...historical cost accounting Financial statements prepared on the historical cost basis do not necessarily lead to a true and fair presentation of an entity’s performance or future potential if capital is not being maintained. Furthermore, actual assessment of performance through ratios such as return on capital are meaningless if profit are overstated, capital undervalued, and assets are valued under a mixture of conventions. Limitations of historical cost accounting include : • Depreciation charged on historically costed assets is only an arbitrary amount based on out-of-date values and estimated useful economic lives. • Depreciation charges do not take into account actual replacement cost of assets at current prices. • Profit will not reflect the actual ‘costs’ of trading, which include the replacement of assets at some point in time. • By not accounting for inflation, there is no assurance that the entity is maintaining its capital base. • Overstating profits by undercharging depreciation based on historical cost, and charging cost of sales at historical cost of inventories (and not current cost) can lead to the depletion of an entity’s capital through high tas charges and distributions. • While historical cost accounting provides a consistent basis for entities to prepare accounts, inflation affects different products and markets, and hence entities, to different degree. • Historical cost accounting makes it difficult for shareholders and analysis to assess the real...
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...Development in Accounting Comparing of the performance of Malaysia Airlines and China Southern Airlines Summary The purpose of this report was discovering and analyzing the performance of Malaysia Airlines and China Southern Airlines; and the benefits and problems in the U.S. adopting of IFRS will be mentioned. First, it evaluates the performance of Malaysia Airlines and China Southern Airlines through five ratios analysis which is profitability, liquidity/solvency, working capital efficiency, long term financial structure and investors’ perspective. Next, on basic of part one analysis, discuss the limitations of financial reporting, meanwhile, companies from different countries which are using different accounting standards should be noticed. Follow on; depend on the situation of financial report, using the SWOT methods to analyze the primary challenges faced by Malaysia Airlines and China Southern Airlines. Finally, discuss the positive and negative of U.S. adopting IFRS. Contents 1. Introduction 1 2. Ratio analysis of the MAS and CZ 1 3. SWTO analysis of the MAS and the CZ 12 3.1. Strengths 12 3.2. Weaknesses 13 3.3. Opportunities 15 3.4. Threats 16 4. The benefits and problems if US adopt IFRS 18 5. Conclusion 26 6. Reference 27 7. Appendices 36 7.1. Appendices 1—Analysis Current Ratio 36 7.2. Appendices 2—Analysis Quick Ratio 36 7.3. Appendices 3—Analysis Gross Profit Margin 37 7.4. Appendices 4—Operation Profit Ratio 37 7...
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...PRINCIPLES OF ACCOUNTING Higher 2 (2016) (Syllabus 9755) CONTENTS Page INTRODUCTION 2 AIMS 2 ASSESSMENT OBJECTIVES 2 SPECIFICATION GRID 2 SCHEME OF ASSESSMENT 3 SYLLABUS OUTLINE 3 SYLLABUS CONTENT 5 SUMMARY OF COMMONLY USED RATIOS 15 RESOURCES 16 Singapore Examinations and Assessment Board MOE & UCLES 2014 1 9755 H2 PRINCIPLES OF ACCOUNTING (2016) INTRODUCTION Principles of Accounting aims to provide candidates with a foundation course in accounting at a breadth and depth appropriate to the A Level. It is designed to provide candidates with a sound understanding of financial and managerial accounting procedures and an appreciation of its role in society. The teaching approach emphasises the broad educational aspects of the subject rather than one which is vocational or professional in nature. There is no requirement to learn the published accounting standards. Prior knowledge is not necessary for students offering this syllabus. It is not the intent of this syllabus to be a pre-requisite for any business-related courses. AIMS 1. Develop an understanding of the concepts, principles and practices of accounting and the ability to apply them in a variety of business and personal situations; 2. Develop an understanding of the role of accounting as an information system for monitoring, problemsolving and decision-making in changing economic, social and technological environments; 3. Develop a critical approach to analysing and evaluating accounting policies...
