ACCT20074 Final Assignment Study
Added on 2020-04-07
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Finance
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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: There are several possible objectives for general purpose financial reporting. Explain what these objectives might be, and which one you think best applies to Amazon’s financial reporting (based on the information in the case study). Make sure that you fully explain your answer.The main objective of GPFR as provided in paragraph OB2 of the IASB Conceptual Framework posits: the provision offinancial info regarding reporting firm which remains useful to existing as well as likely equity-investors, lenders as well as additionalcreditors in making decisions relating to the provision of resources to an entity. Such decisions entail buying shares, selling shares orholding equity as well as instruments of debt, and provision or loans settlement alongside additional credit forms. The objectives of theGPFR include the provision of info regarding the financial position, performance as well as alterations in the financial position of thefirm which is highly useful to a broad array of users when reaching economic decisions (Henderson, Peirson, Herbohn, & Howieson,2015). Another useful objective of the GPFR is to showcase the outcomes of stewardship of the management/managementaccountability for entrusted resources. Another key objective is to assess the reporting firm’s compliance with the legislation, commonlaw, regulation as well as contractual arrangement. The objective of the GPFR is to ensure that financial statements avail info regarding financial position, performance as well ascash-flows which is useful to a broad array of consumers to allow them make economic- related decisions. These objectives arerelevant to the Amazon case above as such users include existing as well as potential investors, creditors and lenders. The users of suchinformation must make the economic decisions on the basis of the evaluation of the firm’s ability to generate cash as well as cash
equivalent as well as of the timing alongside certainty of corresponding generation. The ability to eventually determine, for instance,the Amazon’s capacity to pay its workers as well as suppliers, meet the payment for interest, as well as loan repayment alongsidemaking distribution to owns is of great importance to the users (Pelger, 2016). The users are better capable of evaluating this ability forAmazon to generate cash as well as cash equivalents in case they are provided with the info that focus on financial position,performance as well as cash-flows of the Amazon. As the GPFR emphasizes on the provision of useful financial information including those info regarding economic resources aswell as claims against it, its objectives are really vital to Amazon. Such information as changes in the Amazon’s financial position thatmight be as a result of additional factors like financial performance or additional matters as raising debt remain increasingly of greatsignificance. This enables the use of financial statement to recognize or identify the weaknesses and the strengths of the entity, andfurther to undertake the assessment of the Amazon’s solvency and liquidity to attract lenders. The information on financialperformance of the Amazon based on the accrual accounting indicates the effects of the transactions alongside additional events on theorganization’s assets as well as liabilities in the periods whereby such effects happen, even if the cash is received/paid in a diverseperiod. This is important as it enables the users to more relevant info relating to Amazon’s financial performance than utilizing the cashreceipts terms. Information availed by the Amazon’s financial performance enables the users of the financial statements to assesmanagement performance, ability to generate cash as well as risks linked to the business, and how they might affect Amazon. The cash
flow management is also critical information provided as another key part of performance. Under the concept of accruals, the transactions like sales as well as purchases are recorded in period of their incurrence (FASB,2012). This does not reveal to the users information concerning when the money is due to be received from the clients or customers, orpaid to the suppliers. Via the review of cash flow info, the users of the financial information will be able to undertake the assessment ofthe Amazon’s ability to generate cash inflows, and how the firms spend cash. The cash is linked to solvency of the Amazon; aprofitable firm like Amazon might be insolvent in case it fails to possess adequate funds for its debt payment. This might happen if itprovides more credit than the firm receives, and does not have adequate cash to bridge the difference.References:FASB. (2012). Qualitative Characteristics of Accounting Information.Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.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):0
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