Prior to the issuance of IAS 37, provisions were recognised on the basis of the prudence concept. There was almost no guidance on the proper treatment of a provision in the financial statements and because…
management would create a provision for restructuring without having any commitment. Besides this, management used to manipulate the auditors by combining in many little amounts of provisions, which, when gathered made up a huge amount. This helped them to skim their profits and gain tax advantages, etc. Except these two problems, provision accounting used methods where provision was created for one purpose and then used for another. All this led to poor disclosure and difficulty in assessing the effect of provisions on reported profits.
Provisions were particularly created when profits were high and decreased or eliminated when profits were low in order to smooth the outcome. This was commonly done when an organisation acquired another business entity, the acquirer created increased number of provisions as a cost of merging the new business’s operations. When the provisions were released later, the profits reported would seem falsely inflated.
Provision accounting was used to boost share price by disguising poor performance in a particular year by profit smoothing to create an impression that the profit are less volatile, this led to increased investing in a particular company. (Management Accountant Blog, 2007)
To overcome such an issue, the International Accounting Standards Board (IASB) came up with International Accounting Standard (IAS 37). This standard’s main purpose was to prevent organisations from recognising excessive provisions by focusing on the Balance Sheet and applying proper definition and recognition criteria in the framework for the preparation and presentation of financial statements. According to IAS 37 can only be recognised if it meets the criteria of a liability and a liability according to IAS 37 is “a present obligation arising from past events, the settlement of which is expected to result in an outflow ...
Cite this document
(“Corporate Financial Accounting Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.net/miscellaneous/391277-corporate-financial-accounting
(Corporate Financial Accounting Essay Example | Topics and Well Written Essays - 1250 Words)
“Corporate Financial Accounting Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.net/miscellaneous/391277-corporate-financial-accounting.
The Managing Director is not keen on including Lease A in the books as a finance lease and, instead, wants it recorded as an operating lease. A new accounting standard that will replace International Accounting Standard (IAS) 17, which covers 'Leases', is due to be finalized within the year.
There are many ways to measure performance of the company which include balance score card, bench marking, management by objectives and ratio analysis. In this paper we will use the ratio analyses in analyzing the financial statement of the three publishing company, and establishing the performance of the three companies.
The operations of public accountants are stipulated by state law and must meet the set codes. On the other hand, private accounting refers to the act of a salaried individual accountant being employed by a specific firm to handle its accounting functions (Warren 6).
Currently, corporations and other business organizations expand their operations to expand the client base and attract additional profits within the company. Any form of venture undertaken by an organization entails additional capital; hence an increment in the level of risks (Perks & Leiwy, 2010).
Corporate social responsibility normally referred to as CSR covers the corporate citizenship, corporate conscience, the social performance and business sustainable development. CRS is a corporate self-regulation form that is mostly integrated in the models of most business.
In effect the three issues are conjoined within this theoretical approach. Political Economy Theory questions the supposed neutrality of corporate reports both regulated and unregulated. According to Howieson (2004), Political Economy Theory recognises the existing system of corporate reporting and "subjects to critical scrutiny those issues.
In toto, he owns 30 + 15 = 45% of the total voting rights in S1.
Scenario 2 :H owns 30 % of the voting shares in S1 through indirect holding through S. Moreover, he also holds 75% of 25% i.e. 18 % through his indirect holdings in S2 .Therefore, his total holdings is 30 + 18 = 48% of the voting shares in S1.
The scandal was related to falsification of safety reports prepared by the company. Both the Southwest Airlines and Federal Aviation Administration (FAA) were held responsible for this scandal. The safety reports were meant to
It is the presentation of financial data relating to the performance, position as well as the flow of assets in a given accounting period which is then conveyed to different users of accounting information in order to facilitate their decision-making process. The sole objective