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Unformatted text preview: Ferris-Wallace EOC Discussion Questions Q1.1 Financial Statement Data Users. Financial statement data is utilized by a variety of user-groups to include a companys board of directors, bondholders, corporate employees and executives, customers, investment advisors, labor unions, loan officers and credit analysts, shareholders and suppliers. For each user-group, discuss how financial statement data might be used in their decision-making process. Q1.2 Accounting Standards. Discuss why accounting standards (i.e., generally- accepted accounting principles) are important to investors and to a properly functioning, efficient capital market. How do accounting standards help capital markets be (or become) efficient? Q1.3 Corporate Governance. Discuss what corporate governance is and why it is important to shareholders. Q1.4 Risk, Return, and Accounting Information. Discuss the relationship between investment risk and the expected rate of return on an investment. Explain why accounting information is useful in evaluating the risk/return trade-off inherent in all investments. Q1.5 Global GAAP. Discuss the major impediments to the acceptance of a global set of generally accepted accounting principles. Prepare a list of those key impediments. Of the items on your list, which do you feel will be the most difficult to overcome? Why? Why is having a global set of GAAP desirable? Q1.6 Asymmetric U.S. GAAP. Under U.S. GAAP, long-lived assets such as real estate are carried on the balance sheet at the original purchase price of the asset. In the event that the value of an asset becomes impaired that is, if the current value of the real estate falls below its original purchase price and is unlikely to recover in the foreseeable future the assets book value is then written down to the lower current value and a loss is recorded on the firms income statement. Under no circumstances, however, can a firm write-up the value of its real estate assets in the event that current value exceeds original purchase price. Discuss whether U.S. GAAP should be changed to allow a symmetric treatment of asset value increases and decreases? What are the implications of this asymmetry in the accounting treatment of long-lived assets (like real estate) for current U.S. financial statement users? 1-1 Ferris-Wallace EOC Q1.7 Human Assets. The balance sheet allegedly reports all of the assets of a business. But one of the most critical assets of any business is its employees, and this asset is omitted from the balance sheet of every company in every country in the world. Thus, it can be concluded that the balance sheet of any company understates the true value of its assets. Discuss what types of companies and which industries are most likely to be impacted by this situation....
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- Spring '11