DOCSLIB.ORG

Accounting and Financial Reports in the Function of Corporate Governance

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Accounting and Financial Reports in the Function of Corporate Governance (JPMNT) Journal of Process Management – New Technologies, International Vol. 5, No 2, 2017. ACCOUNTING AND FINANCIAL REPORTS IN THE FUNCTION OF CORPORATE GOVERNANCE Jugoslav Ani čić,1 Dušan Ani čić,2 Aleksandar Majstorovi ć,3 1, “Union-Nikola Tesla University”, Faculty of Entrepreneurial Business, Serbia 2DSN Consalting, Belgrade, Serbia 3 “Union-Nikola Tesla University”, Faculty for Real Estate Management, Belgrade, Serbia [email protected] ; [email protected] ; [email protected] Professional Paper doi:10.5937/jouproman5-13302 Abstract: Market economy development is made according to the accounting highly dependent upon accounting data reliability standards accepted in most developed and financial report quality because the investors decide more easily on investments in the market countries. The need for international which had earned trust and safety in the previous standard acceptance has its practical period. Big financial scandals from the beginning dimension because they equalise the of the 21st century and still actual financial crisis at accounting practices around the world, the global level have especially contributed to that. simplify stock exchange business outside The information prepared on the basis of high quality, transparent and comparable international the national borders and enable national standards considerably reduce investment risks as and international market growth, as well as well as the cost of raising capital. On the other the complete economy. hand, the management of a large number of companies is focused on the creation of short-term True and honest financial reporting personal benefits as opposed to the investors represent a first class public interest so the primarily interested in company survival and principle of the objective reporting should growth, that is, long-term goals. Information be the leading principle for the financial asymmetry is often present in the financial markets, reports creators. Blurring and feigning of and its damaging results, as a rule, are borne by shareholders and other stakeholders of the the results leads to the decisions of the company. Corporate governance depends on legal, investors, which are not in the function of regulative and institutional environment, and it efficient capital allocation, and we can see should balance the interests of the shareholders, that in a number of financial frauds in capital owners, managers as well as company large and powerful companies in the business managers. developed countries. The consequences of Key words: accounting, financial reporting, the false representation of successful corporate governance results are the failure of the seemly Introduction successful companies overnight, where the Financial reports represent the basic burden of the great losses is first suffered ways for companies to report on the by shareholders, and then other investors success of their business and financial and as well, and the side effect is the spread of property conditions for external interested distrust in financial market functioning. parties. The companies that want to invest On the other hand, the existence of the in other countries or collect funds in the information asymmetry is a regular international capital market have to catalyst of the market inefficiency and compile financial reports understandable instability of the complete financial for business partners and investors. system. Therefore, the financial reports have to be 45 www.japmnt.com (JPMNT) Journal of Process Management – New Technologies, International Vol. 5, No 2, 2017. Corporate governance is one of the users. However, the financial reports do key elements in economic efficiency and not offer all the information the users growth improvement, as well as investor might need to make economic decisions, trust increase. Corporate governance offers because they largely reflect financial the structure with company goals set and effects of the previous events, and they do allocate the resources to achieve the goals not necessarily contain non-financial and performance monitoring. Adequate information; business management should provide the • To show the results of the appropriate encouragement for the board management work, that is, their of directors and management to focus on responsibility for the available resources the goals of interest for the company itself entrusted to them. The users of the as well as its shareholders. The existence information who want to evaluate the work of the appropriate system of corporate or responsibility of the management do governance, within individual companies that in order to be able to make important and the economy as a whole, helps in economic decisions, the trust to the providing a certain level of trust necessary existing management among other things. for the market economy to function in the appropriate way. In order to achieve the above mentioned goals, the information about The importance of accounting and property, liabilities, capital, cash flow, financial reporting in a market economy income and costs are contained in the Investors need transparent and financial reports of companies.These reliable information that accurately reflects information, with other data cited in the the financial situation of a company in notes of the financial reports, help the order to enable the smooth functioning of users to understand the company's the market and efficient capital allocation. business in the previous period