The use of financial statements - Free Essay Example

Sample details Pages: 11 Words: 3186 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? The use of financial statements to show the states of affairs of an undertaking is crucial in the quest of satisfying many a stakeholder. The government expects tax payments whose calculation depends on an accurate statement, while shareholders await for dividends declared on the basis of the results of the financial statements and potential investors also view this as a document that provides guidance as to when, how and where to invest their money. The accuracy of the statement is therefore paramount to the success not only of the company but also of all the other stakeholders. This paper evaluates how the regulatory policies of financial statements have been effective by providing a critique analysis of the same. The writer will use examples of companies, to demonstrate situations where the regulations have been effective and where the regulations have failed. Don’t waste time! Our writers will create an original "The use of financial statements" essay for you Create order We will evaluate various reports related to this topic in order to ascertain their applicability and effectiveness. These are; Greenbury 1995 , Hampel 1997, Townbull report 1999, Walkers 2009, Cadburys 1992, Myners 2001, Higgs report 2003, The Smith report 2003. The financial statements and the regulations At this juncture, it is important to look at the books which fall under the category of financial statement as the basis for analysing the regulations thereof. The financial statements compose of four main books of accounting, including; The income statement The balance sheet or statement of balances The statement of the retained earnings and The statement of cash flow. Eliot B., and Eliot J. (2005: 168-171), presented a levelled discussion by looking at the various stakeholders whose interests should be served in different ways when there is proper presentation of financial statement. These stakeholders include; The customers, who will get value for the products which they buy because, as the company uses good practice to write their accounts, there are all chances that benefits will be passed on to the customers. The customers also want to be assured that they are dealing with a company that adheres to the legal requirements of the country, and so this is a matter of corporate social responsibility. Workers, who expect to be paid adequately, when they put their honest efforts to serving in the company,. Workers will also feel proud on knowing that the company which they deal with respects the law and does what is right in the law. Shareholders, who are the owners of the company and of whose interests, the board exists and should serve. It is important for the management to understand that wealth maximisation depends on accurately presented financial information. Failure to do this may result in shareholders taking punishing steps. Granted, shareholders, by the virtue impossibility of all of them working to run the company, they expect to be given a fair statement at the Annual General Meeting which reflects all that has been happening. The financial regulations are meant to protect their interest, and so regulations should be such that makes the directors to consider working in Ubarrimae Fidei with regards to the shareholders. Government; the government expects to get taxes at the end of the year, if not for anything else, for sustaining a viable environment for the business to operate. It is important for the board therefore to present a true picture of the financial position. On personal view, loss or profits are acceptable to the government as long as they are just. Unfair representation of the statement to influence a certain outcome is less objective and if the current legislations cannot discourage such, then it has failed. And society, which expects to accommodate a business that operates in utmost good faith. Therefore on personal view, the effectiveness of financial statement can be judged by how well the financial statements serve the interests of these stakeholders. Eliot B., and Eliot J. (2005: 168) noted that there is therefore need to have regulations to ensure that the managers run the company in the best possible way, hence the need for the regulations. Their work has been impressive by their discussion of what makes the financial statement to be useful or of good quality, which include; The relevance of the statement Reliability Comparability and Understandability However, one striking piece of their discussion is the admission that the Directors and Accountants in the UK are often restricted by a multitude of regulations which come from three sources, which are; the Legislations of parliament, the professional accounting bodies and from the FSA Financial services authority. In view of this, it can be objective to claim that the multitude of regulations may obviously make the directors to fail to present the true satisfying statements not because they do not want but because they are striving to meet so many conditions and someone a failure to meet on may be the beginning of problems for the organisation hence the ineffectiveness of the regulations. If we consider the case of Lehman brothers, the failure came as a result of among others, the downgrading of its credit status, and when Barclays bank had offered to acquire the profitable assets of the company, which they explicitly said would be acquired along the pre-set rules by the Financial services Authority, the deal failed to work out because, as