Creative Accounting Essay Example | Topics and Well Written Essays - 2000 words

Creative Accounting - Essay Example Among the various stakeholders, investors and potential investors constitute the primary group for whom financial statements are basically intended. Investors put their hard earned money with a firm on the basis of the financial information exhibited by statements and their scrutiny. Therefore, accountants are bound to oblige the rules and regulations of accounting practices in the preparation and presentation of financial statements. These rules are framed by accounting bodies of a country in line with international accounting standards. Nevertheless, some accounting standards are violated by accounting professionals/firms for their personal gain. Such practices are illegal and against the ethics of accounting professionalism. Many such practices have been observed from different parts of the world. Such a practice is known as creative accounting. Creative accounting is a sort of accounting scam, which does not follow the accounting rules and principles as such or finds the loop hol es in the accounting rules for the benefit of the preparers and those at the helm of the organization. This essay is meant to detail the basics of creative accounting and the reasons thereof. ... It is the act of using the skill and knowledge of accounting professionals to make advantage of the loopholes of accounting rules so as to manipulate the financial information and thereby deceive the users of such statements. This term is also coined as aggressive accounting since it involves the destruction of current accounting rules and specifications with the intention of deceiving someone. Though, the ultimate intentions of creative accounting are manifold, the fundamental aim is to give unfair and incorrect information about the company and its operational results. Numerous interpretations have been developed on the term 'creative accounting' by eminent authors. In the words of John Blake and Jack Dowds, creative accounting may be defined as a "process whereby accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business" (Blake). Metcalf, L. (US Senate) in his work (The Accounting Establishment, 1977, p.188), interprets " creative accounting is recognized as a synonym for deceptive accounting. Creative accounting methods are noteworthy because they remain in use as generally accepted accounting principles, even though they have been shown to be deceptive in many cases" (Robb, 2007, sl.3). According to Charles W. Mulford, Eugene E. Comiskey in their famous book entitled 'The Financial Numbers Game: Detecting Creative Accounting Practices', "creative accounting practices --a termthe authorschose to encompass any and all steps used to play the financial numbers game -- may be employed in exch ange for a variety of expected rewards. These rewards may include a favorable effect on share prices, lower corporate borrowing costs due to animproved credit rating,

Financial Management Essay Example | Topics and Well Written Essays - 2000 words

Financial Management - Essay Example The small company is usually faced by struggling financially that is the company that is acquired usually financial problems. The large company acquires the all the stock of the smaller company and makes become component of their business, that is, the smaller company usually ends up changing its and adopts the name of the large company. In most cases acquisition are usually friendly, where two parties enter into an agreement but sometimes it involves hostile takeover. For example if the board of directors accept the tender offer. Many scholars have postulated a number of different types of mergers and acquisitions in an effort of delineate the increasing trend of strategic alliances observed in the business world. Nevertheless, there are three main types of mergers and acquisitions which are based on the structure perspective. The main three types of mergers and acquisitions include; Vertical merger refers to a situation where two firms which is in the same industry but in different levels of production combine together to form one firm. For example, a shoe manufacturing company mergers with a shoe retailing company. In this case, the combination motive is to control the supply and distribution channel (Vachon, 2011). A horizontal merger is where two companies which are in the same level of production combines. ... The two companies are unrelated in terms of their operation and production (Carney, 2009). For example, a shoe manufacturing companies, mergers with a road constructing company. In this case the two companies are not related but their unification can only be viewed as diversification strategy (Pablo, Javidan, & Society). A G BARR is company in the food processing sector, producing flavored juices and beverages. Over the past few years the company has experienced increase demand in its product. Therefore, due to the increased demand in the product and the increase in the level of competition in the sector there is need to acquire a firm in the in the food processing sector so as to enhance economic efficiency and scope. After preliminary analysis a horizontal merger was essential where NICHOLS was ascertained as a potential target company. After a careful analysis of Nichols financial stability and the market it was ascertained that a merger was not essential but an acquisition of the company was sufficient. In order, to make the acquisition process successful and also to avoid failures that has hampered many merger and acquisition deals a well constructed plan to acquire shares was formulated together with a study of the financial performance of the company was carried out. The company would acquire the entire share in Nichols. AG BARR goal is to expand its market share in order to satisfy the need of customer as well as venture in to new markets. Nichols was the most suitable company to take over based on its financial health the company performance has not recorded major significant improvements the company has an annual turnover of