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...Operating Lease Running head: DEATH OF THE OPERATING LEASE 1 Death of the Operating Lease and its Impact on Leading U.S. Companies Mark S. Lynn Mount St. Mary’s University Copyright 2010, Mark S. Lynn Death of the Operating Lease Abstract The proposed elimination of operating lease treatment by the IASB and FASB, as outlined in 2 their discussion paper, Leases – Preliminary Views, will have a varying degree of impact on U.S firms. After a review of the evolution of lease accounting and a discussion of financial ratio analysis, this paper examines the impact of the proposed accounting change on common financial ratios of 142 large public companies. The proposal requiring the capitalization of all lease arrangements is generally detrimental to such financial measurements, with significant variability among industry sectors. Through surveys and interviews, it is further determined that while a majority of corporate financial executives do not support the proposed accounting change, they have yet to analyze the impact and prepare for the effects of the change within their own companies. Copyright 2010, Mark S. Lynn Death of the Operating Lease Death of the Operating Lease and its Impact on Leading U.S. Companies 3 “We are only tenants, and shortly the great Landlord will give us notice that our lease has expired.” ~ Joseph Jefferson (1897, p. 476). A lease is broadly defined as a contract by which an owner of property grants to another the right to...
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...Financial Statement Analysis Celeste Thompson, Marcy Newbern, Cynthia Rios, Lashun Nicholson, Joseph Terramgra ACC/561 August 30, 2010 Financial Statement Analysis The financial statement is a report that divulges a company’s past and present financial standings. The financial statement can be thought of as an economic picture for a company. A financial statement analysis is used by investors when an important business decision is to be made. A financial statement analysis can consist of various ratio calculations. This paper will provide information on three different companies and several calculated ratios, information on the differences in the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) and last the differences in industries and how they affect the presentation. Differences in the IASB and the FASB Domestic and foreign corporations have two different accounting standards to follow when preparing their financial statements. The FASB creates the standards for domestic companies and the IASB creates the standards for international organizations. Although the FASB and the IASB are currently working on a convergence project to streamline these accounting measures and create a set of standards that both domestic and international companies can use uniformly, this is a project that will take years to complete and perfect. For now, the differences in these standards...
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...Statements and the Environments of Financial Reporting Accounting: The Language of Business | Relationships Among Financial Statements | Classifications in a Balance Sheet | Income Statement, Statement of Retained Earnings, and Statement of Cash Flows | GAAP and Key Accounting Principles | Balancing the Accounting Equation Accounting: The Language of Business Back to Top Do Not Underestimate the Power of Accounting! I vividly recall my first experience driving in a foreign country. The road signs were written in the language of the local country which I was unable to read or understand. Even as an experienced driver not being able to read the road signs, limited my travel. Accounting is the language of business. One common business language guided by the rules established by the U.S. Securities and Exchange Commission (SEC) known Generally Accepted Accounting Principles (GAAP) gives financial investors the confidence needed to risk billions of dollars purchasing company stock. Accounting allows people from around the globe to understand the financial health of a given company. Without accounting as the language of business, capitalism and free markets in the United States could not thrive. Companies that list their stock on the stock exchange must prepare their financial statements according to generally accepted accounting principles. There are other authorities that issue guidelines such as Financial Accounting Standards Board (FASB). Management is responsible for ensuring...
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...Table of Contents 1.0 Introduction 3 2.0 The major components of Sugar Investment Trust (SIT) annual report: 3 3.0 The Five potential users 5 4.0 How useful are companies’ annual reports in addressing the needs of users of accounts? 6 5.0 Company’s Corporate Social Responsibility (CSR) 8 6.0 To what extent does the regulatory framework govern the preparation of an Annual Report? 9 7.0 To what extent reported profit figures can mislead users of accounts? 10 8.0 Cash flow statements 11 9.0 Accounting Ratios and Cash Flow Statement Analysis 11 10. Cash Flow Statement Analysis 14 11. Criticism of traditional financial accounting and problems encountered in inter-firm comparison. 14 12. Contribution list 16 13. References 16 1.0 Introduction T he Sugar Investment Trust (SIT) is a body corporate established under an Act of Parliament in 1994 which operates as a company under the Companies Act 2001. It is the largest shareholder based public company in Mauritius with more than 40,000 members. It has more than 55,000 shareholders. The foundation of Sugar Investment Trust (SIT) constitutes a landmark in the Mauritian history. It was set up primarily as a participation scheme in the sugar industry but it has become a model of economic democratisation in the country. It provides a forum for participation of planters and workers at corporate decision making level of sugar milling companies and as equity participation. Therefore, it ensures a share of...