put by Barclays, the time had run out for the shareholders approval for this take over, this is because, the approval could be acquired before the duration needed as required by the regulations (New York Times 2008). However, it was disclosed that actually the regulator had discouraged the bank from acquiring Lehman Brothers, on personal view, probably because, this would have had negative effect on Barclays banks financial position which would be reflected on its financial statement and in this time of crisis, it could destabilise Barclays bank, which is one of the stable companies in the banking sector. Here is an instance where w e can view the dependence on the guidance of the financial regulations before any move is made. Therefore, we can say that, the impact here, however indirect it appears to be, has been quite effective in shaping companies financial reporting. The review work conducted by Walker (2009: 13-15) highlights 39 important recommendations in the management of companies under four specific heading, including the governance of the institution, the duties of the board of directors including their performance, the role of the companys shareholders and finally, the governance of risk and remunerations. Of particular interest is the governance of risk and remunerations, where among the recommendations included, the need to have a risk committee responsible for advising the board, the committee should also advise about current risks and their advise should be taken into account. With relations to remunerations where the remuneration committee is responsible for overseeing that the companys policy on pay is clear and fair, also, the there must be a way to monitor how the high end employee are paid and if the pay does not result in risky undertakings in their job roles. But the above case shows the dependence and a form of respect to the regulations by the buyers of the failed company, but, we surely should be asking ourselves, what happened to the failed company. Some of the examples that the writer shall use to explain this scenario, these are the cases of Enron and the Northern Rock. Enron The case of Enron is even more interesting because, it touches on two main issues, one was the failure to follow the regulatory procedures by the accountants who were to oversee the pricing of the mark-to-market shares and secondly, in the UK, there were claims of political interference with the enforcement of regulations. In the first instance, as discussed by Peter C., and Ross M., (2002: 12-14), the accountants worldwide are often torn between using accurate prices or conservative prices (where depreciation is considered) when valuing the shares. The accountants of Enron did not follow the regulations in this valuation which made them to hide companys debts from stakeholders for several years. Anyone would questions where the regulator was to enforce the regulations or was there just no regulation on such valuation? Obviously, if the accountants have all along been in this dilemma, there, well defined regulations touching on this matter should have been given. Secondly, in the UK, the labour government was accused of aiding Enron to succeed in the UK market by changing the energy policy. This could have affected the regulations effectiveness. The Northern Rock The last case is that of Northern Rock, which continued to lend huge sums of money to fist time investors, the loans were given at 125% of the value of the property, for a company that depended on short term borrowing to fund long term loans. It was noted that in this case, the Treasury admitted that the regulations for dealing with the companys financial affairs especially at the time of trouble were very weak and that action had to be taken. This is a case of the failure of the regulation to consider the future happening (Willem H. 2008: 137). Failure to have plans for dealing embattled companies is in itself a weakness of the regulations since it shows lack of foresight. There is a need to consider the harmonisation of the working objectives of the tripartite bodies in the UK which deal with financial matters of the organisations. These are; the Treasury, the Bank of England and the Financial Services Authority, with much of the problems facing companies in their financial statement reporting comes from the failure by the FSA to have clear regulations (Willem H. 2008: 137-142) All the above mentioned cases present us with a desire to seek more about the nature of corporate governance especially in the UK. On the surface of it, while, directors have a duty to run the affairs of the company for the stakeholders especially the shareholders, often the problem of interest occurs. In their study of International Corporate Governance, Diane K., and John J., (2003) blamed the agency problem (often occasioned by the selfish desires of the directors to keep their jobs and benefits), for all the problems facing the corporate world. They further stated that since corporate governance involves seeking to run the company on behalf and for the benefit of others, if the managers do what is wrong, the company fails, because, corporate governance advocates, transparency and accountability. But could we then conclude that failure which has been occasioned by the directors disregard for the rules is the failure of the financial regulations or failure of adherence to the corporate Memorandum of association?, the blame on the former still persists, this because, the regulations should guide the creation of the Memorandum of Association, hence the composition of the board members who run the