北美财务报告

北美财务报告北美财务报告2OutlineofPresentation-1Rolesofstandardsettingbodies(FASB,CICA),Managers,AuditorsandSuppliersofCapital(InvestorsandCreditorsorlenders)[SeeDiagram]InformationEconomicsApproachandEfficiencyofcapitalmarketsWorldCom,EnronandArthurAndersenIncentivesofManagementtoManageEarnings2OutlineofPresentation-1Rol3OutlineofPresentation-2Stepstopreventscandalsfromoccurringinthefuture?SomeEthicalPrinciplesAnEthicalCaseQuestionsregardingpresentationoranyother(accounting)questions.3OutlineofPresentation-2Ste4InformationEconomicsApproachInformationAsymmetryexistsbetweenthepartiesinbusinesstransactions.Themanagers(agents)havemoreinformationthantheinvestors(principals).Managersmayattempttoselectpoliciesortoreleasebiasedinformationthatbenefitthemselvestotheexpenseoftheowners.RoleofAccounting:toprovideinformationusefulforrationaldecision-making.4InformationEconomicsApproac5DecisionUsefulnessApproachSection1000ofCICAHandbook(par.1000.15):Theobjectiveoffinancialstatementsistocommunicateinformationthatisusefultoinvestors,members,contributors,creditorsandotherusers…inmakingtheirresourceallocationdecisionsand/orassessingmanagementstewardship.5DecisionUsefulnessApproachS6ObjectivesofFinancialStatementsStatementsofFinancialAccountingConcepts(1978)(SFAC1):Toprovideinformationthatisusefultopresentandpotentialinvestorsandcreditorsandotherusersinmakingrationalinvestment,credit,andsimilardecisions.Toprovideinformationtohelppresentandpotentialinvestorsandcreditorsinassessingtheamounts,timinganduncertaintyofprospectivecashreceiptsfromdividendsorinterest.6ObjectivesofFinancialState7RelevanceandReliabilityTobeuseful,accountinginformationshouldprovideaninformativeinformationsystemthatlinkscurrentfinancialstatementswithfuturestaterealizationsandpayoffs.AccountinginformationshouldberelevantI.e.hasthecapacitytoaffectinvestors’beliefsaboutfuturereturns.Accountinginformationshouldbereliablei.e.shouldfaithfullyrepresentswhatitpurportstomeasure.Itshouldbepreciseandfreefrombias.7RelevanceandReliabilityTob8ElementsofFinancialStatementsAssets:Probablefutureeconomicbenefitsobtainedorcontrolledasaresultofpasttransactions.Liabilities:ProbablefuturesacrificesofeconomicbenefitsOwner’sEquity:residualInterestinassetsafterdeductingliabilitiesi.e.A=L+O.E.orO.E=A–L.Revenues:inflowsofassets(orsettlementofliabilities)arisingfromtheentity’smajororongoingactivities.8ElementsofFinancialStateme9AccountingPrinciples-1HistoricalCostPrinciplei.e.recognise(recordandreport)assetsandliabilitiesinitiallyatthecash-equivalentcost.RevenueRecognitionPrinciplei.e.recogniserevenueswhenearned(earningprocessiscompleteandanexchangehastakenplace).Allnecessarycostshavebeenincurredandcollectionisassured–usuallyatpointatsale.9AccountingPrinciples-1Histo10AccountingPrinciples-2MatchingPrinciplei.e.recogniseallexpensesincurredinproducingrevenuesinthesameperiodastherevenues.FullDisclosurePrinciplei.e.discloseallrelevantinformation.10AccountingPrinciples-2Matc11LAN’SCLOTHINGCOMPANYInvest10,000Yuans(Y)tostartthebusinessBuy1000shirtsat5Yeach.Paywagesof1000Yforthefirstmonth.Sell400shirtsat20Yeach.Payrentof600Yforthefirst6months.Incurredmiscellaneousexpensesof500Y.Borrowed4800Yandboughtatruck.Truckwilllastfor4years.Whatismynetincomeforfirstmonth?11LAN’SCLOTHINGCOMPANYInvestLan’sClothing

NetIncomeforfirstmonthNetIncomebeforetaxes= Revenues–Expenses= 400X20(sales)-400X5(costofshirtssold)–1000(wagesexpense)–600/6(rentforonemonth)–500(miscellaneousexpenses)-4800/48(amortisationexpensefor1month)=4,300YuansLan’sClothing

