Window Dressing - Free Essay Example

Sample details Pages: 3 Words: 1035 Downloads: 1 Date added: 2017/09/20 Category Business Essay Type Argumentative essay Did you like this example? WINDOW DRESSING Window dressing  is presenting company accounts in a manner which enhances the financial position of the company. It is a form of  creative accounting  involving the manipulation of figures to flatter the financial position of the business. It is also defined as:  Ã¢â‚¬ËœA form of accounting, which while complying with all the regulations, nevertheless, gives a biased impression of the company’s  performance. ’ Though it is  not illegal, it is considered by many financial pundits asunethical. Reasons for Window Dressing: Enhance Liquidity position of the Co. – hiding a deteriorating liquidity position, and †¢Showcase stable Profitability of a company – massaging profit figures with methods such as income smoothing or profit smoothing †¢Reduce Liability for Taxation †¢Ward-off takeover bids †¢Encourage Investors †¢Re-assure Lenders of Finance †¢To influence share price †¢Hide poor manage ment decisions †¢Satisfy the demand of major investors concerning the desired level of return †¢Achieve the sales or profit target, thereby ensuring that management bonuses are paid Methods used for Window Dressing: Income Smoothing: It redistributes income statement credits and charges among different time periods. The prime objective is to moderate income variability over theyears by shifting income from good years to bad years. An example is reducinga Discretionary Cost (e. g. , advertising expense, research and development expense) in thecurrent year to improve current period earnings. In the next year, the discretionary costwill be increased. Ambiguity in Capitalizing and Revenue expenditure –  E. . Computer software with useful life of 3 years. As revenue expenditure it is treated as negative item on PLaccount. As capitalizing expenditure, it is treated as an asset in balance sheet, with yearlydepreciation in the PL. Changing depreciation policy   Incre asing expected life of asset reduces depreciation provision in PL account, hence, increasing net profits. Also, net book value in balance sheet will be higher for a longer period, thereby, increasing firm’s asset values Changing stock valuation policy   Change in method of stock valuation policy (LIFO, FIFO or AVCO) can lead to increase in value of closing stock, boosting up the profits. For example, in a rising price scenario, usage of FIFO method helps in increasing closingstock inventory valuation, thereby reducing the COGS, and hence inflating the earnings. Similarly, in a falling price scenario, LIFO valuation method for inventory is morefavourable. Sale and Lease Back–  This involves selling fixed assets to a third party and then paying a sum of money per year to lease it back. Thus, the business retains the use of the asset but no longer owns it. Off-Balance Sheet Financing –  Conversion of capital lease to operating lease so that the asset no longer features in the assets or liabilities of the balance sheet whichautomatically improves ratios such as Total Asset Turnover Ratio (TATO), Return onAssets, Equity Multiplier, etc. The costs saved are the interest expense on debt availed tofinance the capital lease and depreciation. Also, the debt-raising capacity of the companyincreases as the liabilities component tones down. Naturally, earnings are inflated underthis method. In the later years of use of asset, the company may revert back to capital lease financingsince the with net block having reduced considerably, the deprecation by WDV methodwill also be very less, thereby providing an opportunity to inflate earnings. Also, itprovides the addition benefit of saving on tax. Including intangible assets If intangible assets like goodwill are not depreciated the firm can maintain value of its assets giving a misleading view. Bringing sales forward  Ã¢â‚¬â€œ Sales show up in the PL account when the order is received and not at the point of transfer of ownership rights as mentioned in the notes to accountsof the Co. nder the heading of ‘Revenue Realisation’. Encouraging customers to placeorders earlier than planned increases the sales revenue figure in PL account. This bringssales forward from next year to this year. Extraordinary Items-  Extraordinary items  are revenues or costs that occur, but not as a result of normal business activity. These events are unusual and unlikely to be repeatedThey should be highlighted in accounts, and inserted after the calculation of Profit beforeInterest and Taxation. To include these in normal revenues will again exaggerate businessprofits. Examples of window dressing in Indian Companies : 1. Tata Motors  transferred 24% stake in Tata Automotive Components (TACO), a company with revenue of $675 in FY07, to Tata Capital, a group company,  and booked a profit ofRs 110 crore in Q1 FY09. Management declined to disclose the valuation methodolog y. Tata Motors also changed its methodology for calculating provisions for doubtfulreceivables,  which resulted in higher reported Ebitda to the extent of Rs 50. 7 crore (10%of Ebitda). 