Campbell & Baileys Boston Office Essay Example for Free

Campbell Baileys Boston Office Essay When Campbell and Bailyn’s Boston Office made the decision to restructure their organization and place a new emphasis on specialization, the business and employees faced multiple challenges during the process. Although communication problems were evidenced in the scenario, I was also concerned with the lack of buy-in by the employees within the organization. According to a recent writing in Bloomberg’s Business Week, employees are an important factor in determining how customers perceive the company’s brand. For this reason, companies should do more to nurture the company’s culture through internal branding efforts. In addition, when employers consider a company’s brand, they think in terms of marketing departments, advertising, and publications. In reality, a brand is made up of every experience that a customer has with an organization. (McKee, 2014). Management consultant Peter Drucker states â€Å"culture eats strategy for dinner† (McKee, 2014). When employees become stressed out at work, it impacts their performance and in turn the company’s productivity. In the Boston office, it was clear that Paul Callahan, the top grossing sales person, was stressed out. In a recent article, it is stated that depression and burnout afflict one-third of employees (Cooper, 2014). These afflictions can also negatively impact employee performance and morale. In the case of the Boston office, it would benefit the organization to speak with the employees and work towards obtaining their buy-in. Once the employees buy into the change, they can then pass that enthusiasm on to their customers to gain their buy-in as well. References Cooper, C. (2014, May 15). Depression and burnout at work afflict one-third of employees. The Independent. Retrieved from http://www.independent.co.uk/life-style/health-and-families/health-news/depression-and-burnout-at-work-afflict-onethird-of-employees-9294596.html Donnellon, A. Gifford, D. (2008). Campbell and Bailyns Boston Office: Managing The Reorganization. Boston: Harvard Business Publishing. McKee, S. (2014, May 13). Branding begins at home. Bloomberg Business Week. Retrieved from http://www.businessweek.com/articles/2014-05-13/branding-begins-at-home

Anti-Trust Legislation & Microsoft: Do The Ends Justify The Means? Essa

Anti-Trust Legislation & Microsoft: Do The Ends Justify The Means? Anyone who uses a computer today has likely heard of Microsoft, the maker of Microsoft Windows. Over the past few years, as Microsoft’s software has dominated the market, Microsoft has been involved in a number of anti-trust lawsuits, claiming that Microsoft has engaged in unfair business practices which are monopolistic and anti-competitive. By the end of these proceedings, Microsoft was found to be in violation of federal anti-trust laws. The real question now becomes whether or not these anti-trust laws have served their purposes. They exist in foreign countries very much the same as they do here. After reviewing legal analyses here in the United States, I will conclude that Microsoft may indeed be in violation of anti-trust legislation, but the application of these laws, which Microsoft has allegedly violated, does not follow the intention of these laws back when they were initially written. Anti-trust laws, while pure in motive, have the fundamental flaw of preventing the formation of intelligent mergers and monopolies, when what they should be doing is preventing these monopolies from taking advantage of consumers. In the United States, anti-trust legislation began with the Sherman Act, passed by Congress in 1890. â€Å"The Sherman Act prohibited contracts and conspiracies in restraint of trade as well as monopolization of or attempts to monopolize trade.† The Sherman Act was followed by the Clayton Act and the FTC Act, the latter of which established the Federal Trade Commission as a body who was authorized to prevent corporations from engaging in unfair business practices. By 1950, Congress had enacted two more laws, the Robinson-Patman Act, which mod... ...le to develop the software that will give people what they want. As a result, the software that we want will be produced by some small business, who really don’t have the experience necessary with the operating system, or even if they do, their product will be over priced and will draw little demand anyway. Bibliography: Debra A. Valentine, "The Goals Of Competition Law", prepared remarks, Pacific Economic Cooperation Council Conference on Trade and Competition Policy, May 13-14 1997, 8. Office of Fair Trading, Competition Act 1998 - what is the law?, Office of Fair Trading, 6/8/2004, Joe Wilcox, "Judge Rules Microsoft Violated Antitrust Laws", CNET News.com, April 3, 2000, 4. "Yet Another Anti-trust Suit Against Microsoft," Reuters 22 Oct 1998,

Aci Financial Statement Essay

The companies are now preparing this statement as an integral part of their financial statements. This paper examines empirically the current practices followed by sample companies in preparation of cash flow statement and concludes that the sample companies are in line (with few exceptions) with the requirements of International Accounting Standard (IAS)-7 or Bangladesh Accounting Standard (BAS)-7. It also proposes some suggestions for improving the presentation of the statement Key words: Cash flow statement, IAS/BAS, Listed Company, Disclosure. Introduction The purpose of a cash flow statement is to provide information on the cash flow from a company’s operating, investing and financing activities to enable the users of its financial statements to evaluate the ability of the company to generate cash and to use the historic cash flows to predict future cash flows. The cash flow information enhances the comparability of the operating performance by various companies, because it eliminates the effects that arise from the use of different accounting treatments for the same transactions and events. The use of cash flow information is gaining importance in the analysis of financial statements (Epstein 1991; Yap 1997; Jones and Widjaja 1998; Previts and Bricker 1994). Cashflow information is considered