Financial Statements

Paper Summary:

This paper reviews the current day issues surrounding asset valuation and accounting methodology. The paper discusses the various problems with accounting principles and the international financial reporting standards recently developed as a result of the constantly changing nature of the capital markets and major players and the inclusion of many other countries in the capital markets play arena.

From the Paper:

"This approach has become rather popular to trace "real business" progress, when numerous debt instruments and business approaches have changed. The fault of this approach is the risks which arise with cash receivable as the company shows to the investors and top management business progress as opposed to income received. The longer the company does not receive the money for having sold the product, the less is its' actual present value, while this is not considered. To minimize the affect of this, the companies are now restricted to a limited extent to the amount of transaction they can account for on accruals basis. Another way to minimize the misleading of the investors on the actual and true financial situation within the company, is introduction of several liquidity ratios and "bad debt" ratios which reflect the fact how company is able to achieve revenues, but also how fast and well the company is able to collect the money payable to the company and thus not lose any time value money worth. "

Sample of Sources Used:

• www.ivs.org
• Brealey, R., Myers, S. Fundamentals of Corporate Finance, McGraw Hill, 3rd Edition, 2001.
• Yuji Ijiri, Historical Cost Accounting And Its Rationality, Accounting Review, Vol. 57, No. 2 (Apr., 1982), pp. 446-447

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