2. TCS, the software major,  increased its depreciation policy on computers from two years to four years. As a result, Q1 FY09 PBT was higher by an estimated Rs 50 crore (4% of net profit in 1QFY09). TCS followed cash-flow hedge accounting and till FY08, it usedto recognise hedging gains on effective hedges in its revenue line, thus boosting thereported revenue growth and Ebit margin. In FY08, TCS had Rs 421crore from hedginggains, of which, Rs 137 crore was included in the revenue line. However, from Q1 FY09,TCS is expected to report all forex losses/gains below the Ebit line in other income. Thus,the losses it had on its hedge position will no longer be booked in the operating line. 3. Jet Airways,  changed its depreciation policy from WDV to SLM, and thereby wrote back Rs 920 crore int o its PL, which helped the company to report profits during the quarter. It also helped Jet to report a higher net worth, which will help in keeping reported gearing low. 4. Dr Reddy’s  adjusted mark to market losses (Q1 FY08) on outstanding $250 million of hedges in the balance sheet, while PL reflects forex gains realised. 5. Reliance Communications  adjusted short-term quarterly fluctuations in foreign exchange rates related to liabilities and borrowings to the carrying cost of fixed assets. The company adjusted Rs 109 crore of realised and Rs 955 crore of unrealised forexlosses in the above manner. In addition, the company has not recognised Rs 399 crore oftranslation losses on FCCBs, since the FCCBs can potentially get converted, although theFCCBs are out of money. Adjusted for all the above, the company would have virtually no profits in Q1 FY09 Don’t waste time! Our writers will create an original "Window Dressing" essay for you Create order

To Present Men And Women Alike Have Complications That

To present men and women alike have complications that they must face when it comes to the workforce. To many work is very imperative in the way in which they feed their families as well as provide the necessary thing to live. While women have been in the workforce for many years as well as males, there is a growing stigma that has not been addressed. The stigma being the unequal treatment of men and women in the workforce. I will examine the varied factors men and women deal with while in the workforce. Gender roles influence self-perception coming from research showing that implied theories about the secureness or flexibility of a given concept strongly shape the types of goals that individuals accept.(Dweck Leggett, 1988). I will†¦show more content†¦The history of nursing suggests that if the men and women begin to change into the nursing field, it will help with the gendered role.( Diekman Eagly 2000; Diekman Goodfriend 2006) The key causes of sex discrimination are fixed in social opinions, secondary causes relay to executive structures, strategies, and practices (Ridgeway and England 2007, 199) What this means is that , the culture for countless years have always made it fundamentally okay to treat women in the manner that they are not as significant or worthy as a man. Women are now standing up and voicing their feelings of being respected. In other words, the discrimination that takes place in the workforce is not only applied to women but men as well. As mentioned earlier the male nurse is an example where males can flourish as well as be discriminated. Male nurses face being discriminated against, by patients as well as some co-workers. Male nurses face patients in which they imagine a woman and not a male which makes the male nurse face some difficulties. The difficulties being that some men have the idea of being taking care of by a pretty nurse and not a muscular male, which does not fit the typical standard. Male nurses also have to deal with being treated different or separated from female nurses. Male nurses also have to deal with education barrier when entering the nursingShow MoreRelatedEating Disorders : Anorexia And Bulimia1229 Words   |  5 Pagesdisorders tend to be overly concerned with perfection and the attainment of it. They may feel as if they have absolutely no control when it comes to some parts of their lives, so they achieve control through one of these eating disorders. Anorexics and bulimics often use the eating disorder as a way to muddle through problems from the past, as well as those of present times. 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Accounting in Context for Australian Review -myassignmenthelp.com