less open to manipulation than information on earnings, because it is based on the actual receipt and payment of cash only and not on the accrual and other accounting principles. Rees (1995:75) adds that the cash flow statement can be more informative than the other statements. However, he literature on the cash flow statement indicates that there are grey areas in cash flow reporting that are open to various interpretations (Everingham and Watson 2002). The perceived simplicity of the cash flow statement may therefore create synthetic confidence in the reliability of companies’ cash flow reporting and the comparability of various companies’ cash flow information. The acceptance of IAS-7: The Cash Flow Statement has added a new dimension to the preparation and present ation of financial statements in Bangladesh. This paper is an attempt to investigate into the state of cash flow reporting by the listed Bangladeshi * Lecturers, Department of Business Administration, ASA University Bangladesh 210 ASA University Review, Vol. 6 No. 2, July–December, 2012 Textiles and Clothing companies in general. The focus is not on the quality of the reporting of the companies but rather on what the reporting levels are in general. Objectives of the study The major objectives of the study are as follows: 1. to identify the current practice of cash flow statement of Pharmaceutical companies in Bangladesh. 2. o provide present cash flow statement format, structure and reporting on the basis of information provided in the annual reports of the selected listed Pharmaceutical companies in Bangladesh. Methodology of the study The study was conducted in accordance with secondary information obtained from various sources. The overview of standardization of financial reporting and the regulatory framework has be en based on laws, regulation, and guideline and also on various published sources of information taken from International Accounting Standard Board (IASB) and Bangladesh Accounting Standard 7 (BAS 7). A limited survey has also been made covering a total of 12 Pharmaceutical companies’ annual reports (2009) enlisted in Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). These are selected on the basis of convenience sampling procedure. In order to make the study more revealing it also covers some research articles, textbooks, publications and web sites of various accounting bodies. Limitations of the study 1. Applied non profitability techniques have been used. 2. Due to limitation of the extensive materials, books and previous studies in Bangladesh literature review could not be extensive. 3. This study consists of only 12 listed Pharmaceutical companies due to time and resources constraints. Literature review Cash flow statement: A historical surroundings/background Cash flow Accounting (CFA) was the main system of accounting up to beginning of the 18th century (Watanabe, Izumi: The evolution of Income Accounting in Eighteenth and Nineteenth Century Britain, Osaka University of Economics, Vol. 57, No. 5, January 2007, p. 27-30). Till then, accounting allocation and profit measurement were relatively unimportant; the profit and loss account being used to close off ledger accounts at each period end. However, with the advent of concept and practices of business continuity, periodic measure and statement of financial position began to grow. Thus the basis of cash transaction becomes foundation for the allocation based systems of accounting today. Although there has been a reasonably sustained interest in fund flow statements (based on allocated accounting data) since the beginning of the twenty century, CFA appears to have received little or no support from accountants until the early 1960s. At that time there was little concern over the use of ‘cash flow’ data in the financial analysis- cash flow being interpreted as ‘profit plus depreciation (. Winjum, J. o, 1972). In 1961 AICPA recognized the importance of fund statement by publishing Accounting Research Study (ARS) Cash Flow Statement Disclosures in Pharmaceutical Companies 211 NO 2â€Å"Cash flow analysis and fund statements†. Before that, accountants had prepared funds statements primarily as management report. The Accounting Principles Board (APB) responded in October 1963 by issuing APB Opinion NO. : â€Å"the statements of and application of funds†, which recommended that a statement of sources and application of funds be presented on a supplementary basis. Because of the favorable response of the business community to this pronouncement, the APB issued Opinion No. 198: â€Å"Reporting changing in Financial Position† in March 1971. This opinion required that a statement of changing financial position be presented as a basic financial statement and be covered by the auditor’s reports. In 1981 the Financial Accounting Standard Board (FASB) reconsidered fund flow issues as part of the conceptual framework project taken in 1976. At this time the FASB decided that the cash flow reporting issues should be considered at the standard level. Subsequent deliberation resulted in Statement of Financial Accounting Standard (SFAS) No. 95: ‘Statement of cash flows’ in Nobember1987 (Weygandt, Kieso, Kimmel 1998: 1936). Fund flow statement Vs Cash flow statement Both fund flow statement and cash flow statement serve as a fundamental parts of the financial statements. In 1961, the AICPA issued ARS No. 2, â€Å"Cash Flow Analysis and the Fund Statements† which recommended that a fund statement covered by auditor’s opinion be included in companies financial reports. According to paragraph 5 of Preface to Statement of International Accounting Standard [approved by the IASC Board in November1982 for publication in January 1983 and supersedes the preface published in January 1975 (amended March 1978)], â€Å"the term ‘financial statements’ covers balance sheets, income statement or profit and loss accounts, statements of change in financial position, notes and other statements and explanatory materials which are identified as being part of financial statements† (IASC, 2000:32). As per paragraph 7 of framework for the Preparation and Presentation of Financial Statements (approved by IASC Board in April 1989 for publication