organisation. David S., et al (2000: 12- 17), termed their research work, Some cost benefit issues in Financial Regulation, where they noted that there are more benefits than costs in having a regulator to guide and oversee the preparation of financial statements. however, on the negative side, they noted that the existence of financial regulations have not prevented the management of the company from manipulating the figures and presenting to the ignorant shareholders, a good state of affairs of the organisation, which may involve, misappropriating the shareholders funds to create profits and pay dividends thereof. This view is in line with the agency problem meaning that the regulations are not effective. If we consider the issue of supervision, we are immediately drawn to the Cadburys report (1992) which was commissioned after the Death of Robert Maxwell, the owner of Mirror group where it was found that the company had taken untold risks which resulted in huge debts. Sir Adrian Cadbury, did a report whose main recommendations included, first, having clearly defined responsibilities to diffuse power in the company, to have many independent non executive directors, and at in the audit committee there should be at least three, there should be some non executive directors in the salaries committee and that these non executives must be picked by the entire board (Boyd C., 2004: 167-182). But is this feasible? Obviously, no, because, this report was commissioned to deal with a specific scenario, but, it can be credited with providing a framework for operation which has obviously set governance precedence for companies. The conclusion here was that the problem of the UK regulator is not the lack of regulations to regulate the industry, but the problem has been lack of supervision which makes managers and directors to either take unnecessary risks or flout the rules. The issue of supervision was also raised in the House of Lords by Baroness Cohen of Pimlico on 10th Nov, 2009, who noted that while the process of harmonising the European Union financial regulations is necessary, the need to strengthen the UK regulators management and supervisory authority cannot be any greater, in view of the financial crisis that has plagued the world (The Daily Hansard 2009). Greenbury R., (1995: 19) produced a report in which dealt with the directors remunerations considered the issues of bonus payment to the directors as part of their package to work hard, but, many especially in the recent past, bonus payment has been the cause of unnecessary risks leading to economic crisis, yet the regulations in place cannot do anything about it, because it is an acceptable practice for the directors especially in the banking sector. The potential of the European Union financial regulations to have overriding powers over the UKs Financial services regulations has made most members of parliament in UK to cry foul with Lord Myners noting that this goes beyond Ecofin agreement and must be reconsidered because it gives ESA immense power to control UKs regulations and render them in-effective in dealing with specific national situations The Turnbull report (2005: 4-26), seem to agree with the verdict given by the ACCA by stating that above all the financial regulation needs to be supervised to sustain enforceability. The report touched on four main areas of regulations which must be followed by the corporate managers when presenting their financial statements, these include; The relevance of having an internal control in the organisation for risk management. The sustenance of a reliable internal control system. Having a periodic review on how effective the internal control system is. Having the board to present a statement to the stakeholders on the current position of the internal control. But Turnbull Report looks at the wholesome role of the regulations and its verdict stands, yet we may also need to consider Sir Robert Smiths Report (2005) on the audit committees, on which he states the role of committees as that of monitoring and reviewing the financial statements and providing the necessary recommendations to the directors of the company. This report suggests that there should be deliberations regarding the nature of risks in the company, categories, the likelihood of such risks becoming real and the companys ability to mitigate them. Turnbull further states that an internal control system should; Be integrated in the organisation and be part of its culture Should be able to respond quickly to risky scenarios Have steps for indicating any form of control failure to the right persons and as soon as possible. But this report has been found to have several loopholes, for instance; Boards view issues of risk management as not within their concern Most companies are still concerned with matters of internal financial controls, There may be lack common objectives among directors Normally, internal control issues are regarded as matters of regulations for the sake of public relations. On these issues, Turnbull opines that a good audit system should be able to provide the board with sufficient assurance about its effectiveness, help in process improvement for risk identification and lastly, help board members to make viable decisions. But the critics of this report note that this report has not offered a real solution on how to ensure that external audit system complements the internal system. Therefore, the co-ordinating function of this report goes missing (John I., 2003: 11-12). But Sir Robert Smiths Report (2003: 8-11) gave a more comprehensive detail on the role of audit committees