Question: Discuss about theAccounting in Context for Australian Financial Review. Answer: Introduction The present paper provides an analysis and examination of the key issues discussed on an Australian Financial Review (ARF) in relation to the impression management and the subsequent impact of these practices on non-professional investors. In this context, the paper has undertaken an analysis of the article entitled The impact of information presentation order on the judgments of non-professional investors written by author Hellman et al. Article Analysis The given article has provided an in-depth understanding of the various techniques of non-impression management such as textual presentation and graphical presentation on the judgment of non-professional investors. The impression management can be stated as the methods adopted by the management in developing annual reports to induce a purpose-drive behavior such as maximizing the value of the firm. The methods can result in implementing a reporting bias in the disclosures of a business entity through manipulating the information presented to the users for achieving a desired purpose. As per the article, the impression management is a multi-faced phenomenon that is largely driven by the social psychology and aims to influence the others perceptions (Hellmann, Yeow and Mello, 2017). The use of impression management practices by the managers for driving the decisions of non-professional investors can be best described through the use of agency theory. The theory examines the relationshi p between the investors and managers that is characterized by the some contractual obligations. The theory has regarded that managers are rational decision-makers and as such they tend to adopt the managerial practices that convey good performances in an environment where their remuneration is linked to the entity growth. As such, the theory provides an overview of impression management and its use in adopting reporting bias to depict the good financial performance of a firm (Schmitt, 2015). As per the article, the techniques that can be adopted by the management for impression management are textual and graphical presentation. The use of methods is based on the fact that implicit presentation of financial information is able to influence the decisions of en d-users through exploring the cognitive constraints of human mind. The users tend to perceive negative thoughts about investing in a firm if lower performance is disclosed in the annual reports. Therefore, the managers tend to adopt such practices that maximize the value of firm in its textual presentations. Also, the use of graphics increases the visibility of key financial facts and figures and thus helps in achieving investor confidence (Hellmann, Yeow and Mello, 2017). The use of impression management practices tends to induce biasness in financial reporting and therefore there is need for developing regulations for minimizing the use of such techniques that maximizes a firm value. The non-professional investors are an important group of stakeholders that uses financial information for making decisions in relation to their investment in stock markets. In this context, the Australian Prudential Regulatory Authority (APRA) holds the responsibility of monitoring and controlling the superannuation funds of non-professional investors (Hellmann, Yeow and Mello, 2017). There is need for adopting such regulations on the corporate in order to protect the interest of non-professional investors who possess little knowledge regarding the operations of stock market. However, there are some arguments cited by various authors against the use of regulations on impression management practices. This is because the concept of impression management helps in developing an interaction between the managers and audiences. It tends to develop a reciprocal influence between management and audiences and in providing an explanation to the actions and performances of an organization. The non-professional investors can develop an adequate understanding of the financial performance of a firm through the use of impression management techniques (Rahman, 2012). The use of impression management can result in perceiving a higher financial growth of an entity based on the use of attractive textual and graphical presentations. In this context, it is essential that accounting standard setting boards such as IASB and AASB develops and implements necessary regulatory practices on a firm so that the interest of non-professional investors can be protected. The objective of the regulations would be securing the interests of both professional and non-professional investors. The compliance with the regulations should be monitored by the board and the government on a regular basis (Tessarolo Pagliarussim and Luz, 2010). Conclusion It can be said from the overall analysis of the article and the various views regarding the impression management that it should be used by business entities only for developing a better interaction with the target audiences. The technique should not result in developing biasness in corporate reporting through manipulating the information for achieving personal benefits such as profit maximization for shareholders. References Hellmann, A., Yeow, C and Mello, L. 2017. The influence of textual presentation order and graphical presentation on the judgments of non-professional investors. Accounting and Business Research 47 (4), pp. 455470. Rahman, S. 2012. Impression Management Motivations, Strategies and Disclosure Credibility of Corporate Narratives. Journal of Management Research 4(3), pp. 1-14. Schmitt, D.B. 2015. Advances in Accounting Behavioral Research. Emerald Group Publishing. Tessarolo, I., Pagliarussi, M and Luz, A. 2010. The Justification of Organizational Performance in Annual Report Narratives. Brazilian Administration Review.