Financial Reporting Essay Example | Topics and Well Written Essays - 1500 words - 1

Financial Reporting - Essay shellEach major purpose of accounting often requires a different way of presenting or describe the information in the accounting system. In this scenario, it may be emphasized that it is a vicious solidifying in that there are managers in organizations who affect accounting and such accounting in forge affects peoples behaviour. The impact of accounting reports on the decision devising behaviour of business, government and creditors is termed as the economic consequences and the world has seen the wipe up of such consequences because of the bad reporting as in the case of Enron Corporation. It may also be observe that such external reporting had given rise to the preparation and initiation of unite financial and non-financial statements. some(prenominal) arguments have been flowing around about the very purpose behind the merits and demerits of such consolidated statements. In this context, this paper attempts to draw an boilers suit picture of the position of the consolidated statements in relation to decision making by the stakeholders vis--vis the presence of the consolidated statements as a deterrent factor to have a top understanding of the decision making process.Management wealth, it is argued, is a function of changes in share prices (via stocks and stock options), and changes in cash bonuses (via compensation plans). Ordinarily, managers are predicted to have greater incentives to lobby for accounting standards that lead to increases in account earnings and thereby management wealth. (Markus J. Milne) It is more than normal that managers indulge in enhancing the reported earnings to establish their positions in the organizations higher echelons.Positive Accounting Theory studies the managers accounting policy choices as part of the overall process of corporate governance. Under this theory Positive rather than Normative accounting policies are elect strategically.3.0 REASONS FOR FIRMS TO ADOPT CONSOLIDATED FINA NCIAL REPORTINGThis part of the paper analyses the various reasons why a pixilated may decide to resort to consolidated financial reporting. The decision may be partly callable to the statuary obligations placed on the firm and partly on the managers decision to go with the publication of consolidated statements. Statutory Regulations as a reason for publication of consolidated financial statementsEarlier 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 determining(prenominal) for publication of consolidated statements. However later it turned out that Regulations did play a major purpose 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 professions awareness of