Financial Analytics for Managerial Decisions - Course Report

This report, titled "Financial Analytics for Managerial Decisions," delves into the crucial role of financial accounting and its impact on managerial decision-making. It begins by examining the significance of regulatory frameworks in financial accounting, highlighting their role in ensuring reliable and comparable financial information for stakeholders. The report then analyzes the accounting needs of a news corner agency, illustrating how reporting requirements vary based on stakeholder agreements and the agency's ownership structure. Furthermore, the report discusses the challenges of measuring and reporting human capital and intellectual property on balance sheets, adhering to accounting standards. It explores the limitations of recognizing these intangible assets and the complexities involved in determining their fair market values. The report also references key accounting principles and standards, such as those from the Financial Accounting Standards Board (FASB), to support its arguments. Overall, the report offers a comprehensive overview of financial analytics in the context of managerial decisions, encompassing regulatory compliance, accounting practices, and the valuation of intangible assets.

Running head: FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
Financial Analytics for Managerial Decisions
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1FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
Table of Contents
Answer to Question 1:................................................................................................................2
Answer to Question 2:................................................................................................................3
References:.................................................................................................................................5

2FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
Answer to Question 1:
A regulatory framework is deemed to be essential in financial accounting due to a
variety of reasons, which are elucidated briefly as follows:
 To assure that the requirements of the users of the financial statements are fulfilled
with at least minimal primary information
 To assure that the disclosed information in the pertinent economic arena has
consistency and comparability; however, the progress in multinational organisations
and global investment in this arena is a rising global one (Nobes 2014)
 To increase the confidence of the financial statement users in financial accounting
processes
 To regulate the behaviours of the organisations and their directors towards domestic
as well as international investors
The three primary sources of regulation governing the financial accounting policies in
Australia include government legislation, “Australian Securities Exchange Limited (ASX)”
and the “Australian Accounting Standards Board (AASB)” issuing accounting standards as
well other related pronouncements. In addition, according to the “Corporations Act 2001”,
the financial reports need to provide an unbiased and true picture of the actual financial
position and performance of a business entity (Gitman, Juchau and Flanagan 2015).
A corner news agency maintains complete control over its business operations and by
exercising greater control, the owners of the news agency do not need worry about the
opinions of the public or they do not need to think about the quarterly race for fulfilling the
desired numbers. The accounting needs for a news corner agency vary depending on its
stakeholder agreements. The external investors in the corner news agency primarily develop

3FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
reporting needs as parts of the agreements for investing funds in the organisation (Henderson
et al. 2015). This type of organisation shares its reports with certain stakeholders and it does
not need to share any information with the public.
As news corner agency is a private organisation, it needs to file financial reports with
SEC at the time it has above 500 shareholders and $10 million in assets. This act has been
passed in order to match the sizes of the public firms and the private firms while acquiring a
portion of external ownership having identical reporting obligations like public organisations.
In certain situations, the news corner agencies need to repurchase shares from their existing
shareholders for keeping the number of individuals within the desired limit (Sunder 2016).
However, regulations should be made so that the public could obtain better access to the
financial information of the corner news agencies.
Answer to Question 2:
According to “Financial Accounting Standards Board (FASB)”, it is possible to
record and reflect the measurement of any asset; however, it is not possible to report human
capital in the balance sheet statement, as it could not be measured. For any potential investor,
the measurable human capital is always pertinent and trustworthy for the business, if the
human capital worth could be gauged (Mayo 2016). The suitability of this value would be
ensured, as it would gauge the estimated future cash flows and the strong potential for the
staffs to generate additional contributions to the success of the organisations.
However, the organisations do not own their employees irrespective of the investment
made in employee training. In addition, according to accounting regulations, an asset could
be recognised only on the balance sheet, if it is possible to assign an objective value to it. In
case of human capital, employees carry subjective value and this makes it difficult to assign
values to the intangibles (Zambon 2017). This would not be reliable and improbable for the

4FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
two measures, as there is absence of any particular technique to compute the value of human
capital. This has restricted the organisations to put internally generated assets on balance
sheet, although disclosure of human capital would increase the quality of financial
information in future.
Some types of intellectual property are taken into account in the form of capital assets
and they might be recorded on the balance sheet of an organisation as intangible assets. Some
instances of intellectual property include trademarks, patents, copyrights, unique ideas and
trade secrets (Secundo et al. 2018). Even though some of these assets are disclosed as assets
in the balance sheet, their actual market values could not be ascertained with higher
reliability.
According to the accounting principles, intangible assets are to be recorded at cost in
the financial statements. The internally generated intellectual property like unique idea or
trade secret is not disclosed in the balance sheet due to the absence of clear value or direct
cost. On the other hand, copyrights, trademarks and patents primarily have related costs and
they are capitalised in the form of assets in the balance sheet (Inkinen 2015). However, it is
complex to find realistic market prices for different kinds of intellectual property. According
to the accounting standards, intellectual capital needs to be recorded distinctively on balance
sheet from goodwill, which is the primary intangible asset of any business organisation.

5FINANCIAL ANALYTICS FOR MANAGERIAL DECISIONS
References:
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Inkinen, H., 2015. Review of empirical research on intellectual capital and firm
performance. Journal of Intellectual capital, 16(3), pp.518-565.
Mayo, A., 2016. Human resources or human capital?: Managing people as assets.
Routledge.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Secundo, G., Massaro, M., Dumay, J. and Bagnoli, C., 2018. Intellectual capital management
in the fourth stage of IC research: A critical case study in university settings. Journal of
Intellectual Capital, 19(1), pp.157-177.
Sunder, S., 2016. Better financial reporting: Meanings and means. Journal of Accounting and
Public Policy, 35(3), pp.211-223.
Zambon, S., 2017. Intangibles and intellectual capital: an overview of the reporting issues
and some measurement models. In The economic importance of intangible assets (pp. 165-
196). Routledge.