and predict In the world that is becoming more the future flow of the company's results, globalised, the investors seek opportunities especially the cash flow. to compare the companies in important Accounting is the means through parameters in order to make rational which we measure and describe the results business decisions about investments. of the economic activity. It is the way in Accounting is becoming more globalised which the business people define the as the companies are becoming more business goals, measure the achieved multinational, and the scope of trade and results and assess the future performance. investments between the companies The basic purpose of accounting is to increases all the time. These factors provide the information for the decision reinforce the need for financial reports makers useful for making the vital which will be internationally comparable economic decisions. Therefore, we can and consistent. rightfully say that the economic activity in According to the Committee for the terms of business transactions appears as international accounting standard frame, the input in the process of accounting, and the point of all financial reports is: the output or result is the useful • To present the information on the information (Martac, S. 1998, International financial position, business and changes in financial reports – similarities and the financial position of the entity. The differences, XXIX Symposium of the financial reports prepared for these Association of Accountants and Auditors purposes satisfy the usual needs of most of Serbia, Zlatibor, Proceedings). 46 www.japmnt.com (JPMNT) Journal of Process Management – New Technologies, International Vol. 5, No 2, 2017. The primary goal of accounting services and capital. (Lekovi ć, M., consists of providing complete Arsenovi ć, S., (2013). The role and understanding of the nature of the importance of good-quality financial accounting information, as well as to reporting, Banking, no 4, pp 79-93). nurture the ability to use the information efficiently. It serves as a buckle that Business entities gained access to a directly connects the decision makers with large number of markets around the world the economic activities – and thus, and opportunities to make a geographical indirectly, with the results of such selection at raw material procurement and decisions. The efficient usage of the their own product placement, whereby accounting information assumes the they often decide to do that outside their complete understanding of the nature of own countries. These modern terms of the economic activities included in the doing business offer a whole spectre of financial reports, the understanding of new development and advancement assumptions and measuring techniques opportunities for business entities. used in the accounting process, as well as However, it includes widening the circle of understanding the ways of linking the stakeholders who are trying to gain insight current accounting information with future into the way of doing business within the business decision making. company and its performances. The possession of the relevant information on The purpose of financial reporting is, the efficiency of the use of capital in the primarily, the creation of information company in the previous period, as well as useful for making decisions of financial business potential to be used in the future, nature. Thereby, the decisions of the is of crucial importance for investors when investors, creditors and other external they choose the way for the placement of stakeholders of the company are primarily their funds. taken into account (Stefanovi ć, 1995). They have different information needs The investors’ interests are in depending upon the nature of the decisions collision with the differences in the way of made on the basis of the acquired formatting accounting information which information. It is in the investors’ interest makes them one of the key driving forces to make a portfolio which consists of such of change in the
Load more

Recommended publications
  • How IFRS and the Convergence of Corporate Governance Standards Can Help Foreign Issuers Raise Capital in the United States and Abroad Kyle W
    Northwestern Journal of International Law & Business Volume 30 Issue 2 Spring Spring 2010 Lowering the Cost of Rent: How IFRS and the Convergence of Corporate Governance Standards Can Help Foreign Issuers Raise Capital in the United States and Abroad Kyle W. Pine Follow this and additional works at: http://scholarlycommons.law.northwestern.edu/njilb Part of the Corporation and Enterprise Law Commons, International Law Commons, and the Securities Law Commons Recommended Citation Kyle W. Pine, Lowering the Cost of Rent: How IFRS and the Convergence of Corporate Governance Standards Can Help Foreign Issuers Raise Capital in the United States and Abroad, 30 Nw. J. Int'l L. & Bus. 483 (2010) This Comment is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons. Lowering the Cost of Rent: How IFRS and the Convergence of Corporate Governance Standards Can Help Foreign Issuers Raise Capital in the United States and Abroad Kyle W. Pine* I. INTRODUCTION Since the early 1990s the United States has experienced a dramatic growth in the number of foreign firms choosing to trade their shares in U.S. markets.' Meanwhile, Europe and other markets have not experienced this effect to the same extent. In part, this growth is attributable to the popularity of American Depository Receipts ("ADRs")3 that increased throughout the 1990s, with the number of depository programs increasing from 352 in 1990 to 1800 by 1999.4 More generally, though, there has been J.D.