in July 1989): â€Å"A complete set of financial statement normally includes a balance sheet, an income statements, a statements of change in financial position (which may be presented in a variety of ways, for example as a statement of cash flow or a statement of fund flows) and those notes and other statements and explanatory materials that are an integral part of the financial statements† (IASC : p. 3-44). As per paragraph 4 of the previous IAS 7 (October 1977), statements of change in financial position, the term ‘ funds’ referred to cash, cash and cash equivalents or working capital (IFAC, 1992: p. 813). Funds provided or used in operation of an enterprise should be presented in the statements of changes in financial statement separately from other sources and uses of fund. Unusual items, which are not part of ordinary activities of the enterprise, should be separately disclosed (IASC: Para 21). But many users of financial statements consider current practices of reporting fund flows as confusing because too much information is compressed in the statements of change in financial position, and because no single definition has been established (Mosich and Larsen, 1982; p. 935). In order to develop a conceptual framework for financial accounting and reporting, the FASB issued in December 1980 a discussion memorandum â€Å"reporting Fund flow, Liquidity and Financial Flexibility† which was issued for the following reasons: (1) for assessing future cash flow, and (2) current practices regarding the reporting of funds flow information are not entirely satisfactory. As a result of deliberation, FASB issued SFAS NO. 95 ‘Statements of Cash Flow’ in 1987. The statements require the inclusion of statements of Cash Flows rather than a statement of Change in Financial position when issuing a complete set of financial statements 212 ASA University Review, Vol. 6 No. 2, July–December, 2012 which was made effective for annual periods ending after July 15, 1988. The major requirements of the statements are of the following two areas: Basis of Presentation: The statement must focus on cash receipts and payments and must explain the change in cash plus cash equivalents. Classification of cash flows: Cash flows are to be classified according to operating, investing and financing activities. The basis of such classification is derived from the financial theory, which state that the enterprise derives the cash used for investing activities and settlement of outstanding financial obligation in an accounting period from internal and external sources. Internal cash sources emanate from the net cash generated from current operation and perhaps disinvesting and depletion of cash resources at the start of the period. External cash sources come from financing activities such as borrowing and receiving cash from the sale of equity shares to existing and new shareholders (Wallace et,al). Benefits of Cash Flow Information – The information in a cash flow statement helps investors, creditors, and others to assess the following aspects of the firm’s financial position. – Such statements serve as a mechanism for predicting the ability to generate future cash flows for the investors, creditors and others. – This enables managers or management to plan coordinate and control financial operation in an effective manner. It gives an indication of the relationship between profitability and cash generating ability thus of the quality of the profit earned. – It furnishes information to the management regarding the entities’ ability to pay dividend and meet obligations. – Analyst and other users of financial information often, formally or informally, develop models to assess and compare the present value of the future cash flow of entities. Historical cash flow statements could be useful to check the accuracy of past assessment (ACCA Text book part 2. P. 324). It is free from manipulation and is not affected by subjective judgments or by accounting policies. – Such a statement dictates situations when a business has made huge profit but has run out money or it has sustained loss but has enough cash availability. – The extent of cash generated from operational activity and external finance in order to meet capital, tax, and dividend requirements can be obtained from such statements (Lee, T. A: 1972:27-36). – It aids in the evaluation of risk, which includes both the expected variability of future return and probability of insolvency or bankruptcy ( Hendrickson, Eldom. S, 1982: 237). – Such statements reveal the capability of an enterprise to pay its short obligation as and when due to the lenders. – A cash flow statement in conjunction with a balance sheet provides information on liquidity, viability, and adaptability. The balance sheet is often used to obtain information on liquidity, but the information is rather incomplete for this purpose as the balance sheet is prepared at a particular point of time. Cash Flow Statement Disclosures in Pharmaceutical Companies 213 It may assists users of financial statements in making judgments on the amounts, timing and degree of certainty of future cash flows. – This statement provides information that is useful in checking the accuracy of past assessment of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing price (IAS 7: Para 3 & 4). – Information on cash flows classified by three groups of activities (Operating, investing and financing) that allow users to assess the impact of those activities on the financial position of the enterprise and the amount of its cash and cash equivalents. This information may also be to evaluate the relationship among those activities (IAS 7: Para 11). – This statement is of special importance in assessing future cash flows, quality of income operating capability, financial flexibly and liquidity, and information on financing and investing activities. Using cash flows from operating activities from the cash flow statements, different ratios such as liquidity, ratio, solvency ratio, and profitability ratios can also be calculated to evaluate an enterprise’s liquidity, solvency, and profitability. Aziz uddin and Bala, 2001: p. 14) Overview of Cash flow statement The cash flow statement explains