among which include; See that there is integrity in financial statement Review internal control process. Advise the board about who to appoint as external auditor and to monitor their independence Take part in process of setting policies in case external auditor will be given other tasks to undertake. However, anyone may raise the issue of collusion however remote, between the internal auditors and the potential external auditors which may lead to compromise in preparation of the financial statements. But these reports explicitly provides guidance to the bigger organisations and not the medium and smaller ones with just a few directors, therefore, should the smaller and medium organisations flout their financial statements, the regulation takes the blame. Lastly, according to the research conducted by Kern A., (2004) on the nature of International financial regulations, the UK regulations have been a product, partly, of the informal practices of the Bank of England, which relates to the activities of the banks and other companies, but, that these regulations on their own cannot guarantee fair representation of the financial statement by organisations and that there is a need to involve private participation in this process. Private participants here mean the other stakeholders who should work with the regulator and keep directors on check. However, he has not stated how this can be feasible, or / and practical. From the discussion presented above, we can say that the financial regulations have been less than effective in determining the accuracy of the financial statement and by extension in guiding the actions of the corporate managers. Financial regulations need to be; Reviewed on periodic basis in order to make them compatibles with the changes in the corporate world, this is not only affected by the national factors but by global conditions. The financial regulation allow for more supervisory role in order to ensure that from time to time the activities of the corporate directors are checked. The financial services authority and other regulatory bodies must work together by sharing information within appropriate legal framework in a way that will guarantee effectiveness in the preparation and presentation of financial statements. It is also, not possible to have general regulations touching on all the sectors, because this may give some sectors i.e the Manufacturing sector, undue leeway and advantage at the expense of other sectors like the banking industry. Conclusion In this discussion, we have seen how the financial regulations, have, however well intended, have failed to stop bankruptcy or failure by the banks. There is a cross sectional agreement that unless the supervisory duties of the regulators are strengthened, it is impossible to see the regulations being effective. It is also worth noting that with European Union becoming active, most decisions are not country specific, because they are being made in Brussels, the, country specific regulations cannot be effective anymore if the rules require trading and financial representation in a way that reflects the corporate sector within the Union. Effectiveness can only be achieved, if not guaranteed, by there being drastic changes and multi agency working to create harmony and enforce the rules, thereby benefit the stakeholders.

Comparing Genesis And The Epic Of Gilgamesh - 945 Words

While the book of Genesis in the bible and The Epic of Gilgamesh have striking similarities in the sense of creation and the great flood, the interactions between the divine beings and humans differ greatly. One matter that impacts the entire relationship between gods and humans in both accounts is that the gods in the epic are not almighty beings like God in Genesis since they cannot control each other’s domains. Because of this, they must travel from place to place and work with other gods to carry out a certain task. The gods in The Epic of Gilgamesh were very much like humans and interacted more with them in daily life. In contrast, the all-powerful god in Genesis seems distant and far from having human-like characteristics and does not need to interact with other gods. At the same time, both stories display the reverence and fear humans have for the supreme beings because of their authoritative qualities. In both stories, the gods are respected and feared in some way, but this was not always the case. To enforce His authority over all living creatures, the god in Genesis â€Å"saw that the wickedness of man was great in the earth,† so He created a flood to rid the world of the evil that He created (King James Version, Gen. 6.5). However, not all humans were wicked; He spared Noah and his family because he remained so devoted to God, then later made a promise that â€Å"waters shall no more become a flood to destroy all flesh† (Gen. 9.15). Likewise in The Epic of Gilgamesh, theShow MoreRelatedComparing the Epic of Gilgamesh and Genesis1005 Words   |  5 Pages The Epic of Gilgamesh has many similarities to the Bible, especially in Genesis and it’s not just that the both begin with the letter â€Å"g†Ã¢â‚¬â„¢! One major similarity being the flood story that is told in both works. The two stories are very similar but also very different. Another being the us e of serpents in both works and how they represent the same thing. A third similarity being the power of God or gods and the influence they have on the people of the stories. Within these similarities there areRead MoreComparing Genesis And The Epic Of Gilgamesh940 Words   |  4 PagesWhile Genesis in the bible and The Epic of Gilgamesh have striking