    [Show full text]
  • The Current Expected Credit Loss Accounting Standard and Financial Institution Regulatory Capital
    U.S. DEPARTMENT OF THE TREASURY The Current Expected Credit Loss Accounting Standard and Financial Institution Regulatory Capital September 15, 2020 Table of Contents Executive Summary .................................................................................................................. 3 I. Background ....................................................................................................................... 6 II. CECL’s Implications for Financial Institution Regulatory Capital .......................... 14 III. Key Areas of Debate ....................................................................................................... 21 IV. Recommendations ........................................................................................................... 25 Executive Summary 3 Executive Summary The current expected credit loss (CECL) methodology is a new accounting standard for estimating allowances for credit losses. CECL currently applies—or will apply—to all entities whose financial statements conform to Generally Accepted Accounting Principles in the United States (GAAP), including all banks, credit unions, savings associations, and their holding companies (collectively, “financial institutions”) that file regulatory reports that conform to GAAP. CECL requires financial institutions and other covered entities to recognize lifetime expected credit losses for a wide range of financial assets based not only on past events and current conditions, but also on reasonable and supportable forecasts. Over the
    [Show full text]
  • Cop 416 Cooperative Accounting
    NATIONAL OPEN UNIVERSITY OF NIGERIA SCHOOL OF MANAGEMENT SCIENCES COURSE CODE: COP 416 COURSE TITLE: COOPERATIVE ACCOUNTING COURSE MAIN TEXT Course Developer/ Mr. S. O. Israel-Cookey Unit Writer School of Management Sciences, National Open University of Nigeria, Lagos. Course Editor: Dr. O. J. Onwe NOUN, Lagos Programme Leader: Dr. C. I. Okeke School of Management Sciences, National Open University of Nigeria, Lagos. Course Coordinator:Pastor Timothy O. Ishola School of Management Sciences, National Open University of Nigeria, Lagos NATIONAL OPEN UNIVERSITY OF NIGERIA 14/16 AMADU BELLO WAY, VICTORIA ISLAND, LAGOS SCHOOL OF MANAGEMENT SCIENCES COP415 ASSESSMENT SHEET PROGRAMME: B.Sc. COOPERATIVE MANAGEMENT COURSE CODE: COP 415 COURSE TITLE: SEMINAR IN COOPERATIVE 1 CREDIT: 02 PART A: SEMINAR PRESENTATION NAME OF CENTER: ……………………………………. NAME OF STUDENT: ………………………………...... MATRIC NO: ……………………………………………. S/N Seminar presentation Max Facilitator Head/Coordinator, Remark Score Score (%) Hq. Score(%) (%) i. Content mastery: 10 • Relevance and Comprehensiveness • Correctness ii. Comportment of the presenter 5 iii. • Confidence 10 • Demonstration of boldness to address the audience iv. • Response to questions 10 • Ease attending to audience’s questions and observation v. Communication- Correction of grammer 10 • Fluency and Simplicity vi. Dressing-Simplicity and neatness 5 Grand total 50% 50% Facilitator name and signature PART B: ASSESSMENT OF TERM PAPER S/N Term Paper Report Feature Max Score /Coordinator, Hq. Remark (%) Score(%) i. Literature review 15 • Relevancy of cited works • Comprehensiveness of the review • Extensive of the sources – textual, interact, journals, government report etc. ii. Summary, conclusion and recommendation: 10 iii. Referencing: 10 • Materials – correctly cited using the APA format, Comprehensive cited iv.
