Finance and Accounting - Essay Example

However, the state and local pension experts oppose GASB’s requirements; since the inclusion of pension liability in the balance sheet will mean it is treated as a long-term financial obligation, like bonds and claims (GASB, 2010). This is detrimental to the accounting procedures since the pension accounted for in the balance sheet is the amount payable and paid every year. 

Question 2

Statement No. 60 changed reporting requirements for joint ventures and related organizations by requiring that both parties in the joint venture or other such arrangements should report their portion of revenues received, as opposed to an earlier practice where the revenue of such ventures was reported jointly under single financial statements (GASB, 2010). The statement also requires such ventures to disclose their arrangements, including the assets, rights, guarantees, liabilities, and commitments. The statement sought to improve the accounting practices by improving disclosures, while at the same time creating similarity and comparability between the financial statements of the non-governmental and governmental entities (GASB, 2010). However, the statement complicates the financial reporting for joint ventures and other such organizations, and should be improved through retaining the requirements for disclosure, but eliminating separate financial reporting requirements for the parties involved jointly.

Question 3

LIFO should not be a valid inventory valuation method under IFRS, because it may not give the exact stock valuation in the event of rising stock prices, LIFO results in the understatement of the value of the closing stock. This, on the other hand, raises the valuation of the costs of goods sold; resulting in a reduction in the reported profits (Bloom & Cenker, 2009). Therefore, the consequences of US companies using LIFO, if they move to IFRS, is that the profits earned will always be understated, which will, in turn, reduce the taxable income for the companies (Bloom & Cenker, 2009). Thus, the convergence of IFRS and GAAP would require e banning of LIFO, thus forcing companies to shift either to FIFO or average stock valuation.

Question 4

Intel is using inventoried downtowns to manipulate profits. This is because, it does not report the value of inventory write-downs unless it is significant, thus taking the advantage of the nature of inventory it deals with to manipulate its profits. The semi-conductors that Intel deals with are prone to price changes very often. Additionally, it is not easy to estimate the demand for such inventory. This makes it difficult to tell whether Intel is under or overstocked, an aspect that allows it to manipulate its profits reporting.