Financial Reporting and Accountability exam questions Essay

Financial Reporting and Accountability exam questions - Essay Example 6 Consolidations: Qualitative 7 Why do regulators require consolidations? 7 What is fair value and why is it an important concept in consolidation? 7 Why do regulators require inter-company profits to be removed from consolidations? 7 Corporate Governance 8 What is ‘the public interest’ and what is its relationship to accounting? 8 Do we need mandatory regulation of reporting? If so how should we regulate? Are there major problems? 8 IASB and due process – what are the stages of due process – why is convergence with the US important? 9 What is the ‘market for corporate takeovers’ and the ‘market for managers’ – and what impact have these on accounting disclosure? 10 Reporting Financial Statements Why is one of the elements of the financial statements useful to shareholders? Statement of the changes in position of equity for a company provides the movement of the holding position of the equity shareholders. This statement gen erally comprises of the net profits that can be attributed to the shareholders, the changes in the share capital reserves, the dividend that is paid to the shareholder, the effect of the accounting policy changes or the any kind of changes that has been done to correct any error in the previous period. This is an essential statement that needs to be disclosed to the shareholders because the factors that have an effect on the changes in the position can be known. This statement would be reflecting the nature of the changes that take place in the equity reserves which otherwise would not be available to the shareholders. For example the issue and redemption of the share capital can only be obtained from the statement of financial position. What is the purpose of one kind of disclosure e.g. discontinued activities, or expenses such as audit? Discontinued operations of an enterprise would entail those activities by which the company would be selling a component through any transaction o r demerger or would be disposing off the assets or liabilities of the organisation or abandoning any component of the business. It is important for a company to make the disclosures of the discontinued operations because it would help in assessing the cash flows of the enterprise, the capacity to generate earnings and to make proper segregation of the information about the discontinuing operations form that of the continuing operations. Organisations should cite the evidence of auditing process in the annual statements. Thus the fees that are paid for the auditing as well as the non auditing services need to be paid. On the other hand it is considered that the independence of the auditors is essential for a sound and fair auditing process. Hence by the payment of the fees the quality of auditing in the organisation is ensured. Earnings per Share Basic and diluted EPS Basic EPS is the earnings of the company that accrues to the shareholders of the organisation. Basic EPS is derived b y dividing the net profit of the company by the total amount of outstanding shares. The amount net profit is calculated after distribution of the dividends to the preference shareholders. This may be explained with the example of the following example. Suppose the Net Profit available for a company is $ 40000. And the number of equity shares outstanding is 2000. Then the EPS of the company would be $50. Diluted EPS on the other hand is the net profit of the company divided by the number of equ