, thereby inflating sales for the period. A case in point is Bristol-Myers Squibb co. (BMS), a multinational pharmaceutical company head-quartered in New York. In August 2004, the Securities Exchange Commission (SEC) announced a USD 150 million’s penalty levied against BMS. This was part of an agreement to settle charges by the SEC that the company had engaged in a fraudulent scheme to inflate sales and earnings in order to meet analysts’ earnings forecasts. According to the SEC, the company also engaged in ‘cookie jar’ accounting. That is, it created phony reserves for disposals of unneeded plants and divisions during high-profit quarters. These would be carried to decrease the operating expenses in results of the quarters where BMS’ income or earnings figures are insufficient to meet the forecasted amounts. Required: a. Using relevant academic papers, discuss the incentives why managers would resort to extreme earnings management technique such as this. b. Critically evaluate the effectiveness of ‘stuffing the channels’ and ‘cookie jar accounting’ as earnings management devices. ...
Earnings management is any legal activity via which the entity administers its profits earned, retained and distributed and thereafter carries out its financial reporting, making decisions regarding the contents, details and disclosures to be provided in the deliverables to give a true and fair view of its operations. According to Lev, earnings play a very important role not only because they shape up success of any business but also because they can have drastic effects if the management’s reporting of earnings get manipulated. Therefore, it is of utmost significance for all key personnel of the entity to excel at earnings management, taking into account that it doesn’t involve any manipulative measures and fraudulent practices (Lev, 1989). According to scenario given in the question, the pharmaceutical company mentioned was similarly involved in maneuvering its books of accounts by using tactics such as ‘stuffing the channels’ and ‘cookie jar’ accounting, resulting into non-compliances, being penalized for the same. The question here arises as to why would managers of this enterprise be engaged in such practices of window-dressing the company’s books of accounts though aware of its adverse consequences of non-compliance? Following are given few incentives which may urge managers to be indulged in wrongful earnings management: Fulfilling Expectations of Capital Markets: The most common reason for majority of the times in such instances is motivation to satisfy capital markets. Managers are mostly under extreme pressures to create value for existing and prospective shareholders and when they find no way to do so in real terms, they end up manipulating reporting of earnings thereby affecting favorably stock’s market price in the short run (Dye, ...Show more

Summary

Student’s ID: (ID Number) Coursework: Finance and Accounting Assignment: Advanced Financial Reporting & Regulation Dated: Table of Contents Content Page Introduction to earnings management……………………………………………
Author : marjorie65
Finance and accounting assignment: Advanced financial reporting & regulation essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"Finance and accounting assignment: Advanced financial reporting & regulation"
with a personal 20% discount.
Grab the best paper

Related Essays

Finance and accounting assignment: Advanced financial reporting and regulation
The research delves on stuffing the channels’ marketing strategies. The research focuses on the Vodafone and Peugeot asset impairment topics. All companies must present realistic financial reports. Question 1: a. Discussion of the incentives why managers would resort to extreme earnings management technique.
10 pages (2500 words) Assignment
Financial Reporting Assignment
Finance reporting entails the complete preparation and presentation of organisations’ financial reports, which are useful in internal and external planning. The frequent users of financial reports are: government agencies, creditors, administrators, employee unions, entrepreneurs and investors.
9 pages (2250 words) Assignment
Financial Reporting Assignment
Essex fire service performance can be analyzed by comparing 2004/05 year with 2003/04 year. It can also be analyzed by comparing other fire services with it. However the later is not possible because it has only been recently adopted (best value accounting code of practice) partially.
3 pages (750 words) Assignment
TACC203 Financial Accounting and Reporting
This fee will be treated as direct cost of acquisition and it will not be considered for the purpose of computation of consideration paid. Straight line method is one of the easiest methods to compute the
5 pages (1250 words) Assignment
Advanced financial Accounting
It was voted two years in row as one of the 10 best airports in the world. In terms of economic and social impact, Auckland Airport generates billions of dollars for the economy, creating thousands of jobs, and making
7 pages (1750 words) Assignment
Islamic Accounting & Financial Reporting
The policyholders lend money to the insurance companies and then they are paid interest against their investments (Choudhury, 1983). The involvement of interest caused distastefulness to spread in all Islamic cultures about traditional
10 pages (2500 words) Assignment
Financial Accounting and Reporting
e stakeholders to make decisions about holding, selling and buying debt or equity instruments particularly in the case of lenders, present and potential investors and other trade creditors. Further, they need the information to set or provide loans or other types or forms of
15 pages (3750 words) Assignment
Financial Reporting and Analysis Assignment
This indicates that the internal financial strength of the company has been declining (Palepu & Healy, 2007). The company’s debt proportion is seen to be higher than the equity proportion, leading to a declining debt-equity ratio (Bragg, 2011). A high debt
5 pages (1250 words) Assignment
Islamic accounting & Financial reporting assignment
As a result, there are other arrangements that help banks or even individuals to gain economically even when they lend their money out to people. This takes a contract of lease that is called ijarah. Ijarah means rent or wage in Arabic. This kind of financing is different
10 pages (2500 words) Assignment
Advanced financial accounting
It also predicts the responses of firms to new accounting policies and regulations. A look into the functionality of the Positive Accounting Policy and how it works in predicting accounting policy choice is
6 pages (1500 words) Assignment
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation