BE110 Financial Reporting AnalysisWord文件下载.docx

BE110 Financial Reporting AnalysisWord文件下载.docx

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thefirstpartistojudgewhethertheinformationofthereportingentityfromfinancialstatementsiscomprehensiveenoughtoexistingandpotentialstakeholdersviatheconceptsofcapitalmaintenance.Throughtheinformationoffourmaincomponentsoffinancialstatementstoanalyzethegeneralpurposeoffinancialstatementsanothersection.

TheFinancialAccountingStandardBoard（1980）states“AConceptualFrameworkisaconstitution,acoherentsystemofinterrelatedobjectivesandfundamentalsthatcanleadtoconsistentstandardsandthatprescribesthenature,functionandlimitsoffinancialstatements.”Inotherword,theConceptualFrameworkisregardedasatheoreticalsystemwhichhasaseriesofcoherenceandinterrelatedobjectivesandstandardsandtheinitiallyintentionsareclarifyingthenature,scopeaswellaspurposeoffinancialaccountingandreporting（Jackling,Raar,WliliamsandWines,2007）.The 

Conceptual 

Framework 

primarilydeals 

withfourissues.Thefirstoneistheobjectiveoffinancialstatements,nextisthequalitativecharacteristicsthatdeterminetheusefulnessofinformationinfinancialstatements.Then,thedefinition,recognitionandmeasurementoftheelementsfromwhichfinancialstatementsareconstructedarethirdissue.Thelastpartistheconceptsofcapitalandcapitalmaintenance（Horngrenetal.2004,p:

492）..

CapitalmaintenanceplaysavitalroleintheConceptual 

Framework.Theconceptsofcapitalmaintenancemaybeclassifiedintotwocategories:

financialcapitalmaintenanceandphysicalcapitalmaintenance（Hayek,1935）.Financialcapitalmaintenanceimpliesthattheprofitearnedincorporatenetassetsattheendofaperiodhigherthantheamountatthebeginningoftheperiodunderthepremisethatexcludesanyinflowsfromoroutflowstoowners（Schroeder,ClarkandCathey,2011）.Itcanbegaugedeitherinnominalmonetaryunitsorconstantpurchasingpowerunits（Lemke,1982）.Physicalcapitalmaintenanceisalsonamedoperatingcapitalmaintenanceanditoccursthataenterpriseobtainareturnonincomewhenthephysicalproductiveoroperatingcapacityofenterpriseattheendofaperiodexceedsitscapacityatthebeginningoftheperiodwithouttransactionssuchasanycontributionsordistributionsofowners（Schroeder,ClarkandCathey,2011）.

Incurrentsociety,thefinancialstatementsarenotcomprehensiveenoughtoexistingandpotentialstakeholders.Financialstatementsonlysupporttheinformationofthefinancialaspect,butothercategoriessuchassocialandenvironmentsections.Therearethreemajorweaknessesoffinancialstatements.Thefirstoneisthatfinancialstatementsonlydisclosurethehistoricalinformationandthetimelinessisnotstrongenough（Meyer,1961）.Alongwithintensecompetitionamongenterprisesandfinancialtoolschanging,sharpchangeshavetakenplaceineconomiccircumstance,themanagementandfinancialrisksoftheenterprisemayfollowtheconversion,thus,thereportingentityrequestaccountingchangesalongwiththebusiness,toprovide"

realtime"

information.Therefore,theusefulnessofthefinancialinformationdisclosedinfinancialstatementsdependssignificantlyonitstimeliness（KothariandBall,2004）.Asanexample,ifthefinancialstatementsarenottimely,theenterpriseapparentlycannotpredictthetrendofmanagementandfinancialactivitiesinthefuture.However,forstakeholders,themostcriticalthingisthefuturedecision.Hence,thereisnoreferencevalue 

offinancialstatementswhichlossthetimelinessandcapitalmaintenancemaybeaffectedtoacertaindegree.

Thesecondweaknessisthatfinancialstatementsdonotconsiderthesocialandeconomicenvironmentsuchastheinflation（Meyer,1961）.Thecurrentaccountingsystemmodeisusedinaccordancewiththeprincipleoffinancialcapitalmaintenanceandfinancialaccountingisbasedonhistoricalcost（Hung,2000）.Duetotheinflation,theenterprise'

seconomicresourcesisdistorted,thecarryingamountofassetsfromtheassetsoftheexistingcost.Then,theproductcostisnottrueandpriceinflationcausestheinflatedprofits.Forthepurchasingpowerofmonetaryitems,theholdinggainsandlossesarenotdisclosedinfinancialstatements.Therefore,thefinancialstatementswhichexcludingtheinflationemergethephenomenonofundervaluingassetsvalueandoverestimatingcorporateearnings.Theseuntruthfulnessfinancialpositionandoperatingprofitsofanenterprisereducedtheauthenticityandcorrelationofaccountinginformation,sothattheexistingandpotentialstakeholdersmaynotreachthecapitalmaintenance.

