ACCT2542

ACCT2542 - (a) Would the MCS be a useful addition to the...

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(a) Would the MCS be a useful addition to the suite of financial statements already available to users of financial statements? Why or why not? (2 marks) In the Bloom article an implementation of the MCS was conducted on several companies and showed that it was simple, inexpensive to produce and also provided useful information of goodwill to users of financial statements. Since the MCS itself focuses attention on the value of goodwill, there are a number of advantages. Firstly, the MCS maintains the balance sheet in its traditional form, enabling it to only reflect the book value of net tangible assets unambiguously. This is done by moving the goodwill and identifiable intangible assets (IIA) to MCS. Therefore, the MCS reflects the importance of goodwill, IIA and net tangible assets as constituents of market capitalisation which can be directly compared. Secondly, removing the concept of amortization of goodwill and therefore having no impact on the profit and loss statement. Also removes the calculation of impairment of goodwill
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