In a group where related companies are not responsible for each others debts

In a group where related companies are not

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notion of "group solvency" does not apply, as the "quote" in the question suggests. In a group where related companies are not responsible for each others debts, then a highly aggregated cash flow statement does not help interpret the ability of any company in the group, including the parent, to meet its debts as and when they fall due. Where the companies in a corporate group guarantee each other’s debts the notion of group solvency does have meaning because it is possible to look to any company in the group for restitution of the debt. This suggests that cash flow reporting by "areas of mutual guarantee" would be useful for the evaluation of solvency. It should be noted that corporate groups with wholly owned subsidiaries often enter into a deed of cross guarantee to guarantee each other’s debts. The purpose of such action is to take advantage of an ASIC Class Order that relieves wholly owned subsidiaries from having to prepare an audited financial report and directors’ report. SegmentationSegment reporting 到底好不好 : 好处 This information should enable users to better understand the entity’s past performance and assess the entity’s risks and returns. (1)Many entities provide groups of products and services or operate in geographical areas that are subject
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to differing rates of profitability, opportunities for growth, future prospects, and risks. (2)Information about an entity’s different types of products and services and its operations in different geographical areas … is relevant to assessing the risks and returns of a diversified or multinational entity but may not be determinable from the aggregated data.(3) Better understand the enterprise’s performance. Better assess its prospects for future net cash flows. (4)a layer of information on the risk and return characteristics of the enterprise (5)is relevant to the economic decision making of financial report users. (i) improved the accuracy of consolidated sales and earnings forecasts and can reduce the cost of capital of an entity;(ii) reduces information asymmetry; (iii) is perceived by analysts to be relevant to forecasting. 坏处: (a) Investors in the parent entity of a group do not invest in individual segments so segments are not the accounting entities of interest; (b) data is difficult to interpret and may confuse users; (c) data involves numerous judgements in the determination of reportable segments and arbitrary allocations in the determination of segment assets and segment expenses. Therefore, segment information fails the qualitative characteristic of reliability; (d) Segment data is not comparable as different entities measure segment results in different ways. Hence segment data fails the test of comparability. (e) Segment reporting may act to stymie corporate innovation because managers may shy away from investment in products or markets that will result in initial losses that must be separately disclosed; (g) The cost of compiling segment information outweighs any perceived benefits. Segment report Group work Part 3 (a) Firstly, according to AASB 8 Appendix A (a), operating segment is defined as a component of entity which undertake business activities that may generate revenues and expenses. It implies that several organisation units which are merely cost centres, e.g. personnel or marketing departments, may be excluded from the operating segment. However, the costs incurred in these units would be expected to be reported regularly to WOW
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