the changes that have occurred in the company’s cash and cash equivalents during the year by classifying the cash flows in its operating, investing and financing activities. The statement must focus on cash receipts and payments and must explain the change in cash plus cash equivalents. The classification is done in a way tha t is most appropriate to the company’s business. The following are the definitions of the components of the cash flow statement: Cash: cash on hand and demand deposits Cash equivalents: short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Operating activities: the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities: activities that result in changes in the size and composition of the equity capital and borrowings of the enterprise (Epstein, p. 93). Objective and Scope of IAS 7 Information about the cash flow of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. The economic decision taken by users requires an evaluation of the ability of an enterprise to generate cash and cash equivalents and timing and certainty of their generation. The objective of IAS 7 is to require the provision of information about the historical change in cash and cash equivalents of an enterprise by means of a cash flow statement that classifies cash flows during the period from operating, investing and financing activities. An enterprise should prepare a cash flow statement in accordance with the requirements of IAS 7 and should present it as an integral part of its financial statements for each period for which financial statements are prepared. Users of an enterprise’s financial statements are interested in how the enterprise generates and uses cash and cash equivalents. This is the case regardless of the nature of the enterprise activities and irrespective of whether cash can be viewed 214 ASA University Review, Vol. 6 No. 2, July–December, 2012 as the product of the enterprise, as may be the case with a financial institution. Enterprises need cash for the same reason however different their principal revenue- producing activities might be. They need cash to conduct their operations, to pay their obligations and to provide return to the investors. Accordingly this standard requires all enterprises to present a cash flow (Para 1 & 3). Presentation of Cash flow statement under IAS 7 Cash and cash equivalent: The definition of cash and cash equivalent are central to the preparation and interpretation of cash flow statements. Cash consists of cash in hand and demand deposits, coins and notes of an organization, etc. In our country deposits in postal accounts may be termed as cash (Cooper and Ijiri, 1984: 88; Ghosh, 2001). Cash equivalents are short-term, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value. According to the definitions of paragraph 6 of IAS 7 cash comprises cash in hand and demand deposits; usually ‘cash on hand’ includes currency, notes, and coin in the cash box of the enterprise. It also includes prize bond, negotiable money orders, postal orders, and under posited checks, bank drafts or pay- order. Demand deposits refer to deposits in checking accounts in banks and other financial institutions that may be withdrawn without notice usually subject to deduction of outstanding check. Thus cash equivalents – 1. are short-term investments but the ‘term’ ‘short’ not clearly specified, although a period of three months and less is suggested to be taken as short term period. 2. are highly liquid investments. Here ‘liquid’ means having in a situation where cash equivalents are available in sufficient amount to meet obligation of payments. . are investments that are both: (a) readily convertible, to known amounts of cash and (b) subject to an insignificant risk of change in value. According to SFAC No. 95, the risk categorically refers to risk of change in interest rate. The short-term investments are so near their maturity that they represent insignificant risk of changes in interest rate. Examples include treasury bills, commercial papers, a nd money market funds purchased with cash that is in excess of immediate needs. However, although by definition, cash equivalents refer to short term highly liquid investments, they are usually held for the purpose of meeting short term cash commitments rather than for other purpose. For an investment to qualify as a cash equivalent it must be readily convertible to a known amount of cash and be subject to insignificant risk of change in value. Therefore an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months and less from the date of acquisition. Equity nvestments are excluded from the cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred share acquired within a short period of their maturity and with a specified redemption date (Para 7). Cash Flow Statement Disclosures in Pharmaceutical Companies 215 Preparation of Cash flow statements IAS 7 requires cash flows to be classified into operating, investing, and financing activities. Example of cash flows by cate gory Operating Activities Inflows Receipts from customers Outflows Payments to suppliers Advance deposits from customers Wages and salaries to employees Income tax refunds Income tax payments Interest received on customers’ notes or Other tax payments accounts Dividends and interest received from Interest paid on bank debt or bonds outstanding and investments and included in determining net included in determining net income income Investing Activities Cash received from sale of capital assets Payments for purchase of capital assets Cash from sale of debt or equity investments Cash flows capitalized as intangible assets, such as:  · development costs  · start-up costs  · capitalized interest  · exploration Costs Collection of principal on loans to others Purchase of debt or equity securities of others Interest and dividends received on investments Loans extended to others and not included in determining net income Financing Activities Net proceed of issuing debt or equity securities Payment of principal on bonds or bank loans Cash proceeds received from ba nk loans Purchase of the entity’s own shares Interest paid on bank debt or bonds outstanding and not included in determining net income Dividends paid to shareholders Variations in Reporting activities for Cash flows A. Operating or Financing activities Transactions with different categories included in cash flows are classified in a different manner. According to IAS 7, Para 12, â€Å"A single transaction may include cash flows that are classified differently. For example, when the cash repayment of a loan includes both interest and capital the interest element may be classified as operating activities and the capital amount is classified as financing activities†. B. Operating or investing and financing activities Some cash flows may be classified as arising from any activities such as ‘interest’, ‘dividend’ ‘income tax’. The detailed provisions of these types are as follows. 