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I need some assistance with these assignment. reasons for firms to adopt consolidated financial reporting Thank you in advance for the help!
I need some assistance with these assignment. reasons for firms to adopt consolidated financial reporting Thank you in advance for the help! Each major purpose of accounting discussed in the paper often requires a different way of presenting or reporting the information in the accounting system. In this scenario, it may be emphasized that it is a vicious circle in that there are managers in organizations who affect accounting and such accounting, in turn, affects people’s behavior. The impact of accounting reports on the decision-making behavior of business, government, and creditors is termed as the ‘economic consequences’ and the world has seen the worst of such consequences because of the bad reporting as in the case of ‘Enron Corporation’. It may also be observed that such external reporting had given rise to the preparation and presentation of consolidated financial and non-financial statements. Several arguments have been flowing around about the very purpose behind the merits and demerits of such consolidated statements.
It is more than normal that managers indulge in enhancing the reported earnings to strengthen their positions in the organizations higher echelons.
Positive Accounting Theory studies the manager’s accounting policy choices as part of the overall process of corporate governance. Under this theory, Positive rather than Normative accounting policies are chosen strategically. The part of the paper analyses the various reasons why a firm may decide to resort to consolidated financial reporting. The decision may be partly due to the statuary obligations placed on the firm and partly on the managers’ decision to go with the publication of consolidated statements. .Earlier studies (Whittred 1986, 1987, 1988) concluded that the regulations did not have much impact for the firms to resort to consolidated financial statements, whereas the contracting cost variables were the major determinant for publication of consolidated statements. However, later it turned out that Regulations did play a major role in compelling the firms to adopt publication of consolidated financial statements. .”The introduction of tax legislation permitting the presentation of consolidated returns seems to have been a significant factor in widening the profession’s awareness of consolidated statement.” (R.G.Walker and Janet Mack 1988). Similarly, the listing requirements of various stock exchanges world over have led the companies to prepare and file consolidated statements for the wider information of the shareholders and stakeholders. “Support for the use of the consolidated statements by banks came from the New York Stock Exchange which in 1919 introduced listing rules requiring the presentation of either consolidated statements or the separate statements of all constituent companies” (R.G.Walker and Janet Mack 1988) .Starting from 1919 various regulations have dealt with the presentation of consolidated financial statements and these regulations affecting the preparation of consolidated statements have become more perspective and authoritative over time.