    [Show full text]
  • What Board Members Need to Know About Not-For-Profit Finance and Accounting
    What Board Members Need to Know About Not-for-Profit Finance and Accounting www.jjco.com 1-2014 Table of Contents Introduction 2 Role of Board Member in Financial Oversight 3 Understanding Financial Statements 4 Financial Statements: Review Checklist 12 Reviewing the IRS Form 990 13 Key Financial & Governance Policies 17 Evaluating Funding Sources 18 Roles and Responsibilities 20 Glossary of Terms 26 (words and terms found in glossary are italicized throughout) Other Resources 30 Our Services/Contact Us 34 © 2014 Jacobson Jarvis & Co PLLC. All rights reserved. 1 Introduction Thank you for agreeing to serve on the board of a not-for-profit organization. Without your dedication and commitment, we would not enjoy the thriving not-for-profit community we do. As a board member, you are probably very familiar with some aspects of not-for-profit management. You understand the basic need to raise money to support the activities of the organization for which you volunteer, and you probably have seen the fundamental challenge every not-for-profit management team faces – to make the dollars raised go as far as possible. However, in addition to addressing funding challenges, as a board member you now have a legal responsibility to protect the organization’s assets by overseeing its financial activities and implementing “best practices” to protect the organization. For board members without experience in not- for-profit accounting,and especially for those without any formal accounting training, it is easy to neglect this important responsibility and bear some liability for the outcome. This booklet is designed to help you perform your financial responsibilities more effectively.
    [Show full text]
  • Class #15 Accounting Trading Strategies Do Investors Understand Accounting?
    Class #15 Accounting Trading Strategies Do Investors Understand Accounting? 15.535 - Class #15 1 Road Map: Where do things fit? • Risk Analysis: –CAPM – 3 Factor Model: Size and B/M Matter – Combine with Cash Flow Analysis • Where Now? – Recall discussion in first class about market efficiency edbate • Application of Fundamental Analysis … Can we use financial accounting numbers to identify mis-priced stocks? 15.535 - Class #15 2 Does the market set stock prices correctly all the time? • EMPHASIZE: Mkts are very competitive! • But .. Evidence that markets may not be perfectly efficient Æ Possible (risky) arbitrage opportunities. • Question: Can we use current (historical) financial accounting information and fundamental analysis to “pick” which stocks will do better/worse in the upcoming months/years? – Answer: There is growing evidence that this appears to be possible! 15.535 - Class #15 3 What is the correct benchmark for “Beating the Market”? • A high stock return (relative to other stocks) does not immediately imply you are getting a “free lunch” or an arbitrage opportunity exists! • Asset pricing models: There is a trade-off between risk and return. – Higher risk stocks should have higher returns. • What is the expected return on stock? … It depends on the stock’s systematic risk! • Simple case – CAPM: E( R ) = Rf + E*(Rm-Rf) – Expected return is increasing in systematic risk! 15.535 - Class #15 4 Abnormal Stock Returns: Getting the benchmark correct • Abnormal stock performance must be calculated relative to the stock return predicted by CAPM (or other model): • D = Abnormal return = Actual return – { Rf + E*(Rm-Rf) } – Abnormal return is known as the “alpha”.
    [Show full text]
  • Introduction to Management Accounting and Control
    ⬛⬛ CHAPTER 1 Introduction to Management Accounting and Control FEATURE STORY It’s Monday morning, 9 o’clock. Pekka Virtanen, Pekka: Restructuring means laying-off a larger general manager at FinnXL, one of the larg- percentage of the employees. Let me have est furniture companies in the world, calls a closer look at your scenarios, please. I’m for a meeting with his chief controller, Linn sure you’ll have included all the financials Petersson. in your model, but have you considered One of FinnXL’s production facilities in Estonia potential employee reaction to the restruc- is under discussion for a major restructur- turing plans? I remember some five years ing. The profitability of the production site ago, when I was the plant manager at our has dropped severely in the last six months. production site in Poland, that the financial Pekka is responsible for the Eastern European forecasts, which had been prepared by the operations, and FinnXL’s top management has central accounting department, were too instructed him to solve the problem. optimistic. They underestimated the nega- tive effects on employee motivation. Pekka: Good morning Linn. Great that you Linn: I have to admit, employee reaction is not could make it at such short notice. As I told explicitly considered in my model, as this is you last week, we need to find a solution for really difficult to quantify. But I have looked our Estonian production facility. up FinnXL’s experience with restructurings Linn: Absolutely. I’ve collected all the numbers in the Baltic states. In recent years, the actual from the last six months.