216 ASA University Review, Vol. 6 No. 2, July–December, 2012 Interest: a. For a financial institution, interest paid and interest received are usually classified as operating cash flows (para 33). b. For other enterprise, interest paid and interest received may be classified as operating cash flows because they enter into the determination of net profit or loss. Alternatively, interest paid may be classified as financing cash flows, because they are costs of obtaining financial resources. Interest received may be classified as investing cash flows, because they are returns on investments (para 33). Dividend: a. For a financial institution, dividends received are usually classified as operating cash flow (Para 33). b. For other enterprise, dividends received may be classified as operating cash flows because they enter into the determination of net profit or loss. Alternatively dividend received may be classified as investing cash flows, because they are returns on investments (para 33). c. Dividend paid may be classified as financing cash flows, because they are costs of obtaining financial resources. Alternatively dividend paid may be classified as component of cash flows from operating activities in order to assist users to determine the ability of an enterprise to pay dividend out of operating cash flows (para 34). Income tax: a. Taxes on income arise on a transaction that gives to the cash flows that are classified as operating, investing, and financing activities in cash flow statement. While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are often impracticable to identify and may arise in a different period from the cash flows of the underlying transactions. Therefore taxes paid are usually classified as cash flows from operating activities. However, often it is practicable to identify the tax cash flow within individual transaction that gives rise to cash flows that are classified as investing or financing activity as appropriate. When tax cash flows are allocated over more than one class of activity, the total amount of taxes paid is disclosed (Para 36). In the light of SFAS 95, â€Å"Transaction that enter into the determination of net income† are defined as operating activities and hence, interest received or paid, dividend received and taxes on income are rigidly treated to arise from operating activities. Dividend to stakeholders are treated as cash outflows classified as financing activities (Keiso and Weygandt, 1998: 1275-76) Cash flow statement Practices in Bangladesh Regulatory Framework, in the eyes of the Companies Act 1994 (Act no. 18 of 1994): According to Section 183 of the Companies’ Act 1994 (which came into effect from 1 January 1995), a company is required to present balance sheet, profit and loss account (income and expenditure account, in case of non profit companies). Under section 185, the balance sheet and the income statement have to be prepared according to the forms set out in Part –1 and Part –2 of Schedule XI respectively under which information on consecutive two years (concerned year and Cash Flow Statement Disclosures in Pharmaceutical Companies 217 preceding year) are to be provided. However according to note (g) of the general instruction for preparation of balance sheet (given in part –1 of schedule XI after the horizontal format of the balance sheet), â€Å"a statement of change in financial position shall be included as an integral part of the financial statements, and shall be presented for each period for which the profit and loss account is prepared†. However no specific format of cash flow statement has been prescribed in Companies Act 1994. In the light of the Security and Exchange Rule 1987 (S. R. O No. 237-l/87 dated on 28 September 1987): Under the provision of rule 12 (1) of the Securities and Exchanges Rules (SER) 1987(amended by the section notification No. SEC/ Section 7/SER/03/132 dated 22 october1997 published in the official gazette on 29 December 1997), the annual report to be furnished by an issuer of listed security shall include â€Å"a balance sheet, profit and loss account, cash flow statement and notes to the accounts collectively hereinafter referred to as the financial statement’. In the part III of the Schedule of the SER 1987, issues relating to interest paid on short-term borrowing, interest and dividend received income taxes are clearly guidelined. For example, interest paid on short-term borrowing shall be a cash outflow under operating activities; ‘interest and dividend received’ shall be a cash inflow under investing activities. And ‘interest paid on long term borrowing’ and ‘dividend paid’ shall be a cash outflow under financing activities. Under paragraph 35-36, ‘taxes on income’ should be treated as operating cash outflow unless they can be identified in financing and investing activities. Findings of the study To know the extent of cash flows statement reporting practices by Pharmaceutical companies, a survey has been conducted covering twelve annual reports (2009) (For detailed the name of the companies see Appendix-1). The major findings of the study are given below in terms of general variations in reporting and voluntary disclosure. General findings It includes the current format and structure of cash flow statement and the extent of compliance of IAS-7, followed by sample Pharmaceutical Companies in Bangladesh. All the sample companies prepare cash flow statement as required by IAS-7/BAS 7 adopted by the Institute of Chartered Accountant of Bangladesh and present it as an integral part of the financial statements. Notes to cash flow statement have been presented as part of the financial statements i n case of all the sample companies.  · The sample companies prepare cash flow statement in vertical form and shows figure of cash flows of the current year and the previous year.  · All the sample companies’ cash flow statement contains a classification of operational, investing, and financing activities.  · The sample companies did not illustrate the policy dopted in determining the formulation of cash and cash equivalents although this is required by paragraph 36 of IAS 7. 218 ASA University Review, Vol. 6 No. 2, July–December, 2012 Variation in Reporting Another objective of the survey was to determine which alternatives, permitted by IAS-7, are used most in practice by Bangladeshi pharmaceutical companies. It is found that there are not many differences between companies in their reporting of cash flow information. This is expected because the preparation of cash flow statement does not allow for many choices, differences of interpretation or different accoun ting treatments. The results are set out in table 1. Table-1 Variations in reporting [Cash flow statement (CFS)] Factors 1 Notes to CFS Options Separately, following the CFS Part of the notes to the financial statements Incorporated in the CFS Total Direct method Indirect method Total Operating activities or no interest Financing Investing activities Total Financing activities or no dividends Operating activities Investing activities Total Part of accounting policy note Nothing disclosed Total Operating activities or no tax Financing activities Investing activities Total Number of companies 0 12 0 12 12 0 12 12 0 0 12 12 0 0 12 12 0 12 12 0 0 12 2 Operating activities 3 Interest received and Interest paid 4 Dividend received and Dividend paid 5 Definition of cash and cash equivalents 6 Income tax Notes to table 1  · Refer to point 2 of Table 1. According to IAS-7 and SEC Rule 1987, the enterprises are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows which is not available under the indirect method. All the sample companies followed the direct method in reporting operating cash flows. One company (Pharmaceutical Mithun Knitting & Dyeing Ltd. ) discloses cash flows from operating activities under indirect method in notes of financial statements as additional information. Cash Flow Statement Disclosures in Pharmaceutical Companies  ·  · 219 Refer to points 3 & 4 of Table 1. All the companies studied have shown ‘interest received and paid’ under operating activities and ‘interest paid on long term borrowing’ and ‘dividend paid’ under financing activities. Refer to points 5 & 6 of Table 1. All the companies studied have shown â€Å"definition of cash and cash equivalents† in the notes of accounting policy and â€Å"income tax† under operating activities. Voluntary disclosure The survey also included an examination of any additional information that is disclosed regarding the company’s cash flow which is not required by IAS-7, but which may be helpful to the user. For example, separate disclosure of cash flows increases operating capacity and cash flows that maintain operating capacity, disclosure of segmental cash flows, cash flow per share etc. The survey found no company to disclose such additional voluntary information in its cash flow statement. Conclusion and Recommendation A materially misstated cash flow statement, whether it is in terms of incorrect classification in the categories or numerical accuracy, can be misleading to the user and can lead to wrong decisions taken by the users of the statement. The survey has revealed that although sample companies prepare cash flow statement according to International Accounting Standard-7 (BAS-7), there is also a degree of non-compliance. It is, however, found that there are not many differences between companies in their reporting of cash flow information. This is expected because the preparation of cash flow statement does not allow for many choices, differences of interpretation or different accounting treatments. To make cash flow statement more informative and useful for users, the companies should disclose additional voluntary information such as cash flow per share in their cash flow statements. Items consisting of cash flows from operating, investing and financing activities should also be clarified in the notes of the financial statements. Due to the limited scope of the present study, a large number of research issues have not been attempted but are identified in the course of the study. Disclosure practices of additional items other than operating, investing and financing activities, disclosure practices differences between listed and unlisted companies, disclosure practices differences between financial and other institutions are some such potential issues for future research. 220 ASA University Review, Vol. 6 No. 2, July–December, 2012 References Annual Reports of Sample Pharmaceutical Companies Listed in Dhaka Stock Exchange and Chittagong Stock Exchange 2009. Aziz Uddin, A. B. M and Bala. , S. K. ( 2001), â€Å"Cash Flow Reporting in Bangladesh†, The Cost & Management, Nov- Dec. ICMAB, p. 13. FASB Discussion Memorandum (1980), Reporting Funds Flow, Liquidity and Financial Flexibility, FASB, Stanford. Thomas H. Beechy. Joan E. D. Conrod, Intermediate Accounting, second Edition, Chpter 5, Exhibit 5-1 pp. 91 Ghosh, Santi N. (2001),â€Å"Workshop Material on IAS # 7 : Cash Flow Statements† compiled under the Institute of Chartered Accountants of Bangladesh (ICAB)Project, Development of Accounting and Auditing Standards in Bangladesh, The World Bank. Government of Bangladesh (GOB) (1994), The Companies Act 1994 (Act No. 18 of 1994). Gup, B. E. & Samson, W. D. 1993. An analysis of patterns from the statement of cash flows. Financial Practice & Education, 3(2):73-79. Hendrickson, Eldom. S(1982), Accounting Theory, Richard D. Irwin, Inc. , Illinois, p. 236. Hertenstein, J. & McKinnon, S. 1997. Solving the puzzle of the cash flow statement. Business Horizons, 40(1):69-76. International Accounting Standards Committee (IASC) (2000), International