Nobody downloaded yet

Financial reporting - Assignment Example

Comments (0) Cite this document
Historical cost is a widely acknowledged and accepted accounting approach, which requires accountants to report every item within the financial statements on the basis of their historical (original cost). It basically refers to the actual cost borne by the company, while…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.1% of users find it useful
Financial reporting
Read TextPreview

Extract of sample "Financial reporting"

Download file to see previous pages Financial statements, prepared on the basis of historical cost accounting method, do not provide a fair and true presentation of equity’s performance or future prospects, if capital is inadequately maintained (Charnes, 1976). Moreover, critical assessment of equity’s performance by studying ratios, such as, return on capital employed, will be useless if capital is undervalued, profit is overstated and values of assets are misinterpreted. These sometimes occur because of historical cost accounting. The limitations have been summarized as follows:
Overestimating and valuing profits by undercharging depreciation on the basis of historical cost and recording sales cost at original cost of inventories, may result in the reduction of an entity’s capital because of high taxation charges and distribution (Belfo and Trigo, 2013).
This accounting approach toughens the task for analysts and shareholders of evaluating and assessing the ability and performance of management. This is precisely because variations in the situation of the current market are not considered in historical valuation approach.
Then, owner of the entity tried to restock his inventory and realized that the cost of replacement was $2,200. They did not have enough cash to restructure to the pre-sale condition. The difficulty escalated due to the fact that the owner was unable to differentiate between the profits generated from holding the inventory for a particular time period before selling it and the revenue that was generated through trading. Had the company matched the cost of replenishment against revenue, they would have realized a profit of $300. If this excess proceed had been withdrawn, it would have left the company with $2,200, which could be used for the purpose of inventory replacement. Thus, this example suggests the fact that historical accounting can be misleading to the user of the information (Bakar and Said, 2007).
The application of general price index under this method is ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Financial reporting Assignment Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from
(Financial Reporting Assignment Example | Topics and Well Written Essays - 1000 Words)
“Financial Reporting Assignment Example | Topics and Well Written Essays - 1000 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Financial reporting

Financial Reporting

...?Financial Reporting Executive Summary This assignment reviews the accounting standards adopted by Early Learning Services Limited in the preparationof the financial statements. In the wake of the recent events transparency in financial reporting has become an important issue. Here it has been highlighted as to whether the company complied with any revisions or changes in accounting standards like AASB 101; and other accounting standards relating to intangible asset; provisions and contingent items etc. Any change adopted by the company in financial reporting for 2009 over the previous year has also been discussed. Table...
10 Pages(2500 words)Essay

Financial Reporting

...? Introduction Financial ments of the firms provide the key information to the shareholders regarding the performance of the firm over a certainperiod of time. Not only investors and shareholders get an insight into the overall performance of the firm but different disclosures made in the financial statements offer stakeholders a clear and concise view of the where the firm is heading and in what affairs it is involved. Through financial statements, management provide the details of the accounts and any explanations and details which become part of the accounts as to how the different issues were treated and under what circumstances. Financial reporting...
4 Pages(1000 words)Essay

Financial Reporting

...?Financial Reporting Introduction Intercontinental Hotels Group Plc (IHG) is a British multinational company in the hotel industry. It is headquartered in Denham, UK, and it is the largest hotels company globally operating seven brands. It has over 4,500 hotels in over 100 countries. 10 hotels are managed directly, 652 of the hotels are managed by the company while an approximate of 3,900 hotels are under franchise agreements. The brands offered include, candle wood suites, crown plaza, holiday Inn, Even, Hotel Inn Express, Hotel Indigo, Intercontinental, Hualuxe and Staybridge Suites (IHG Annual report 2011). InterContinental Hotels primarily listed on the London Stock exchange and is a...
6 Pages(1500 words)Essay

Financial Reporting measured, it is very difficult for accountants to include such functions on the balance sheet. The difference between accounting for financial and physical objects is that one type can be measured on a scale while the other is more ambiguous. Financial objects have value because we give values that can be assigned to specific objects. For example, for an investment that loses money, it is easy to track that flow because we can compare the end result with the start value. The difficulty with accounting for physical objects is that often there is no ways to place value on them and also it may be hard to find a starting value in some instances. Activity 2 In this cartoon, the difference between the two...
3 Pages(750 words)Essay


