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BBA 2004 Business Accounting and Financial Management (Coursework)

This document discusses two topics related to business accounting and financial management: 1) The characteristics of useful information for financial statements, which include relevance, reliability, objectivity, understandability, comparability, realism, consistency, timeliness, economy of presentation, and completeness. 2) The conflict between shareholders' interests in profits and social considerations, noting that companies must balance treating employees well against maintaining profits, and discussing situations where expenses must be incurred for safety despite profit impacts, using the example of paying higher or locally appropriate wages in developing countries to support the local economy rather than just multinational interests.

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66 views5 pages

BBA 2004 Business Accounting and Financial Management (Coursework)

This document discusses two topics related to business accounting and financial management: 1) The characteristics of useful information for financial statements, which include relevance, reliability, objectivity, understandability, comparability, realism, consistency, timeliness, economy of presentation, and completeness. 2) The conflict between shareholders' interests in profits and social considerations, noting that companies must balance treating employees well against maintaining profits, and discussing situations where expenses must be incurred for safety despite profit impacts, using the example of paying higher or locally appropriate wages in developing countries to support the local economy rather than just multinational interests.

Uploaded by

Chai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BBA 2004

BUSINESS ACCOUNTING AND FINANCIAL MANAGEMENT


(COURSEWORK)

NAME
NO.IC
STUDENT ID

SEPTEMBER 2015

Coursework
1. Please describe the characteristics of useful information.
From the various reports which have appeared since 1975 the following characteristics
have been noted.
1. Relevance. This is regarded as one of the two main qualities. The information
supplied should be that which will satisfy the needs of its users.
2.

Reliability. This is regarded as the other main quality. Obviously, if such


information is also subject to an independent check, such as that of the auditor, this
will considerably enhance the reliance people can place on the information.

3. Objectivity. Information which is free from bias will increase the reliance people
place on it. It is, therefore, essential that the information is prepared as objectively
as possible. Management may often tend to give a better picture of its own
performance than is warranted, and is therefore subjective. It is the auditor's task to
counter this view, and to ensure objectivity in the financial statements.
4. Ability to be understood. Information is not much use to a recipient if it is presented
in such a manner that no one can understand it. This is not necessarily the same as
simplicity.

5. Comparability. Recipients of financial statements will want to compare them both


with previous financial statements of that company and with the results of other
companies. Without comparability the financial statements would be of little use.
6.

Realism. This can be largely covered by the fact that financial statements should
show a `true and fair' view. It has also been contended that financial statements
should not give a sense of absolute precision when such precision cannot exist.

7. Consistency. This is one of the basic concepts, but it is not to be followed slavishly
if new and improved accounting techniques indicate a change in methods.
8. Timeliness. Up-to-date information is of more use to recipients than outdated news.
9. Economy of presentation. Too much detail can obscure the important factors in
financial statements and cause difficulties in understanding them.
10. Completeness. A rounded picture of the company's activities is needed.

You will recall that many of these featured prominently in the IASB Framework.

2. Please describe conflict between shareholders interests and social considerations.


Obviously, an organisation has to come to a compromise about how far it should look
after the interests of its shareholders and how far it should bother about social
considerations. For instance, a company could treat its employees so well in terms of
pay, pensions and welfare that the extra costs would mean very low profits or even
losses.
On the other hand, there must be instances where, no matter what the effects on
profits, the expenses just have to be incurred. If the company has a chemical plant
which could easily explode, causing widespread destruction and danger to people, then
there cannot be any justification for not spending the money either to keep the plant safe
or to demolish it. The full severity of the law must bear down on transgressors of the
law in such cases of wilful neglect.
All the facts of the particular case must be brought into account. Let us look at a
typical case where the answer may seem obvious, but perhaps there may be other
factors which may make the answer not so obvious. Workers in underdeveloped
countries are usually paid far lower wages than those in the developed countries. What
happens if a large multinational company pays its workers in a given country three or
four times as much as home-based companies? Immediately everyone wants to work for
the multinational company, which can afford high wages, and leave the home-based
companies which cannot. Is that sensible? What chance is there for the development of

the country's own home-based industries if the outside companies constantly take all the
best brains and most able people?
In such a case it would probably make more sense for the multinational
company to pay wages more in keeping with the particular economy, and to help that
country in other ways such as by improving the health care generally for all, better
education for all, and so on. Obviously, a topic such as this will engender discussions
and arguments for some considerable time.

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