Accounting Standards 2000 International Accounting Standards Committee, London, â€Å"International Accounting Standard IAS 7 (revised 1992): Cash Flow Statements† in pp. 139165. International Federation of Accounting (IFAC) (1992), IFAC Handbook 1992: Technical Pronouncements (New York: IFAC). â€Å"IAS 7 (October 1977): Statement of Changes in Financial Position† in pp. 812- 816. Khan, M. H. & Akter, M. S. & Ghosh, S. K (2005), â€Å"Cash Flow Statement Disclosures: A Study of Banking Companies in Bangladesh†. Available at www. pcte. edu. in/site/OJMR/Finance/cashflow. pdf Keiso, Donald, E. and Jerry. J. Weygandt (1998), Intermediate Accounting, John Wiley & Sons, Inc. New York, 9th Edition, pp. 1275-76. Lee, T. A. 1982. Cash flow accounting and the allocation problem. Journal of Business Finance & Accounting, 9(3):341-352. Lee, T. A (1972), â€Å"A Case for Cash Flow Reporting†, Journal of Business Finance, Vol. 4, No. 2, pp. 27-36 as quoted in Studies of Accounting Theory, Steyn, B. W. & Hamman, W. D. 2003. Cash flow reporting: are listed companies complying with AC 118? Meditari, 11:167-180. Weygandt, Kieso, Kimmel, Accounting Principles, 9th edition, John, Wilely and Sons, Inc, pp. 732-733 Wallace, R. S. O. and Choudhury, M. S. I. And Pendelbary, M. 1997), â€Å"Cash Flow Statements: An International Comparison of Regulatory Positions†, The International Journal of Accounting, Vol. 32, No, 1, pp. 1-22 Cash Flow Statement Disclosures in Pharmaceutical Companies 221 Appendix-1 List of the twelve Pharmaceutical companies studied. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. GlaxcoSmithKline Bangladesh Limited (2009) The IBN SINA Pharmaceutical Industry Ltd. (2009) BEXIMCO PHARMACEUTICAL LTD. (2009) ORION INFUSION LTD. (2009) ACI Formulation Limited (2009) Ambee Pharmaceutical Limited (2009) Square Pharmaceutical Ltd. (2009) Libra Infusions Limited (2009) BEACOM Pharmaceuticals Limited (2009) Rahman Chemicals Limited (2009) Renata Limited (2009) Therapeutics (Bangladesh) Limited (2009)

IFRS Adoption in the US - Free Essay Example

Sample details Pages: 5 Words: 1580 Downloads: 3 Date added: 2017/06/26 Category Business Essay Type Analytical essay Did you like this example? IFRS Adoption in the US? Introduction à ¢Ã¢â€š ¬Ã…“The International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements.à ¢Ã¢â€š ¬Ã‚  (Rouse, 2011, p.1) At present, over 100 countries have adopted IFRS but certain countries including the US have yet to adopt IFRS standards and currently use US GAAP accounting standards. Whilst these two standards are converging and becoming more similar, differences still exist. In this report I will discuss the benefits and the outstanding issues regarding IFRS adoption in the US. Potential benefits of IFRS adoption Adopting IFRS has many advantages, most notably making comparisons of companies in different countries very easy. This means that à ¢Ã¢â€š ¬Ã… “cross-border businesses benefit from reduced preparation costs, and cross-border trading in securities increases.à ¢Ã¢â€š ¬Ã‚  (ICAEW, 2012, p.6) This is beneficial as companies will have lower costs and therefore more retained earnings. The extra trading aids growth and helps them to achieve higher turnovers. As IFRS was introduced into the EU in 2005 evidence can be obtained and this concluded that the implementation of IFRS in the EU led to reductions in the cost of raising capital. (ICAEW, 2012) This benefit can be expected by the US, should they adopt IFRS and this would encourage more companies to invest as it would cost less to raise capital, making otherwise unfeasible projects feasible. IFRS adoption leads to à ¢Ã¢â€š ¬Ã…“a set of truly global, high quality accounting standards, providing the foundation for transparent and comparable financial statements.à ¢Ã¢â€š ¬Ã‚  (ICAEW, 2012, p.6) Transparent accounts breed confidence within investors as they have a clear er picture of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial position, allowing them to make more informed decisions about which company they want to invest in. It also allows swift comparisons of international companies and this creates more opportunities to invest abroad. Adopting IFRS will help to increase the reliability of the accounts and this will lead to higher market efficiency. (Brown, 2011) Another advantage is that IFRS has been designed for use on an international scale. It was developed away from particular controls such as legal controls. However, this is not the case for US GAAP, which has specific regulations and has been subject to political intervention. Therefore, US GAAP is not as effective when companies which arenà ¢Ã¢â€š ¬Ã¢â€ž ¢t in the US use it. (ICAEW, 2012) IFRS also has the advantage of being principles based whilst US GAAP is rules based. Rules based accounting can be exploited easier creating misleading accounts. It can also lead to a set of more comple x accounts being produced, which is ineffective for international companies. For example, when accounting for inventory costs using IFRS the LIFO method isnà ¢Ã¢â€š ¬Ã¢â€ž ¢t acceptable, however when using US GAAP either the LIFO or the FIFO method are acceptable. If only one method was used comparisons between international companies would be improved and inventories under the LIFO method wouldnà ¢Ã¢â€š ¬Ã¢â€ž ¢t need to be adjusted in order to compare companies. (Nguyen) Therefore analysts wouldnà ¢Ã¢â€š ¬Ã¢â€ž ¢t be needed to adjust the figures and this would save time and money. The figures would also be more reliable as theyà ¢Ã¢â€š ¬Ã¢â€ž ¢re less prone to error leading to a better informed decision. Barriers to IFRS adoption A barrier to IFRS adoption is the fact that there is no global regulator to ensure that IFRS has been adopted and applied constantly. Different countries will interpret IFRS in different ways and maybe change it slightly to reflect any differenc e of opinion that they have. If this is the case the benefits of having one global set of accounting standards will be lost. (ICAEW, 2012) Also IFRS adoption wouldnà ¢Ã¢â€š ¬Ã¢â€ž ¢t guarantee comparability because of a number of factors that differ between countries. Some of these factors include language, cultures and legal