The Debt And Equity Securities

2. Which of the following is not an objective of financial reporting described in FASB Concepts Statement No. 1? 
a. To provide information about how management of an enterprise has discharged its stewardship responsibility to owners.
B. To measure the current market value of the business enterprise.
c. To provide information so potential investors or creditors can make their own predictions of future

One major criticism of the equity method is that the method does not consider market values. As of now the equity method uses book value which is based on original cost plus a portion of the investee’s adjusted income minus dividends cite?. The equity method’s book value

Baruch Lev and Feng Gu authors of “The End of Accounting and The Path Forward for Investors and Managers” indicate that over the past 110 years, the structure and content of financial reports has not changed, and that the role that these reports play in influencing the decisions of investors has greatly diminished. Lev and Gu make a case that non-transaction events that are not captured by the financial reports such as those disclosed through 8-k filings with the Securities and Exchange Commission (“SEC”) have a greater impact on stock prices, and thus more useful to investors. In addition, they suggest that one of reasons for the decline in usefulness of financial reports stems from the increase of estimates that has made its way into these reports (Lev and Gu 2016).

It is reasonable to say that fair value of reporting units have fallen significantly in pace with market capitalization, and it has possibly fallen below book value of the reporting units. Therefore, above analysis raises substantial doubt on management’s action to carry forward the 09 fair values of Fitness and Hockey. They should not carry forward the previous fair value estimates and should revalue Fitness and Hockey for 2010.

With the shares vesting in the future, Blackstone expected to face deferred cost approximated $13 billion. It may record significant net losses for a number of years following without paying any interests or dividends hereafter. As a result, Blackstone developed a metric called “economic net income,” which excluded the impact of income taxes, noncash charges related to the vesting of equity-based compensation, and amortization of intangible assets. By using the economic net income metric, the Blackstone‘s executive team argued that this metric was justified, as the future noncash charges reflected an extraordinary situation, incurred only because of the one-time event of the firm’s listing. Moreover, the stream of income against which these expenses would be offset was uncertain but highly likely to be more than enough to cover these costs. Furthermore, the management team also thought that this $13 billion expenses was based on the extreme assumption that all the employees would not leave their jobs in the coming eight years. If they left the firm before their vesting

The information reflected in the financial statements actually is expected to be of high quality and useful to support the quality decision-making of market stakeholders due to the far-reaching and very costly consequences. It is important in this context to properly identify and discuss the user needs and thereby we refer to the actual requirements of all information users amongst them the management, which uses the financial information to steer, regulate and co-ordinate the business.

The impairment-only accounting model for goodwill was initially brought to the table in 2004, to replace the previous amortization-based model. Over the years, research supported the idea that impairment charges improved the fundamental economic attributes of goodwill than systematic amortization charges. Research also revealed that such annual changes had minor information value to users. According to KPMG (2014), this was the key reason why the US Financial Accounting Standards Board (FASB) “replaced straight-line amortization of goodwill with this model that was based exclusively on impairment testing” (p. 4). The FASB argued that this approach provides

In fully investigating all of our calculations we are fully invested in using the Net Present Value figures we calculated as a means of ranking the eight projects. In doing so we found reasons in which why the Net Present Value was our benchmark for ranking the projects and why we did not use the Payback Method. The Payback Method ignores the time value of money, requires and arbitrary cutoff point, ignores cash flows beyond the cutoff date, and is biased against long-term projects, such as research and development and new projects. When comparing the Average Accounting Return Method to the Net Present Value method we found that the Average Accounting Return Method is a worse option than using the Payback Method. The Average Accounting Return Method is not a true rate of return and the time value of money is ignored, it uses an arbitrary benchmark cutoff rate, and is based on accounting net income and book values, not cash flows and market values. Plain and simply put, the Net Present Value method is the best criterion to use when ranking these eight

The consolidated financial statements include the accounts of Yahoo! Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The equity and loss from operations attributable to the minority shareholder interests which related to the Company 's foreign and domestic

Also referred to as a Profit and Loss (P&L) statement, income statements illustrate a company’s revenues and expense, operating and non-operating income and expense, which is generated and incurred within an accounting period. “The analysis of income can create a picture of the quality of operations in the composed profit and loss account period” (Jeletic, 2012, pg. 325). In addition, income statements also inform external users of net profits or losses from the corporation 's equity position during an accounting period. These data are valuable to a company’s stakeholders, respectively. Some external stakeholders may utilize this information to highlight potential risks, financial strength, the yield on investment and operational abilities of a company (Carrahera & Auken, 2013).

Fair value accounting utilising market value as a benchmark to value company’s assets has drawn a lot of controversy.

The framework for measuring fair value is easy to understand and follow, and relates to the conceptual framework. As stated earlier the preferred measure of fair value is the market approach, because the prices are observable. For this reason the standard recognizes the need for relevant, reliable, and comparable information in order for users to make better decisions about the current financial position of a company. Financial readers are aware of the valuing measurement used to calculate the fair value, whether the measurement were derived from an observable or unobservable input. The measurement establishes the existence of reliable and relevance qualitative factors that make accounting information useful for decision making (Barbera, 2007). If it were observable then the value derived can be researched and verified. However, if it were unobservable then the user must read the disclosures which will be discussed later in the research paper, and determine the reliability of the internally generated measurement. In return it can be understood that the level 1 inputs are more reliable and relevant than the other two levels.

Using the return regression, where the dependent variable is raw returns and independent variables are raw earnings and earnings surprises, this study will test the association between fair value FV and intangible assets. Moreover, the IAD variable in equation (1A) is added to assess the degree of value

In today’s businesses, there has been an increase in the demand for financial reporting and also, the need to have reliable measurements of fair value and its disclosures. The need for reliable information has caused continuous change to accounting policies which has posed a challenge not only to management of companies, but also to auditors. The frequent changes in accounting principles pose a challenge for managers in measuring accounting estimates accurately and are an exceedingly difficult task. Fair value accounting is a financial reporting approach in which companies are required to measure and report on an ongoing basis certain assets and liabilities at estimates of the prices they would receive if they were to sell the assets or would pay if they were to settle their liabilities. Under fair value accounting, companies report losses when the fair values of their assets decrease or liabilities increase. Those losses reduce companies’ reported equity and may also reduce companies’ reported net income.

In the financial markets, the most common forms of marketable securities are stocks and bonds. Though they have some similarities to each other, they differ greatly in many aspects. Broadly speaking, both financial instruments enable one to invest in corporations, public and/or private, with possible profitable returns in the future.