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Financial Reporting and Analysis - Essay Example

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Financial Reporting and Analysis

Favourism on one party over the other which is intentional should not exist concerning the information on financial reports. The financial statements will henceforth, provide a balanced scorecard to all the parties I relation to the effects of the transactions. b) The Board may be required to abandon neutrality and establish standards of reporting that conceals the particular transactions impact from the users of the financial reports. These costs will, however, exist regardless whether or not FASB authorizes their recognition in financial statements. It will not alter the economics of transaction and it will only withhold information from the users of the financial reports while making informed decisions and, eventually, the credibility of financial reports is impaired. c) The SEC relies on the Board and the private sector predecessors to establish and upgrade financial accounting and the reporting standards Accounting standards are therefore, established through a due process and open deliberations system to improve and certify the Board’s mission of improving financial reporting. By developing neutral accounting standards to the best interest of the public, similar transactions should be treated similarly and different transactions treated differently. This clearly shows that standard setting is in private sector in US. d) Some accounting standards are subverted so that they can achieve their purpose which is not related to fair and accurate presentation of financial statements. They there fore fail in the purpose they serve and consequently lack economic effect since they are not of importance to decision makers on allocation of resources and making other economic decisions. Problem 3(7) a) Dividends should be disclosed in changes of equity statement and in the notes as follows. Dividends that are declared are entered in the Retained Earnings account on the credit side and credited to the dividends payable account. When paid, dividends are posted to the dividends payable account in the debit side and to the Cash account, are posted to the credit side. Notes concerning the dividends can be illustrated as follows; Date Title of Account Reference Debit (Dr) Credit (Cr) 2011 June 1st Earnings Retained **** Dividends payable **** Authorized dividends Date Title of Account Reference Debit (Dr) Credit (Cr) 2011 June 1 Dividends payable **** Cash **** Authorized dividends b) The provision for a law suit should not be disclosed because the likelihood of the loss is minimal. The contingent liability that is probable and can be estimated reasonably must be reported in the balance sheet as a liability. Lawsuits are not regarded as liabilities on the balance sheet since the risk of a loss is not estimated as probable or the amount of loss cannot be quantified. When the risk of loss is at least reasonably possible, the company should provide a note. The company is consequently, a party to the legal proceeding that arises in the ordinary pursuit of its business; it is a party to legal proceedings currently, that the management honestly believes would have a material negative effect on the financial position because there is a major possibility of a loss. c) Provision on the client suffering a strike should not be made since there is no verifiable amount. The unfavourable event is likely to feature and thus the disclosure should be made in notes. d) The fire that the client suffered after closing is a non-adjusting event. There is because it is an event that occurred after the reporting period was over. These non-adjusting events should be disclosed when they are of huge importance to the users and nondisclosure would affect them when making ...Show more

Summary

Financial statements information helps the users such as investors, creditors, regulators, and government, to make business and economic decisions. These financial statements should thus report an economic activity without exaggerating it so that the behaviour towards one direction can be influenced towards one direction…
Author : beverly20
Financial Reporting and Analysis essay example
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