similarities in the sense of creation and the great flood, the interactions between the divine beings and humans differ greatly. One matter that impacts the entire relationship between gods and humans in both accounts is that the gods in the epic are not almighty beings like God in Genesis since they cannot control each other’s domain. Because of this, they must travel from place to place and work with other gods to carry out a certainRead MoreComparing and Contrasting the Floods in Genesis and The Epic of Gilgamesh588 Words   |  3 PagesThe floods in Genesis and The Epic of Gilgamesh are in no doubt different but in so many ways similar. The two men are given a task to save humankind from a flood and succeed and are rewarded. The major basic events that take place in the stories a similar however the smaller details of them and how they are carried you are different. They two also tells us a lot about the relationship between humans to Divinity. The floods in The Epic of Gilgamesh and Genesis 6-9 are very similar. 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The Makah Essay Example For Students

The Makah Essay The Makah are a Native Indian tribe who have recently decided to enact their treaty rights, and start to hunt for whales. These actions have caused an uproar in North America. The Natives state that they are not doing anything but exercising their legal rights. Opponents to their hunting of whales argue that the Makah are a group of uncivilized and inhumane individuals, and that they are harming nature. The reportage of the controversy surrounding the Makah can be seen as ethnocentric in many ways. Through the language used by the media involved in the controversy, one can constantly see the Native people being viewed as inhumane savages. In turn, this language allows readers to be sent mixed messages about the Makah and their position in the whaling dispute. Finally, the protestors themselves have contradictory arguments which leads one to question the motivating factors behind their position. In order to fully understand the whaling controversy, it is necessary to understand the history of the Makah. They were a group of Native people who hunted gray whales. As a result of their increased trade with the Europeans, the white man decided to also enter this hunt for the whale. This competition between the Makah and the white man lead to the whale coming close to extinction. Due to their love for nature and respect for the whale, the Makah decided to voluntarily refrain from hunting whales. It is important to note however, that in 1855, the Governor of Washington State agreed to the Treaty Of Neah Bay, which gave the Makah a right to hunt for whales. This is what is at the heart of the controversy. The Makah have recently enacted their hunting rights of the whale after seventy years, and are now resuming their hunt for whales. The Makah reasoning is a relatively simple one. In 1946, the gray whale population was 2000, and now their count is over 26,000. They believe that it i s safe to hunt for whales again. The Makah have been a group of people who have relied on whale hunting. . They used the blubber from the whale to feed their families, and they used the rest of the whale to provide themselves with shelter and tools. However, their opponents have dismissed this practice of hunting whales as inhumane. Through the language that is being used by the media, one can see Native people being viewed as savages. The language being used is not blatantly discriminatory against the Native people, but is done in a subtle, yet powerful way, in order to evoke a message that Native people are inhumane. One of the reasons for this negative commentary regarding Native people hunting for whales could be due to ethnocentrism. This is the belief that ones own culture is considered to be normal, therefore, other cultures are considered abnormal. The media carefully uses words that show their bias towards the Native People. The media tries to make the Makah look like a band of savages. While writing about a recent anti-whaling demonstration, Peggy Andersen writes, In a simmering dispute that ended with a scuffle and arrests, angry Makah Indians pelted a protest boat with rocks as the two sides bickered over a tribal plan to hunt gray whales. The wording of this opening paragraph leads the reader to thi nk that it was Makah who were causing trouble, and that they were the ones that were arrested. However, if one were to complete the article, they would realize that this was not the case. Another example of media bias against the Makah people is when Jonathan Dube writes, As much as its possible for one dead animal to give new life to an entire nation, thats what has happened here. Dube is implying that it is impossible for an animal that has died to bring life to a nation, however, that is what has occurred. He does not understand how killing this whale could give life to the Makah, and therefore, he conveys this message of doubt to his readers. Dube is indirectly stating that the Makah need to kill in order to have life. The Ethics Of Computers With AiThe white man took away their tradition in the 1920s, and they will take it away again. This will be done either by giving the right to whale to everyone, and once again bring the gray whale close to extinction, or by crushing the remains of the tribe until they give up their right on their own. BibliographyAuthor Unknown. (1999, May 18) Stop the Whale Hunt. October 30, 1999}Available: http://www.oregonlive.com/oped/99/05/ed051801.htmlAuthor Unknown. (1999, May 22) Racism Enters Whale Dispute. October 