...assessment, several risks has been identified and assessed such as firm related risks, currency risks, capital structure risks and market risks. The Kerry Group PLC actively follows the corporate governance directives issued by the government for the corporation registered in the Ireland. Being a premium company listed on the stock exchange, the company is required to follow the directives of the corporate governance requirements. The company has stated in its latest financial report that it has complied with all of the provisions and directives of the corporate governance as per the regulations. The company has always remained sincere to its corporate social responsibility and has always strived for it....
14 Pages(3500 words)Assignment

Financial Reporting

...?Coca-Cola Company Financial Reporting From an analysis of the balance sheet of The Coca-Cola Company for the year ended December 31, and December 31, 2012, it can be noted that the assets in the company’s current assets are listed in the proper order (The Coca-Cola Company, 2013). In common financial reporting, the assets in the current assets part of the balance sheet should be listed starting with the most liquid to the least liquid form of current assets. In this case, cash and cash equivalents are the most liquid current asset, followed by short-term investments, and assets held for sale are the least liquid current assets. The assets listed in Coca-Cola Company’s balance sheet are classified into two main categories, current... changes...
3 Pages(750 words)Assignment

Financial reporting

...Financial Reporting Case study: Summary The collapse of Lehman Brothers Holdings, Inc. (Lehman) unmasked the presence of problematic loopholes in the accounting treatment for repos. Although Lehman filed for debtor-in-possession reorganisation (Chapter 11) in the United States of America, yet its financial shockwaves severely hit the global economy, prompting the International Accounting Standards Board (IASB) to reconsider its accounting framework towards the International Financial Reporting Standard (IFRS) 7: Financial Instrument. At the same time, the Securities and Exchange Commission (SEC) issued new additional disclosure...
6 Pages(1500 words)Case Study

Financial Reporting

...Financial Reporting Task Table of Contents Financial Reporting Table of Contents 2 Introduction 3 Tesco’s financial performance 3 Investment ratio 3 Profitability ratios 4 Liquidity ratios 5 Effeciency ratios 6 Gearing ratios 7 Growth ratios 8 Non-financial ratio 9 Accounting policies for goodwill and intangible assets 10 List of References 11 Appendix 1: Ratio Calculation. 12 Introduction Tesco PLC is a Supermarket chain store located in the United Kingdom. The business was established in 1919 by Jack Cohen. The industry in which the company operates is food retail. The Supermarket provides both fresh and ready-made foodstuff that comes in varieties. The business operates in twelve countries globally with over 530,000 employees... as is...
7 Pages(1750 words)Coursework

Financial reporting

...of project: FINANCIAL REPORTING – COPPRATE SOCIAL AND ENVIRONEMENTAL RESPONSIBILTY and number: ’s name: Date submitted: a) Identify the main reasons why companies might undertake corporate social and environmental reporting and evaluate against those reasons the ABF plc “CORPORATE RESPONSIBILITY REPORT 2013” Corporate Social and Environmental Responsibility (CSER) for any business organization irrespective of the industry in which they are operating, is referred to demonstrate the act and gesture of corporate citizenship, environmental care and completely acknowledgement by organization for its responsibility and duty towards the society and environment, at large...
6 Pages(1500 words)Assignment

Financial reporting

...sheds light on the US automotive industry which experienced sale of 15,600 vehicles in 2013. The report further assesses the past financial performance of CarMax and AutoNation. Among the financial aspects that would be analysed include, the revenue and working capital. Additionally, the report analyses the strategies that are used by both AutoNation and CarMax to maintain a competitive edge at the market. Table of Contents Executive Summary 2 1.0 Introduction 3 2.0 The Automobile Industry Economic Characteristics 4 3.0 The Company Strategies 8 3.1 The AutoNation’s Strategy 9 3.2 The CarMax’s Strategies 12 4.0 The Financial Statements 15 4.0...
15 Pages(3750 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Financial reporting for FREE!

Contact Us