Discussion 11- reporting net income - Assignment Example

Discussion 11- Reporting Net Income I disagree. While analysts and average shareholders champion for the application of earning per share (EPS) as the most recommendable model, the model is exposed to numerous challenges that have the magnitude of failing huge firms. Economic consequences relatable to reporting net income and GAAP that demands that earning per share are significant with consideration of the disclosure. There are typically myriads of economic repercussions associated with report of the net income.

Ritualistically, companies have the discretion in decision or manipulation of the EPS figures required (Starling, 2011). Habitually, EPS has been hugely applied but it is susceptible to critical errors in calculation. Customarily, EPS is mostly influenced by the model of the accounting policies adopted by the company. Yields gained from the growth percentages is mostly perplexing and may be misleading or even meaningless with regards to small base and even negative earnings collected from past periods.

EPS becomes distorted in cases when the company re-tracks share buy back in instances when the company repurchases its main shares thus reduces the amount of the shares placed in issue (Pratt, 2013). This provides automatic increment on the EPS figures. While most companies would boats of elevating the EPS, it is enormously vital to note that earnings must increase which is the desire of the investor. Even after placement of savings on the account of the investor, the cash should earn additional income in terms of compound interest (Peters, 2013).

Normally, the EPS does not consider the company’s dept level and concurrent leverage which are the factors that influence the direction taken by the investor in selection of the future investments. EPS are repeatedly configured by the mergers and other entailed acquisition which has least regards for the actual value that is created (Pratt, 2013).ReferencesPratt, J. (2013). Financial accounting in an economic context.Starling, G. (2011). Managing the public sector. Belmont, CA: Wadsworth Cengage Learning.Peters, B. G. (2013). American public policy: Promise and performance.

Thousand Oaks, Calif: CQ Press.