    [Show full text]
  • Commission Statement in Support of Convergence and Global Accounting Standards
    SECURITIES AND EXCHANGE COMMISSION RELEASE NOS. 33-9109; 34-61578 Commission Statement in Support of Convergence and Global Accounting Standards AGENCY: Securities and Exchange Commission. ACTION: Commission statement. SUMMARY: The Securities and Exchange Commission (the “Commission”) is publishing this statement to provide an update regarding its consideration of global accounting standards, including its continued support for the convergence of U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”) and the implications of convergence with respect to the Commission’s ongoing consideration of incorporating IFRS into the financial reporting system for U.S. issuers. FOR FURTHER INFORMATION CONTACT: Eloise Quarles Bavaria, Special Counsel, Office of International Corporate Finance, Division of Corporation Finance, at (202) 551-3450, Jeffrey S. Cohan, Senior Special Counsel, Office of the Chief Accountant, at (202) 551-5300, or Nili Shah, Associate Chief Accountant, Office of the Chief Accountant, at (202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission continues to believe that a single set of high-quality globally accepted accounting standards will benefit U.S. investors and that this goal is consistent with our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. As a step toward this goal, we continue to encourage the convergence
    [Show full text]
  • India IFRS Profile
    IFRS® STANDARDS—APPLICATION AROUND THE WORLD JURISDICTIONAL PROFILE: India Disclaimer: The information in this Profile is for general guidance only and may be updated or corrected from time to time. You should not act on the information in this Profile, and you should obtain specific professional advice to help you in making any decisions or in taking any action. If you believe that the information has become outdated or is otherwise incorrect, please contact us at [email protected]. This Profile provides information about the application of IFRS Standards in India. IFRS Standards are developed and issued in the public interest by the International Accounting Standards Board (Board). The Board is the standard-setting body of the IFRS® Foundation, an independent, private sector, not-for-profit organisation. This Profile has been prepared by the IFRS Foundation based on information from various sources. The starting point was the answers provided by standard-setting and other relevant bodies in response to surveys that the Foundation conducted on the application of IFRS Standards around the world. The Foundation drafted the Profile and invited the respondents to the surveys and others (including regulators and international audit firms) to review the drafts; their comments have been reflected in this current version. The only purpose of the IFRS Foundation’s Jurisdictional Profiles is to illustrate the extent of implementation of IFRS Standards across the globe. The Profiles do not reflect the intellectual property licensing status of IFRS Standards within any given jurisdiction. The IFRS Standards are protected by copyright and are subject to different licensing arrangements according to jurisdiction.
    [Show full text]
  • Code of Ethics for Professional Accountants Contents
    June 2005 Revised July 2006 CODE OF ETHICS FOR ♦ PROFESSIONAL ACCOUNTANTS CONTENTS Page PREFACE ...................................................................................................... 1102 PART A: GENERAL APPLICATION OF THE CODE ............................... 1103 100 Introduction and Fundamental Principles ........................................ 1104 110 Integrity ........................................................................................... 1110 120 Objectivity ....................................................................................... 1111 130 Professional Competence and Due Care .......................................... 1112 140 Confidentiality ................................................................................. 1113 150 Professional Behavior ...................................................................... 1115 PART B: PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE ... 1116 200 Introduction ..................................................................................... 1117 210 Professional Appointment ............................................................... 1123 220 Conflicts of Interest ......................................................................... 1127 230 Second Opinions .............................................................................. 1129 240 Fees and Other Types of Remuneration .......................................... 1130 250 Marketing Professional Services ..................................................... 1133 260 Gifts and
    [Show full text]
  • Report Comparison with International Accounting Standards Etc
    Report to the Swedish Government Report Comparison with international accounting standards etc. 2013:21 Date: 2013-02-21 Dnr: 49-1071/2011 ESV-nr: 2013:21 Copyright: ESV Project leader: Anne-Marie Ögren Translated into English by: Anders Ejdemark 2 Preface As instructed by the Swedish Government the Swedish Financial Management Authority (ESV) gives an account of the result of the work on comparing the accounting rules and regulations applied in the Swedish Central Government Annual Report and Consolidated Financial Statements (henceforth called Central Government Annual Report) to the ones of the International Accounting Standards. Also, according to this Government instruction, the report contains a comparison with other countries, and also a consideration of an adjustment of measurement and recognition of assets in the Central Government Annual Report to the principles of accounting applied in the National Accounts. Mats Wikström, Director General of ESV, has decided on the report. Anne-Marie Ögren has presented it. The work has been accomplished by a working group composed of the Senior Advisors Anne-Marie Ögren (project leader), Claes-Göran Gustavsson, Ingemar Härneskog, Curt Johansson, Maria Olsson and Margareta Söderhult, and the Advisors Svante Andersson, Elin Bergman, Eva Engdahl Gäfvert, Carina Franzén, Lars Nordkvist and Ellen Rova. Views have also been acquired from the Swedish Financial Accounting Standards Board of ESV. 3 4 Table of contents Preface .......................................................................................................................
