“Where Financial Reporting Still Falls Short”

This article will try to summarize and emphasize the article titled “Financial Reporting Still Insufficiency”. The article describes the shortages that are still affecting the financial world. Its purpose is to educate readers about the drawbacks that unscrupulous and profitable CEOs or executives who are trying to get more money during difficult times in the company can still use. While hiding profits or losses at the same time, it depends on how the company needs investors or auditors to check in order to obtain monetary compensation. This article raises 5 questions for readers and provides a possible solution. Companies continue to find ways to game the system, while the emergence of online platforms, which has dramatically changed the competitive environment for all businesses, has cast into stark relief the shortcomings of traditional performance indicators.

This article aims to educate potential investors and auditors where to look for signs of familiarity. In an ideal world, financial statements will accurately reflect the performance of the entity and allow comparisons between entities in difficult jurisdictions and industries. Unfortunately, there are many challenges throughout the accounting framework that make this task difficult-the result is that financial statements are based on accurate estimates, not precise scientific knowledge. The challenge involves the following:

Problem 1: Universal Standards, reconciliation between IFRS and GAAP, to further complicate matters, the way that IFRS regulations are applied varies widely from one country to the next. Results under GAAP versus IFRS can be different enough to change an acquisition decision.

Problem 2: Revenue recognition when revenue is recognized according to different accounting standards. Under current GAAP rules, if there is no objective way to measure such costs beforehand. The result is a perverse system in which accounting rules influence the way business is done, rather than report on company’s performance.

Problem 3: Unofficial Earning Measures, using operational indicators as financial indicators Today, Sarbanes-Oxley requires companies on U.S. exchanges to reconcile GAAP measures of earnings to non-GAAP measures, and IFRS has a similar requirement.

Problem 4: Fair value accounting, acquisition cost and fair value accounting, Today, however, companies use fair value for a growing number of asset classes in the hope that an examination of balance sheets will yield a truer picture of current economic reality. In doing this, RBS followed the IFRS (and GAAP) fair value hierarchy, which states that if observable market prices are available, they must be used.

Problem 5: Cooking with decisions instead of accounting books, dealing with income statements, Recent changes in GAAP and IFRS rules have made such activities less egregious than they once were, although overprovisioning will most likely always be with us.

This article provides interesting examples as narrations for each challenge. For example, for general accounting standards, GAAP and IFRS are the two most widely used accounting standards. There are key differences between accounting standards and the degrees of specific countries in each accounting standard, which makes comparison a major challenge. Consider an example: The colossal success of social networks such as Facebook, Twitter, and Ren Ren, fantasy sports and game sites such as Changyou and Zynga and online marketplaces such as Amazon, eBay, and Alibaba quickly demonstrated that traditional guidelines for the recognition and measurement of revenue and expenses were preventing them from truly reflecting their businesses’ value in reported accounts and another good example, Take the British confectionary company Cadbury. Just before it was acquired by the U.S. firm Kraft, in 2009, it reported IFRS-based profits of $690 million. Under GAAP those profits totaled only $594 million almost 14% lower. Similarly, Cadbury’s GAAP based return on equity was 9%, a full five percentage points lower than it was under IFRS (14%).