Accounting Essays - Financial Accounting, Financial Statements

Accounting Essays - Financial Accounting, Financial Statements Accounting On September 28, 1998, Chairman of the U.S. Securities and Exchange Commission Arthur Levitt sounded the call to arms in the financial community. Levitt asked for, immediate and coordinated action to assure credibility and transparency of financial reporting. Levitts speech emphasized the importance of clear financial reporting to those gathered at New York University. Reporting which has bowed to the pressures and tricks of earnings management. Levitt specifically addresses five of the most popular tricks used by firms to smooth earnings. Secondly, Levitt outlines an eight part action plan to recover the integrity of financial reporting in the U.S. market place. What are the basic objectives of financial reporting? Generally accepted accounting principles provide information that identifies, measures, and communicates financial information about economic entities to reasonably knowledgeable users. Information that is a source of decision making for a wide array of users, most importantly, by investors and creditors. Investors and creditors who are responsible for effective allocation of capital in our economy. If financial reporting becomes obscure and indecipherable, society loses the benefits of effective capital allocation. Nothing illustrates the importance of transparent information better than the pre-1930s era of anything goes accounting. An era that left a chasm of misinformation in the market. A chasm that was a contributing factor to the market collapse of 1929 and the years of economic depression. An entire society suffered the repercussions of misinformation. Families, and retirees depend on the credibility of financial reporting for their futures and livelihoods. Levitt describes financial reporting as, a bond between the company and the investor which if damaged can have disastrous, long-lasting consequences. Once again, the bond is being tested. Tested by a financial community fixated on consensus earnings estimates. The pressure to achieve consensus estimates has never been so intense. The market demands consistency and punishes those who come up short. Eric Benhamou, former CEO of 3COM Corporation, learned this hard lesson over a few short weeks in 1996. Benhamou and shareholders lost $7 billion in market value when 3COM failed to achieve expectations. The pressures are a tangled web of expectations, and conflicts of interest which Levitt describes as almost self-perpetuating. With pressures mounting, the answer from U.S. managers has been earnings management with a mix of managed expectations. March of 1997 Fortune magazine reported that for an unprecedented sixteen consecutive quarters, more S&P 500 companies have beat the consensus earnings estimate than missed them. The sign of a quickly growing economy and a measure of the importance the market has placed on consensus earnings estimates. The singular emphasis on earnings growth by investors has opened the door to earnings management soluti ons. Solutions that are further being reinforced to managers by market forces and compensation plans. Primarily, managers jobs depend on their ability to build stockholder equity, and ever more importantly their own compensation. A growing number of CEOs are recieving greater percentages of their compensation as stock options. A very personal incentive for executive achievement of consensus earnings estimates. Companies are not the only ones to feel the squeeze. Analysts are being pressured by large institutional investors and companies seeking to manage expectations. Everyone is seeking the win. Auditors are being accused of being out to lunch, with the clients. Many accounting firms are coming under scrutiny as some of their clients are being investigated by the SEC for irregularities in their practice of accounting. Cendant and Sunbeam both left accounting giant Arthur Anderson holding a big olbag full of unreported accounting irregularities. Auditors from BDO Seidman addressed i ssues of GAAP with Thing New Ideas company. The Changes were made and BDO was replace for no specific reason. Herb Greenberg calls the episode, A reminder that the company being audited also pays the auditors bill. The Kind of conflict of interests that leads us to question the idea of how independent the auditors are. All of these pressures allow questionable accounting practices to obfuscate the reporting process. Generally accepted accounting principles are intended to be a guide, not a procedure. They have been developed with intended flexibility so as not to hinder the advancement of new and innovative business practice. Flexibility that has left plenty of room for companies to stretch the boundaries of GAAP. Levitt

Uses of Do

Uses of Do Uses of Do Uses of Do By Maeve Maddox ESL learners sometimes have difficulty with the uses of the verb do. For example, a reader wonders about the use of the -ing form doing: According to what I have learned, â€Å"do† is used with the simple present form of the verb to make a question: â€Å"Do you like pizza?† But I have seen â€Å"do† used with the â€Å"-ing† form of the verb: â€Å"Does closing a scheme for new money pay off?† â€Å"Does shutting furnace vents improve efficiency?† â€Å"Does doing a tattoo hurt?† Please explain. Do may be used as either a main verb or as a helping verb. Its forms are do, did, (have) done, doing. As a main verb, do means â€Å"to carry out some action.† What shall I do about the spoiled fruit? (main verb) Mr. Baxter does odd jobs. (main verb) She did all the cleaning for her mother. (main verb) As a helping verb, do is used to pose questions: Do you live in the neighborhood? (The main verb is â€Å"do live.†) Does your dog know the basic commands? (The main verb is â€Å"does know.†) Didn’t I see you at the Court House yesterday? (The main verb is â€Å"did see.† Do is used both to frame a negative statement and to contradict a negative statement: A: I don’t think you know Charley. (negative statement) B: I do know him. (contradiction) A: I don’t think Mrs. Wong turned off the lights last night. (negative statement) B: She did turn them off. (contradiction) Do is used for emphasis: I do love chocolate chip cookies! Jack certainly does love his Monday night football! The form doing can be used with a helping verb to form a main verb, as in â€Å"She was doing her best not to cry,† but in the examples that puzzle the reader, the -ing form doing is not part of the verb. It is a noun (gerund): Does closing a scheme for new money pay off? (The verb is â€Å"does pay off.† The subject is â€Å"closing a scheme for new money.†) Does shutting furnace vents improve efficiency? (The verb is â€Å"does improve.† The subject is â€Å"shutting furnace vents.†) Does doing a tattoo hurt? (The verb is â€Å"does hurt.† The subject is â€Å"doing a tattoo.† In some contexts, the verb do cannot be replaced. For example, â€Å"What shall I do?† But in many others, it can be replaced by a more specific verb. For example, â€Å"I’m doing the dishes† can be rephrased as â€Å"I’m washing the dishes.† Here are some common expressions that use do as a main verb: do a favor do well/do badly do good/do evil do damage do homework do housework do nothing do research do something do the math do one’s best do 70 miles an hour do time (serve a prison sentence) Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Grammar category, check our popular posts, or choose a related post below:How Many Tenses in English?Homogeneous vs. Heterogeneous20 Names of Body Parts and Elements and Their Figurative Meanings