Moreover,financialstatementscanonlyreflectthephysicalassetsofenterpriseowingtomonetarymeasurement.However,intangibleassetsgraduallybecomeasignificantresourceforenterprisestocreatevalue（Hung,2000）.Notalltheintangibleassetscanusemoneytomeasureandshowonfinancialstatements.Financialstatementscannotpresenttheintellectualproperty,thecompetitivenessofproductsandenterprise,thequalityandmanagementofhumanresourcesandtheinnovationabilityofproductsandtechnologyandanyothersoftassets（KothariandBall,2004）.Ifacorporateonlyrelyonthephysicalassets,itishardtokeepthesustainablecompetitive.Especiallyinthehigh-techandinformationenterprises,thecontributionofthehumancapitalandintangibleassetsisfarbiggerthanthetangibleassets.Itcanbeextendedthatintangibleassetsbringacrucialimpactoncapitalmaintenance,particularthephysicalcapitalmaintenance.

Itcanbeseenabovethatfinancialstatementsandcapitalmaintenancearerelevant.Financialstatementshavethreemainfunctionstobeanalyzed.Thefirstoneistoanalyzethesolvencyandthestructureconcerningtherightsandinterestofenterprisesinordertoestimatetheutilizationlevelofthedebtcapital.Thesecondoneistoevaluatetheoperatingabilityofenterpriseassetssothatcananalyzethedistributionenterpriseasstsandtheusageofturnover.Thelastoneisthattheevaluationoftheenterprise'

sprofitabilitycananalyzethecompletingsituationofprofittargetandthechangingcircumstanceindiverseannualprofitdegreeofenterprise（Meyer,1961）.Therefore,existingandpotentialstakeholderscanachievefinancialcapitalmaintenancethroughtheinformationoffinancialstatementsbecausethefinancialstatementsmaysupportfinancialinformationanddate.But,theinformationoffinancialstatementsisnotcomprehensiveenoughtoreachthephysicalcapitalmaintenance.Thephysicalcapitalmaintenancerequiresconsideringotheraspectsinformationsuchassocialsituationandeconomicenvironmentandsoon.

Therearefourmajorcomponentsinfinancialstatements,theyrespectivelyareIncomeStatement,StatementofFinancialPosition（BalanceSheet）,CashFlowStatementandStatementofChangesinEquity.IncomeStatementmeasuresallamountofincomeandexpenseduringaspecificperiod.ThefinancialinformationontheIncomeStatement,whichcanbeusedtoevaluatethemanagementefficiencyandoperatingresultsofanenterpriseandestimatethevalueandreturnsofinvestmentsothatcanmeasureafirm'

ssuccessinmanagement（Foulke,1968）.Inparticular,IncomeStatementhasthefollowingseveralfunctions:

IncomeStatementcanberegardedasthedistributionfoundationofoperatingresults.Thedatasuchastheoperatingcostandincome,businesstaxes,non-operatingrevenueandexpenditurewilldirectlyaffecttheinterestsofexistingandpotentialstakeholders,suchasthenationaltaxrevenue,thebonusofmanagers,thewagesandotherremunerationofworkersandshareholder’sdividends,etc.Then,IncomeStatementcancomprehensivelyreflectdifferentaspectsoftheproductionandoperationactivitiesandassisttoassessthejobperformanceofmanagementpersonnel.Furthermore,IncomeStatementcanbeusedtoanalysistheprofitcapabilityandpredictfuturecashflowofenterprise（ChesnickandEversull,1994）

.

BalanceSheetstatesthefinancialpositionofanentityataspecifydate,therefore,alsoknownasstaticstatement（Foulke,1968）.Itisbasedonadoubleentrysystemtoreachtwosidesbalanceout.TheproofofthisbalancingactisshowninthebalancesheetwhenAssets=Liabilities+Equity（EversullandChesnick,1995）.Thefunctionofbalancesheetistomainlyprovidetheinformationregardingthefinancialsituationofenterprise.Forinstance,throughtheBalanceSheet,itcansupplythetotalamountandstructureofassetsatacertaindateandshowthattheenterpriseownedorcontrolledresourcesandtheirdistribution.Tobebrief,itpresentshowmanyresourcesarecurrentassets,howmanyresourcesarefixassetsandhowmanyresourcesarelong-terminvestments,etc.Ontheotherhand,BalanceSheetcanoutlinetheamountofassetsorse