systems. A considerable barrier to IFRS adoption in the US is the costs and disruptions that will be caused to businesses by adopting IFRS. Accounting policies and computer systems will change and this means that staff would have to be retrained to become comfortable and efficient in the new policies. This will cost the company lots of time and money, which could be used more effectively if IFRS isnà ¢Ã¢â€š ¬Ã¢â€ž ¢t adopted. (ICAEW, 2012) Selling states in his journal that spreading out the expenses that would come with adopting IFRS over a long period of time would have no significance as it would still impact the companies in the same way. The companies would have less money and therefore would miss out on investment opportunities, regardless of how long the payments were spread out for. Smaller companies have no interest in being compared to foreign companies, as they donà ¢Ã¢â€š ¬Ã¢â€ž ¢t trade internationally, and therefore wouldnà ¢Ã¢â€š ¬Ã¢â€ž ¢t want to adopt IFRS as they would bear the transition costs. Therefore adopting IFRS has no positive impacts on their company. (Selling, 2013) It is estimated that switching to IFRS will cost US companies $8 billion. (Jordan, 2013) à ¢Ã¢â€š ¬Ã…“One off transition costs for small and medium sized companies will be on average $420,000.à ¢Ã¢â€š ¬Ã‚  (Jordan, 2013) This is a substantial amount for these companies and could possibly put some in financial distress. Therefore the majority of SMEs donà ¢Ã¢â€š ¬Ã¢â€ž ¢t want to adopt IFRS as it could have a detrimental effect on their businesses especially in the short term. Conclusion In conclusion there are many benefits and barriers to IFRS adoption in the US. One of the most important benefits is the reduction in the cost of raising capital for companies and the increase in cross border trading. IFRS also promotes transparent and comparable financial statements and this gives investors a clearer idea of whether to invest in the company. It is also principles based meaning that accounts are less likely to be exploited. However, the biggest barrier to IFRS adoption in the US is the costs that are associated with switching from US GAAP to IFRS. These costs are substantial and are too high for many of the companies in the US. It is likely that the US will adopt IFRS in the future but for the moment it doesnà ¢Ã¢â€š ¬Ã¢â€ž ¢t appear that they will be adopting IFRS. Annotated Bibliography BROWN, P. (2011), à ¢Ã¢â€š ¬Ã‹Å"International Financial Reporting Standards what are the benefits?à ¢Ã¢â€š ¬Ã¢â€ž ¢ Accounting and Business Research, 41 (3), 269-285 This journal mainly highlighted the ben efits that are associated with IFRS and only slightly touched on the barriers for IFRS. The paper was sponsored by ICAEW. The main arguments all involved reference to the effect on the financial markets. One of the main arguments was that IFRS adoption encourages cross border trading leading to market efficiency. Brown used lots of sources to back up his points and further his argument. He concluded that many benefits could be obtained by adopting IFRS but it would take more than one country to achieve these, but more evidence was required. I used this journal because it concentrated on the benefits of IFRS and it was useful in furthering my understanding of IFRS and how it impacted the financial markets. However this paper was commissioned by ICAEW who work with IASB and therefore would favour the introduction of IFRS. This explains why the paper only concentrates on the benefits. ICAEW also assisted in the UK adoption of IFRS. The paper is also written by a respected author/journa list. ICAEW (2012) à ¢Ã¢â€š ¬Ã‹Å"The future of IFRSà ¢Ã¢â€š ¬Ã¢â€ž ¢ This journal was written by ICAEW. One of the biggest accounting firms and it has a good reputation. The journal discussed both benefits and barriers to IFRS adoption. The main arguments included the high costs involved with adopting IFRS and the associated benefits such as high quality accounting standards that are transparent and comparable. The journal uses many sources to back up its arguments including other ICAEW publications. It concluded by discussing possible options going forward. This paper was presented in a non-biased way it discussed both benefits and barriers to IFRS. However it was written by ICAEW so it could be biased as they assisted in the adoption of IFRS in the UK. Jordan, Anna., 2013 Advantages and disadvantages of IFRS compared to GAAP [Online] Available at: https://research-methodology.net/advantages-and-disadvantages-of-ifrs-compared-to-gaap/ [Accessed: 2nd December 2014] This article displayed several advantages and disadvantages of IFRS adoption. It had advantages such as improved consistency and transparency of financial reporting. It also wrote about disadvantages such as the high costs of changing to IFRS. This article was not biased although it contained more advantages than disadvantages. The accuracy of the information could be questioned as it is not written by a known author. Nguyen, J. What are some of the key differences between IFRS and US GAAP? [Online] Available at: https://www.investopedia.com/ask/answers/09/ifrs-gaap.asp [Accessed: 3rd December 2014] Fact based website explaining key differences. The information was provided by a non-scholar so it may not be entirely accurate. Rouse, M.,2011 IFRS [Online] Available at: https://searchsecurity.techtarget.co.uk/definition/IFRS-International-Financial-Reporting-Standards [Accessed: 3rd December 2014] Provided a definition. Selling, T. (2013) à ¢Ã¢â€š ¬Ã‹Å"B umps in the road to IFRS adoption: Is a U-turn possible?à ¢Ã¢â€š ¬Ã¢â€ž ¢, Accounting Horizons, 27 (1), 155-167 This journal focused solely on the barriers for IFRS adoption. It listed 10 facts and then went on to disprove them. It focused on the barriers and the main arguments included that the costs of implementing IFRS were too high for it to be feasible. It used many sources to back up its points and to further them. The journal was written by an American and he is displaying part of his opinion that he doesnà ¢Ã¢â€š ¬Ã¢â€ž ¢t want the US to adopt IFRS. Don’t waste time! Our writers will create an original "IFRS Adoption in the US" essay for you Create order