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ACCT20074 Final AssignmentTerm 2, 2017Student ID:..................................... Student name..............................................................Marker’s overall comments:The markers may include any final comments here.Overall Mark (Total) out of 50:0
Question 1:The major GPFR objective: to avail useful financial info about reporting company to current and prospective equity-investors,creditors and lenders to make decisions about providing resources to the company. These decisions comprise buying, holding equityand selling shares besides holding instruments of debt. The decision also entails providing loan and settling them and other types ofcredit. GPFR also aims at showcasing outcome of management stewardship alongside management accountability of resourcesentrusted on them. GPFR also aims at assessing the compliance of the reporting company with common law, legislation, regulation andcontractual agreement (FASB, 2012). Another objective is to make sure that financial statements (FS) avail useful info on financialposition, performance and cash-flow to a vast range of stakeholders thereby permitting them to make rational decisions. These are essential objectives to Amazon situation. This is because its consumers can understand the company financialposition, performance and cash-flow. The consumers of use such info to make decisions by evaluating the capability of Amazon toproduce cash alongside cash equivalent and timing and future generation certainty. The info will allow to consumers gauge Amazonability to pay its employees and supplies as well as whether Amazon can pay for interest and repay loans. Consumers of Amazon’sfinancial info can then be in a position to evaluate whether if they invest in the company, they will have ROI. GPFR puts emphasis on useful financial info provision which include info on resources (economic) alongside claims on thisresource. This makes these objectives really essential to the firm. Information on financial position changes of Amazon can be due toextra aspects including financial performance and other issues like increase in debt. This is significance to investors, lenders and even
creditors when making decisions about Amazon’s shares. Lenders, for example, will be able to acknowledge the Amazon’s strengthsand weaknesses in terms of debt payment. Lenders will also assess the solvency as well as liquidity of Amazon to decide on whetherto lend company. The users of financial info can access the financial performance info of Amazon based on accrual accounting. This is a usefulpiece of info when stakeholder asses the impacts of Amazon’s transactions and other events on Amazon’s assets alongside liabilities inrespective period of occurrence irrespective of cash received or paid in a different period. Users will understand financial performanceof Amazon unlike where they utilize cash receipts basis. Investors can then assess the financial performance of Amazon managementand risks facing Amazon before investing in the firm. Understanding the cash- flow management in Amazon through the informationit provides can also help evaluate its performance to allow lenders to make rational decision. The transactions such as sales and purchases are recorded in respective periods when they are incurred based on accrualsconcept. Such a practice, however, fails to unravel the information to the users when funds are due for receipt from respective client orwhen funds are due to be paid to suppliers. Users will review cash-flow info to assess the ability of Amazon towards cash-inflowsgeneration and its respective spending. The users will gauge Amazon’s solvency based on spending and generation of cash by lookingat its liquidity (Pelger, 2016). They will make a decision on whether Amazon is solvent or insolvent by looking at the adequacy offunds it holds to service its debts. The information will then help users to check whether Amazon give much credit than what it
receives, and whether the company has sufficient cash for bridging the variance.References:FASB. (2012). Qualitative Characteristics of Accounting Information.Pelger, C. (2016). Practices of standard-setting–An analysis of the IASB's and FASB's process of identifying the objective of financialreporting. Accounting, Organizations and Society, 50, 51-73.Marker’s Comments: The marker will provide feedback here.Mark (10):0Question 2: The concept of historical cost uses the original cost to valuate assets. The purchased asset will be first recorded in accountbooks at the original cost or price of transaction. The period for reporting is recorded and the asset is measured at same amount whenshown in balance sheet. No depreciation or appreciation in assets value is recognized. The method of historical cost is beneficial due toits reliability and objectivity. The technique also shows simplicity alongside convenience. It shows accounting info consistency andcomparability. Jeff Bezos appears to be using conservative accounting while stakeholders prefer aggressive methods. Jeff appears tohave preference for the transactions being recorded at original amounts. Thus it is pointless to restate financial statement every year toecho value changes. Historical costing remains a simple and convenience method as transactions are merely recorded at transactionprices (Zeff 2007).
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