Acc Theory
From Sheet of Accounting Theory
Difficulties in Segment Reporting
Base of Segmentation: in case of complex business, it’s difficult to select a base for organization as well as difficult to compare.
Allocation of Common Costs: Common costs are likely to be allocated, bringing segment information into question
Pricing Inter-segment Transaction: No specific method for inter-segment pricing, different method use for cost, cost plus market price and negotiable price.
Costs of Segment Disclosure: Increased competition may result segmental disclosures where profitable segment may attract competitors, & loss making segment arise the take over situation. Foreign companies are not required to provide segmental reports.
Management Conservatism: Management determination of segments implies that what is useful to management is useful to investors.
FASB’s 5 possible objective for interim reporting:
1. To estimate annual earnings
2. To make projections
3. To identify turning points
4. To evaluate Management Performance
5. To supplement the annual Report.
Problems in Interim Reporting
Accounting Problems:
Inventory Problems: There are three types of problems;
Determination of Inventory quantities
Valuation of inventories
Adjustment of valuation
Matching principle: Business operations are not similar throughout the year. Resources are acquired & output may be sold & there are many types of cost which related with these issues. It should defer in an interim period costs if the benefits extend beyond that period.
Extent of disclosure problem: Problems in deciding the quantity disclosure in interim reporting. Problem with determining the material criteria to disclose in interim reporting.
Conceptual Issues: There are toe views, Integral View & Discrete view;
The integral theory of interim reporting views an interim period as an instalment of an annual period The discrete theory of interim reporting views each interim period as a basic accounting period to be evaluated as if it
Difficulties in Segment Reporting
Base of Segmentation: in case of complex business, it’s difficult to select a base for organization as well as difficult to compare.
Allocation of Common Costs: Common costs are likely to be allocated, bringing segment information into question
Pricing Inter-segment Transaction: No specific method for inter-segment pricing, different method use for cost, cost plus market price and negotiable price.
Costs of Segment Disclosure: Increased competition may result segmental disclosures where profitable segment may attract competitors, & loss making segment arise the take over situation. Foreign companies are not required to provide segmental reports.
Management Conservatism: Management determination of segments implies that what is useful to management is useful to investors.
FASB’s 5 possible objective for interim reporting:
1. To estimate annual earnings
2. To make projections
3. To identify turning points
4. To evaluate Management Performance
5. To supplement the annual Report.
Problems in Interim Reporting
Accounting Problems:
Inventory Problems: There are three types of problems;
Determination of Inventory quantities
Valuation of inventories
Adjustment of valuation
Matching principle: Business operations are not similar throughout the year. Resources are acquired & output may be sold & there are many types of cost which related with these issues. It should defer in an interim period costs if the benefits extend beyond that period.
Extent of disclosure problem: Problems in deciding the quantity disclosure in interim reporting. Problem with determining the material criteria to disclose in interim reporting.
Conceptual Issues: There are toe views, Integral View & Discrete view;
The integral theory of interim reporting views an interim period as an instalment of an annual period The discrete theory of interim reporting views each interim period as a basic accounting period to be evaluated as if it