Accounting Estimates and Policy Essay

Disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies are two important requirements in financial reporting, although these are the most subjective and complex areas, they are of significance in making business decisions to users of financial statements. This paper compares our company’s current accounting practice with the requirements in respective accounting standards in relation to disclosure of sources of estimation uncertainty and judgments in applying accounting policies with the aim the identify any gaps between these two which may trigger ASIC’ reviewers attention. It takes a look first at the requirements in respective accounting standards (Chapter 2). It then examine the current accounting practices in our company (Chapter 3 and 4) and identify the gaps between company’s practice and accounting standard (Chapter 5). At the end recommendations are made for a better-compliant report (Chapter 6). Requirements in accounting standards The disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies should be disclosed separately in the financial reports. Not only the nature of estimates should be disclosed but also the sensitivity analysis to these estimates should be included. Judgments in terms of whether the nature and the amounts are relevant to the company’s operation are critical in applying the respective accounting policies. See more:Â  Mark Twain’s Humorous Satire in Running for Governor Essay Company’s accounting practices Estimations disclosed are impairments for intangible goods, provision for restoration and rehabilitation, employee benefits, estimation of useful lives of assets and ore reserve and revaluation estimates. judgments in applying accounting polices are disclosed in two areas which are depreciation of non-financial tangible goods and taxations. Identifying the gaps Our company prepared the financial statements in compliance to Australian Accounting Standard. However there are minor gaps between our company’s practice and the requirements in accounting standards in terms of content and manner. More significant disclosure could have been made the structure can be improved. Conclusion and recommendations Disclosures about timing in revenue recognition, classification of finance leases and operating leases and going concern could have been included, since they are relevant to our company’s operating and can better assist users in evaluating our company’s performance. The disclosure of estimates and judgments should be disclosed in separate notes since it is required by AASB 101. 1 Introduction ASIC announced recently that one of its focusing area would be the disclosure of entities’ estimates and accounting policy judgements.This is because some entities did not make material disclosure of sources of estimation uncertainty and significant judgments in applying accounting policies, while these disclosures, though subjective and complex, are critical factors in business decision-making. The purpose of this report is to identify any gaps between our company’s current accounting practice and the requirements of accounting standards by firstly looking at the requirements set out in the related accounting standard, then to carry out an examination of the current accounting practice of our company accordingly. The report will then compare the information collected and identify any compliance with or deviation from AASB requirements in regards to disclosure in estimates and accounting policy judgments, and discuss recommendations for a better compliance report to meet the satisfaction of ASIC reviewers. 2 Requirements in respective accounting standards AASB 101 paragraph 112-133 specifically state the requirements for material disclosures of sources of estimation uncertainty and the significant judgments used in applying accounting policies. 2.1 Requirements for disclosures of sources of estimation uncertainty According to AASB 101 paragraph 125-129 which relate to disclosure of sources of estimation uncertainty. entities are required to disclose estimates at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year (AU AASB 101.125). for these assets and liabilities, details of their nature and their carrying amount at the end of reporting period are required. To determine the carrying amount of assets and liabilities, estimations for the effect of future events are needed. for example, when the recent market value is absent, future-oriented estimates are of necessity in measuring recoverable amount of property, plant and equipment. Other examples can be long term employee benefits, or provision liability which subject to future results of legal events. The manner of the disclosures should be in a way that can assist users of the financial statements to comprehend the judgments that managements makes about the future and other sources of estimation uncertainty, usually users will expect to have the nature of the assumptions or other estimation uncertainty and the extent of sensitivity disclosures provided for the estimates. However, in some cases when the extent of possible effects the sources of estimation uncertainty at end of reporting period become impracticable, the entity should state that a material adjustment to the carrying amount of the asset or liability may be required if the outcomes within the next financial period are different from the assumption. 