25,1999} Available: http://www.spokane.net/news-story-asp?Date=052299;ID=s580242;cat=Anderson, Peggy. (1998, November 2) Melee during anti-whaling demonstration Shakes both sides. November 2, 1999}Available: http://oregonlive.com/todaysnews/9811/st110213.htmlAnderson, Peggy. (1999, May 21) Anti- Makah Protests Turn Ugly. November 3, 1999} Available: http://www.spokane.net/news-story-body. asp?Date=052199;ID=s580004;cat=}Dark, Alx. (1999, April) The Makah Whale Hunt.October 28, 1999}. Available: http://www.conbio.rice.edu/nae/index.htmlDube, Jonathan. (1999, May 18) Plenty of Meat To Go Around. October 26, 1999} Available: http://abcnews.go.com/sections/science/DailyNews/makahs990518.htmlWebster, John. (1998, November 3) Anything for an unworthy cause. October29, 1999} Available : http://www.spokane.net/news-story-body.asp?Date=11039;ID=s477881;cat=Anthropology

Verbal Aggression Is Message Behavior Which Attacks A Persons Self-con

Verbal aggression is message behavior which attacks a person's self-concept in order to deliver psychological pain.(Infante, 1995) Studies of verbal aggression have focused primarily on children and adolescents in educational and social settings. Very few studies were found to examine verbal aggression in adults in the workplace.(Ebbesen, Duncan, Konecni, 1974) The consequences of verbal aggression in the workplace can lead to social isolation, job related stress, health related problems, as well as problems in career advancement. It therefore should be considered important, for the individual and management, to identify and address the causes of verbal aggression. This program attempts to understand verbal aggression by 1) identifying the various functions of verbal aggression. 2) identifying the antecedent conditions of verbal aggression. 3) Avoiding the antecedent conditions of verbal aggression. Method Subject The subject, Shirley J., is a 49 year old African American fem ale. Shirley J. has several advanced degrees and is employed as a school psychologist in a metropolitan school district. She is married with two adult children. The subject readily agreed that the target behavior, verbal aggression, is a problem as it interferes with her relationships with others. She was enthusiastic in her desire to reduce, if not eliminate, this behavior. It would seem that self-monitoring for verbal aggression and antecedent control would be valuable as it would allow for consistent avoidance of verbal aggression. As a school psychologist the subject was very familiar with the basic principles of applied behavioral analysis and frequently offered programmatic suggestions. A behavioral contract was developed jointly between the therapist and subject. The contract outlined the target behavior, success criteria, and individual responsibilities of the therapist and subject. (see Appendix A) Apparatus A basic checklist was used to document the frequency of verbal aggression on a daily basis. The checklist was designed to track only the occurrence of the behavior. It was felt by the therapist that the content of the verbally aggressive message would be too open for subjective interpretation and that no meaningful data would be gained from such documentation. In addition the subject made frequent comments of significant success or failure in avoiding verbal aggression for discussion with the therapist. The weekly discussions were used to evaluate the appropriateness of the procedures used and make any necessary adjustments to the program. Procedure For the first two weeks of the program no intervention was applied. Given that the subject self-reported that verbal aggression was a problem it was important to determine if the frequency of the behavior merited intervention. Therefore, the subject documented the daily frequency of verbal aggression. The results of the baseline period revealed a high rate of verbal aggression. (see Appendix B ) Given the results of the baseline data as well as the demanding, often stressful, nature of the subjects job, it was mutually agreed that reducing verbal aggression would be the focus of the program. Verbal aggression was defined as cursing, yelling, and screaming at others. The agreed upon goals of the program was to decrease verbal aggression by 75% of baseline for four consecutive weeks. Treatment would consist of identifying and avoiding the antecedent conditions to verbal aggression. Avoidance of the antecedents is considered less restrictive, more proactive, and most effective. During the initial consultation it was determined that the antecedent conditions included, but was not limited to: work stress, time of day, verbal behavior of others (ie. tone of voice, inflection of voice and content of conversation, etc.), and non- verbal behavior of others (ie. facial expression, body posture, eye contact, etc.). In addition, the subject was required to self monitor for the fo llowing antecedents: clenched fists, tight jaw, rapid heart beat, and the emotions of anger, frustration and disappointment. Lastly, it was suggested by Infante (1995) that appropriate strategy must be taken to prevent verbal aggression from escalating. Successful avoidance of the antecedent conditions consisted of removing oneself from stressful situations, when possible, as well as not responding verbally when provoked. Weekly consultation revealed that verbal aggression was most often used to: 1) Escape demand situations. 2) Avoid demand situations. 3) Relieve job stress. The subject was to document the frequency of verbal aggression and record the circumstances of significant success or failure during the work