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...Financial Accounting and Reporting March 2015 Maldives Business School Cover Page ASSIGNMENT BRIEF BTEC HND/Associate Degree in Business (Management/HR/Marketing) The student must fill the relevant parts of the following table. Student Date Student First Name Student Last Name ID Task No. submitted Date issued Mohamed 1 8th March 2015 Statement of authenticity I, the above named student, hereby confirm that this assignment is my own work and not copied or plagiarized. It has not previously been submitted as part of any assessment. All the sources, from which information has been obtained for this assignment, have been referenced in the Harvard format. I further confirm that I have read and understood the Maldives Business School rules and regulations about plagiarism and copying and agree to be bound by them. Assignment summary information Unit 10 Financial Accounting & Reporting Unit Assignment reference 1 Assignment type This is an individual assignment. Task Submit on Do on Task 1: LO1, LO3, LO4, M1, M2, D1, D2, D3: Report 11 April 2015 NA Task 2: LO2, M3: Class assessment NA 23 March 2015 An extension must be applied for in writing by individual students and will only be granted Extensions for valid reasons. Late submissions Late submissions will be marked for all grades but will incur a fine of MVR 500. Assessor(s): Internal verifier: Assessor(s) please fill the table below AFTER the evaluation. Assessment Feedback ...
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...Of Historical Cost Accounting Limitations of historical cost accounting Financial statements prepared on the historical cost basis do not necessarily lead to a true and fair presentation of an entity’s performance or future potential if capital is not being maintained. Furthermore, actual assessment of performance through ratios such as return on capital are meaningless if profit are overstated, capital undervalued, and assets are valued under a mixture of conventions. Limitations of historical cost accounting include : • Depreciation charged on historically costed assets is only an arbitrary amount based on out-of-date values and estimated useful economic lives. • Depreciation charges do not take into account actual replacement cost of assets at current prices. • Profit will not reflect the actual ‘costs’ of trading, which include the replacement of assets at some point in time. • By not accounting for inflation, there is no assurance that the entity is maintaining its capital base. • Overstating profits by undercharging depreciation based on historical cost, and charging cost of sales at historical cost of inventories (and not current cost) can lead to the depletion of an entity’s capital through high tas charges and distributions. • While historical cost accounting provides a consistent basis for entities to prepare accounts, inflation affects different products and markets, and hence entities, to different degree. • Historical cost accounting makes it difficult...
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...accountants of india(ICAI) (A Statutory body under an act of parliament) SYLLABUS 2012 STRUCTURE & contents Evaluation Synthesis ANALYSIS ANALYSIS APPLICATION APPLICATION COMPREHENSION COMPREHENSION COMPREHENSION KNOWLEDGE KNOWLEDGE KNOWLEDGE LEVEL A LEVEL B LEVEL C FOUNDATION COURSE - Syllabus 2012 the institute of cost accountants of india(ICAI) (A Statutory body under an act of parliament) SYLLABUS 2012 STRUCTURE & contents The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 FOUNDATION COURSE - Syllabus 2012 The Following table lists the learning objectives and the verbs that appear in the syllabus learning aims and examination question. Learning objectives Level A COMPREHENSION What you are expected to understand List Make a list of. State Express, fully or clearly , the details/ facts of. Define Give the exact meaning of. Communicate the key features of. Distinguish Highlight the differences between. Explain Make clear or intangible/state the meaning or purpose of. Identify Recognise, establish or select after consideration. Illustrate What you are expected to know Definition Describe KNOWLEDGE Verbs used Use an example to describe or explain something. The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2 FOUNDATION...
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...fhthethregTHE EFFECTS OF THE SARBANES-OXLEY ACT AND CANADIAN EQUIVALENT, BILL 198/CSA RULES, ON CANADIAN CROSS-LISTED STOCKS Ben Amoako-Adu * Financial Services Research Centre School of Business and Economics Wilfrid Laurier University Waterloo, Ontario, Canada N2L 3C5 Telephone: (519)-884-0710 x 2327 Email: bamoako@wlu.ca Vishaal Baulkaran Financial Services Research Centre School of Business and Economics Wilfrid Laurier University Waterloo, Ontario, Canada N2L 3C5 Telephone: (519)-884-0710 x 2846 Email: baul2810@wlu.ca ________________________________________________________________________ * Direct correspondence to the contact author, Ben Amoako-Adu. This research was presented at the 2008 Eastern Finance Conference in Florida and the 2008 Midwest Finance Conference in San Antonio, Texas. We would like to thank the discussants of the paper at the above conferences. An earlier version of this paper was discussed at Wilfrid Laurier Finance Workshop in 2007. THE EFFECTS OF THE SARBANES-OXLEY ACT AND CANADIAN EQUIVALENT, BILL 198/CSA RULES, ON CANADAIN CROSS-LISTED STOCKS Abstract Following the Sarbanes-Oxley Act of 2002 (SOX), Canada subsequently implemented similar SOX-type rules on Canadian firms by enacting Ontario Bill 198 and the enforcing several of the Canadian Securities Administrators’ (CSA) rules. This paper tests the impact of the Canadian equivalent, Bill 198/CSA rules, on Canadian firms listed on the Toronto Stock Exchange. First, we examine the...