2.2 Requirements for disclosure of judgments in applying accounting policies According to AASB 101 paragraph 117-124, requirements for disclosure about judgments used in applying accounting policies are set out. ‘Judgments’ are defined as ‘apart from those involving estimations, that management has made in process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognized in the financial statement (AU AASB 101.122). Two important elements to be disclosed are judgments about the measurement basis used in preparing financial statements and the other accounting policies. Judgments in terms of the relevance in applying a particular accounting policies should be exerted since management needs to consider whether the disclosure would assist users in understanding the financial position and performance of the company. it is noted that not only AASB 101, but other accounting standards such as AASB 116 (disclosur e of the measurement bases used for classes of property, plant and equipment) also states the requirements for judgments. what should be taken into account when applying a particular accounting policy are the nature of the entity’s operations and the policies that users of financial statements would expect to look at. for example, users would expect a manufacturing company to disclose its accounting policies for depreciation and revaluation on property, plant and equipment. or, users concerning about the entity’s income taxes would expect the entity to disclose information on accounting policies for income taxes, including deferred tax liabilities and deferred tax assets. it may be the case that even the amount for certain assets and liabilities are not material, but because it is highly relevant to the entity’s operation, then professional judgments are needed when applying the accounting policies. 3 Company’s current accounting practice—Resources of estimation uncertainty The disclosures of significant accounting estimates and assumptions are examined in note 2 to the financial statement, there are seven estimations made for the financial reports, the ones that deserve attention to are impairment of goodwill and intangibles with indefinite useful lives, provision for restoration and rehabilitation, employee benefits, estimation of useful lives of assets and ore reserve and resource estimates. 3.1 Impairment of good will and intangibles with indefinite useful lives detailed disclosure about the assumptions and estimates used in calculating the impairment value are * Discount rate: it requires management’s estimate of the time value of money, in the financial report, weighted average cost of capital of the entity and business risk specific to the unit are accounted for the calculation. * Market conditions: management made assumptions on key domestic market segment activity including construction, mining, agriculture and manufacturing, and also assumptions on GDP, CPI as well as long-term exchange rates for AUD/USD and NZD and made sure they are consistent with external information. * Sensitivity to changes in assumptions: management considered that the carrying amount of the CGUs would not exceed their recoverable amount given any changes from the above assumptions. 3.2 Provision for restoration and rehabilitation the provisions include future cost estimates in relation to dismantling, closure and decontamination of various site, and the calculation for these requires assumptions on application of environmental legislation, available technologies and consultant cost estimates. Since these factors are subject to changes in the future, updates need to be made periodically. in Note 18, three main categories are provision for restoration and rehabilitation, provision for legal customer claims(legal fees) and provision for restructuring. 3.3 Employee benefit employment benefit such as long service leave would require estimation on future salary, discount rate and the years that the employee may work for our company. Other actuarial assumptions are applied when calculating defined benefit plans for employees. 3.4 Estimation of useful lives of assets basing on historical experience, management made the estimation of the useful lives of assets .The condition of the assets is assessed at least annually and considered against the remaining useful life, adjustments are made accordingly. 3.5 Ore reserve and resources estimates This is the estimation of the amount that can be extracted economically and legally from the entity’s mining properties, the calculation is based on the geological judgments and other factors such as foreign exchange rates, commodity prices and the size and grade of the ore body. 4 Company’s current accounting practice—judgments in applying accounting policies Judgments in applying accounting policies were disclosed in Note 2 under ‘Significant accounting estimates and judgments’. Two significant accounting judgments are identified in Note 2, being ‘impairment of non-financial assets other than goodwill and intangibles with indefinite useful lives’, and ‘Taxation’. 4.1 Impairment of non-financial tangible assets Our company take into account the relevant factors, such as business performance, technology, economic and political environments and future business expectations when assesses the impairment of all assets. management decides that the recoverable amount of the asset is determined if an impairment indicator exists. for the financial period ended 30 June 2012, management regarded that the indicators of impairment were significant enough so that assets have gone through impairment tests and recoverable amounts were determined. 4.2 Taxation Our company is subject to income taxes in Australia and jurisdiction where foreign operations apply. While ultimate tax on transactions and calculations are uncertain, judgments is required in assessing whether deferred tax assets and deferred tax liabilities are recognized on the balance sheet and the application of certain income tax legislation. Because there is risk and uncertainty involved in making judgments, there is a possibility that the amount of tax assets and liabilities recognized on the balance sheet would be impacted if there are changes in future circumstances, resulting in a change to income statement. Judgment is also exerted when determining whether deferred tax assets should be recognized, and it is based on that highly considerable likeliness that the tax losses can be recovered by sufficient future taxable profits. 