NetIncomefor13StandardSetting&Auditing-1Standardsettingorregulationisnecessarytoprotecttheinvestors(conflictinginterestsofinvestorsandmanagers).TheFASB(FinancialAccountingStandardsBoardandtheCICA(CanadianInstituteofCharteredAccountants)areindependentbodies.13StandardSetting&Auditing14StandardSetting&Auditing-2Auditing(external)ensuresthatathirdindependentpartyhasexaminedthefinancialstatementsandthattheyareinaccordancetoGAAP(GenerallyAcceptedAccountingPrinciples).14StandardSetting&Auditing15EfficientSecuritiesMarketsThepricesofsecurities(stocks)“properlyreflect”allinformationthatispubliclyknownaboutthesesecurities.Investorswillquicklyadjusttoneworcorrectedinformationasitbecomesavailable.Investorscannotexpecttoearnabnormalreturnsi.e.areturnonasecurityinexcessofitsnormalexpectedreturn.15EfficientSecuritiesMarkets16WORLDCOM(CommunicationsIndustry)-1LargestBankruptcyinhistory.Bankruptcydate=July21,2002.Totalassets(pre-bankruptcy)=US$103,914,000,000approximately850,000millionsYuansorRMB(assuming1usdollarapproximatelyequalto8.2Yuans)16WORLDCOM(CommunicationsIndu17WORLDCOM(CommunicationsIndustry)-2InternalAuditor(CynthiaCooper-TimeMagazinePersonoftheyearfor2002)wenttoBoardofDirectors,claimingassetsshouldbewrittenoffthebalancesheet.B.O.D.agreewithher.Onwritingoffassets,largelosses.Stockpricesfelldownsteeply.17WORLDCOM(CommunicationsIndu18EnronCorp

(EnergyIndustry)CompanywentbankruptonDecember2,2001.Totalassetspre-bankruptcy=US$63,392,000,000approximatelyequalto520,000millionsYuansorRMB.Profitsoverstated;revenuesrecognizedbeforetheyareearned.Liabilitieshiddenfrombalancesheet.Gamblingonenergyfuturescontracts.SherriWatkins(Enronmanager)blewthewhistlebutnoonelistened.18EnronCorp

(EnergyIndustr19ArthurAndersen(Former“BigFive”AccountingFirm)Issuedunqualifiedopiniontofinancialstatements.Didnotdiscloseaccountingirregularities.Shreddeddocumentstohideevidence.Guiltyofobstructingjustice.19ArthurAndersen(Former“Big20Management’sIncentivestoManageEarningsIncometaxes—PostponepaymentbyminimizingreportedincomeBonus—MaximizetheirbonusesbyincreasingreportedincomeDebtAgreements–Easiertomeetdebtagreements(covenants)byincreasingincomeandassetsStockoptions(giveyoutherighttopurchaseastockatafixedpriceinsomefutureperiod)—maximizeshareprices(believedtoberelatedtoreportedincome).20Management’sIncentivesto21AccrualsandEarningsManagementAmortizationexpenseIncreaseinnetreceivablesIncreaseininventoryDecreaseinaccountspayableandaccrualliabilities21AccrualsandEarningsManage22Whatcouldbedone?Betteraccountingstandardsandbetterdisclosure.Lessemphasisonhistoricalcostandmoreemphasisoncurrentmarketvalueofassetsandliabilitiesonbalancesheet.Foreexample,recordallstockoptionsasanexpenseonincomestatement,whenissued.Restrictionsonauditorse.g.auditorsnotallowedtodoconsultingworkforfirmtheyauditGreateraccountabilityofboardofdirectorsandmorepunishmentforwrongdoings.22Whatcouldbedone?Betterac23EthicsandaccountingEthicsRulesOfProfessionalConductLegalWhatislegalormeettherulesofprofessionalconductmaynotbeconsideredethical.23EthicsandaccountingEthics24SomePrinciplestoEvaluateOne’sActions-1Non-Maleficence:AmIcausingharmbyfailingtodosomethingoragreeingwithit?Beneficence:Domyactionsbenefitotherpersonsbesidesmyself?Justice:DoItreatthoseforwhomIamresponsibleequitably(fairly)?24SomePrinciplestoEvaluate25SomePrinciplestoEvaluateOne’sActions-2Fidelity:DoIupholdmypartoftherelationship?ActConsciously:DoIknowtheassumptionsonwhichIbasemyactionsandaretheyvalid?UtilitarianismDeontology25SomePrinciplestoEvaluate26ConsequencesorNatureofActions?Utilitarianism:[BritishPhilosopherJohnStuartMill(1806-1873)]—Domyactionspromote“theGreatestGoodfortheGreatestNumberofIndividuals”?Deontology:[GermanPhilosopherImmanuelKant(1724-1804)]–Examinethenatureofactionsratherthantheoutcomesachieved.Doingtherightthingwhatevertheconsequences.26ConsequencesorNatureofAc27AnEthicalDilemma(conflictinduties)SupposeyouaretheauditorofABCauditingcompanyandyouaredoinganauditofXYZCompany(yourclient).TheCFOofXYZCorefusestowritedownsomeinventoryyoustronglybelievetobeobsoleteandnotworthmuch.YoudiscussthesituationwithyourownbossatABC.Yourboss(agoodfriendoftheCFO)tellsyoutoagreewiththeCFO.Whatshouldyoudo?27AnEthicalDilemma(conflict28AnEthicalCaseAnalysisFrameworkWhatarethefacts?Whoarethestakeholders(thoseaffected)?Whatarethealternatives?WhatEthicalPrinciplesApply?Examinepros(advantages)andcons(disadvantages)ofeachalternative.Makeadecision28AnEthicalCaseAnalysisFra29ApplyingtheFrameworkStakeholders:yourselfandfamily,