accounting in crisis-316

accounting in crisis-316 - Accounting in Crisis? Financial...

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Accounting in Crisis? Financial Reporting at a Crossroads
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Laws of Accounting Trial Balances don’t Bank reconciliations never do Working capital does not Return on investments never will
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The “New” Pledge of Allegiance One nation, under greed, with stock options and tax shelters for all.
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Consider Five Quotations
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Quotation #1 Transparent accounting plays an important role in maintaining the vibrancy of our financial markets. Alan Greenspan Chairman, Board of Governors of The Federal Reserve Board
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Quotation #2 The single most important innovation shaping the (American capital) market was the idea of generally accepted accounting principles. We need something similar internationally. Lawrence H. Summers Former Deputy Secretary of the Treasury March 9, 1998 Remarks before the IMF
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Quotation #3 The quality of information we now receive from companies in the U.S. is about the best we have ever seen and exceeds that of almost any other nation. Abby Joseph Cohen Chair, Investment Policy Committee Goldman, Sachs & Co.
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Quotation #4 We are in a situation now in our society where the temptations to provide “bad” financial reporting are probably greater than they used to be. The need to get the stock price up, or to keep it up, is intense. Floyd Norris, Reporter 2001 Annual Report of the Financial Accounting Foundation
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Quotation #5 While the U.S. accounting is generally recognized as the best in the world, the Enron collapse that unfolded in 2001 has reminded us all that there is still room for improvement. Manuel H. Johnson, FAF Chairman 2001 Annual Report of the Financial Accounting Foundation
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What is the “purpose” of Accounting?
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Objective #1 Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.
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Objective 1 continued The information should be comprehensible to those who have a reasonable understanding of business and economic activities and are willing to study the information with reasonable diligence.
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Objective #2 Financial reporting should provide information to help present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash flows.
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Objective #3 Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources (obligations of the enterprise to transfer resources to other entities and owners’ equity), and
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Objective #3 continued The effects of transactions, events, and circumstances that change its resources and claims to those resources.
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First-Order Feedback System Process Inputs Outputs Sensor Control Feedback Loop Environment Boundary
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General Purpose Financial Statements GPFS means that Information is . . . Not exactly what the investors need,
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This note was uploaded on 11/15/2011 for the course I SYS 201 taught by Professor Meservy during the Winter '11 term at BYU.

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accounting in crisis-316 - Accounting in Crisis? Financial...

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