    [Show full text]
  • Evolutionary Developments in Accounting Standard Setting for Private Entities and Smes
    Journal of International Business and Cultural Studies Evolutionary developments in accounting standard setting for private entities and SMEs Gregory S. Kordecki Clayton State University Maria L. Bullen Dominican University of California ABSTRACT Financial reporting is a necessary component of sustained local and international commerce. Various systems of accounting and reporting are evident in the world today. The needs of users of financial information for private entities and small and medium size enterprises (SMEs) are vastly different from those users of financial information of publicly traded and widely held companies. This paper examines some of these systems in place to deal with this bifurcation, beginning with the Anglo American roots in the United States and the dilemma of standard setting for diverse entities, then turns to developments in other countries, primarily on the Pacific Rim, before focusing specifically on China. The paper concludes with rationale for the movement toward efficient and effective accounting standard setting with decentralized professional control. The paper includes an overview of historical development in the United States to promote financial reporting for private companies versus public companies as well as progress in other countries in developing differential standards related to differences in entities and financial markets served by accounting information. The paper provides support for continuing global efforts such as International Financial Reporting Standards for Small and Medium Sized Business (IFRS for SMEs) to recognize the importance of standards appropriate for small and medium sized and privately held entities as opposed to large public companies. The authors suggest further research to study how standards may be adapted to local needs and variability in firm size and ownership.
    [Show full text]
  • E-Procurement in Accounting
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Clute Institute: Journals The Review Of Business Information Systems Volume 7, Number 1 E-Procurement In Accounting: A Macro Perspective Of Selection Techniques Saravanan Muthaiyah (E-Mail: saravanan.muthaiyah @ mmu.edu.my), Multimedia University, Malaysia Murali Raman (E-mail: murali.raman @ mmu.edu.my), Multimedia University, Malaysia Larry Lombard, Ph.D. (E-mail: [email protected]), Metropolitan State College of Denver Abstract Selecting an E-procurement accounting package is a complex process because of rapidly chang- ing technology and the variety of options proposed by software providers. There are many e- procurement packages available in the market, but most of these packages simply automate the ordering process. Using an integrated system to place orders over the Internet can save time, re- duce postage and paper cost. But without integrating e-procurement packages within a compa- ny’s finance and accounting systems, one of the largest opportunities for savings is missed out. To achieve full advantage of e-procurement, the procurement system must be integrated not only within the financial system but also with vendors and customers. There are two main categories of e-procurement solutions: 1) buy-side and 2) marketplace. While the full range of benefits might be better secured with buy-side procurement solutions, application costs make marketplace solutions more affordable. For smaller companies, costs of development of buy-side solutions will most often outweigh benefits and therefore marketplace solutions will be more suitable. For large businesses that choose buy-side solutions, careful evaluation is required in selecting the best software that can best suit the company requirements.
    [Show full text]