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...Financial statement analysis (or financial analysis) the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, by using different accounting tools and techniques. Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of reformulated and adjusted financial statements. The first two steps are often dropped in practice, meaning that financial ratios are just calculated on the basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the foundation for evaluating and pricing credit risk and for doing fundamental company valuation. 1. Financial statement analysis typically starts with reformulating the reported financial information. In relation to the income statement, one common reformulation is to divide reported items into recurring or normal items and non-recurring or special items. In this way, earnings could be separated in to normal or core earnings and transitory earnings. The idea is that normal earnings are more permanent and hence more relevant for prediction and valuation. Normal earnings are also separated into net operational profit after taxes (NOPAT) and net financial costs. The balance sheet is grouped, for example, in net operating assets (NOA), net financial debt and equity. 2. Analysis and adjustment of measurement...
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...Chapter 7: Prospective Analysis: Valuation Theory and Concepts Copyright (c) 2008 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Chapter 7: Prospective Analysis: Valuation Theory and Concepts Palepu & Healy Key Concepts in Chapter 7 • Forecasts (Ch. 6) are converted into estimates of value. • Discounted future dividends, cash flows, and abnormal earnings may be used to estimate value. • Price-based multiples may also be used as value estimates. • No method by itself dominates any of the others. Copyright (c) 2008 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Chapter 7: Prospective Analysis: Valuation Theory and Concepts Palepu & Healy Discounted Dividends Valuation • The present value of future cash flows to shareholders is the basis of the discounted dividends method. • This method is the basis for most theoretical approaches to stock valuation, including the other methods discussed in this chapter. Where re is the cost of equity capital Copyright (c) 2008 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Chapter 7: Prospective Analysis: Valuation Theory and Concepts Palepu & Healy Discounted Abnormal Earnings • Abnormal earnings are...
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...profit assertion 1948 the companies act calls for balance bed sheet and profit and reduction accounts to be true and fair and also to be revealed at minimum amount level and so forth. Accounting regulations in UK is portioned into three main regulating authority and governance which often all organizations whether lone trade relationship or minimal company which often all organizations must abide by in organizing their economic year finish. These regulating bodies are the company Act 2006, UNITED KINGDOM Accounting Standards Board and International Accounting Standards (IAS). There have been no specific legal or regulation requirement managing the lone trader and partnership accounts inside company React 2006. For instance if these firms registered pertaining to value additional tax, they may wish to prepare their own records determined by HMRC requirements. Therefore managers of companies maintain your accounting records in manners that satisfy them nearly all. The Company Act 2006 was originated from the development coming from all regulations in the United Kingdom from 1844, 1855 under the JSCA, Joint Stock Company Act. These regulations required necessary audit associated with balance bed sheet and profit and reduction account to be true and fair, a nominal amount disclosure level of accounting routines and business of team or combined accounts. The 2006 company Act add the development of operations operation and reporting associated with limited responsibility companies....
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...FINANCIAL RATIOS Joseph Faello, Mississippi State University ABSTRACT The purpose of this paper is to provide financial statement users and accounting academics with some useful insights when working with financial ratios. Initially, the uses and benefits of financial ratios and the limitations of using financial ratios are discussed from the financial statement users’ and accounting academics’ perspectives. Then, practical advice is provided to both financial statement users and accounting academics alike to mitigate the limitations of using financial ratios. Financial statement users and accounting academics will find the issues discussed in this paper useful in their work with financial ratios. Keywords: Financial ratios, Comparability, Homoscedasticity, Outliers INTRODUCTION Financial ratios play an important role in the analysis of financial statements and accounting research. However, the use of financial ratios comes with its hazards. Both accounting academics and financial statements’ users need to understand the problems and limitations in working with financial ratios. The purpose of this paper is to address these issues and to provide guidance on how to mitigate the problems surrounding financial ratios. Both accounting academics and financial statement users will find this study useful in their dealings with financial ratios. The study is organized as follows: 1. 2. 3. 4. Uses and benefits of financial ratios; Limitations of financial ratios; Dealing...
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