5 Comparisons between company’s current accounting practices and accounting standard requirements It is important that our disclosures are in compliance with the requirements in Australian Accounting Standard Board. After the explanation of AASB101 and the examination of the note to our financial statements, the following points should deserve attention from the board: 5.1 Disclosure compliance Our financial statements disclose and only disclose the critical judgments about the application of accounting policies, and major sources of estimation uncertainty inherent in assets and liabilities, the information provided is appropriately tailored to our company’s circumstances, for example, our company is subject to income taxes, therefore the policies of calculation of income taxes, recognition of deferred tax assets and deferred tax liabilities are disclosed in note 1 to the financial statements. Since we are material company, ore reserve is highly relevant to our operating activity, therefore the estimation for ore reserve is disclosed in note 2 listing the factors we took into account when preparing the financial statements. 5.2 Content of disclosure the potential gap between our company’s current practice and accounting standard is that some other disclosures about judgments can be included in the notes, such as the judgments in the classification of leases as finance or operating. Although this figure is not material as shown in the financial statements, leased assets are relevant to our operating activity and should be included. 4.3 Manner of disclosure Another gap is that in AASB 101 critical judgments and major sources of estimation uncertainty should be considered separate categories, in our company’s note to financial statement, these two items are placed under the same note 2. 6 Conclusion and recommendation After the comparison between our company’s current accounting practice and the requirements in accounting standard, to better satisfy the ASIC reviewers, the following points can be noted when preparing for the financial statements: 6.1 Improvement in contents we can included some other judgments we used in applying the accounting policies, such as the classification of assets ( whether a non-financial asset held of sale, or class of financial asset), classification of leases as operating or financial leases, and going concern judgments. The lease assets amount might not be as material as others, but these are relevant to material company like us and therefore the judgment involving in choosing the accounting policies should be disclosed, and so does going concern, it is believed that the reasonable disclosures of management’s judgment on going concern can assist users in making financial decision. 6.2 Improvement in structure Critical judgments should be separately identified from the estimation uncertainties, and should be disclosed in separate notes. This is because in AASB 101 it makes clear distinction between judgments and estimations. Not only the content but also the structure and manner of presentation are critical in achieving true and fair disclosures.

Employee Training and Career Development Essay

In this Employee Training and Career Development Paper a number of topics will be discussed pertaining to development. Explaining the role of training in an organizations development and describing different employee development methods and its benefits will be reviewed. The paper will address analyzing the relationship between employee and organizational development, as well as, describing the role of human resource management in career development. Resources for this information will come for the eBook; Fundamentals of human resources management text. Included in this paper will also be a reflection on the writers’ personal career development, and where they see themselves in 5 years. Along with it will be the writers’ opinion on how their present and/or future company can assist in their career development and if the company’s career development opportunities are sufficient. Bullet 2 Employee development is future oriented and concerned with the education of an employee rather than job training. By education, this means enhancing an employee’s ability to understand and interpret knowledge. Employee development focuses on personal growth to aid in the success of preparing for greater responsibility positions, have analytical, human, conceptual and specialized skill. There are three methods of employee development that will be reviewed; job rotation, assistant-to positions, and lecture coursed and seminars. Each of these methods are either on-the-job techniques or off-the-job techniques. Job Rotation involves moving employees throughout the company to different positions with the intent of expanding skills, knowledge and abilities. This  method can be done either horizontally or vertically. Job Rotation is a great method, its benefits such as broadening the employee’s exposure to the organizations operations, increasing experience, reducing boredom, and stimulating new ideas are excellent avenues to have within a company. This also allows management the opportunity to observe the employee for reliability. The Assistant-To Positions method is when employee’s with potential work under someone with a higher position in other areas of the organization. These employees may be staff assistants or serve on a particular board. Whichever duty it is, it is done under the eye of a supportive coach. Benefits for this method is that the employee will gain a numerous amount of experience in management activities and grooming duties for a higher leveled position. Lastly the Lecture Course and Seminars method is one many organizations offer either in-house or through outside sources. This method involves traditiona forms of instruction, revolving around lecture courses and seminars. Employees acquire knowledge and develop DeCenso, D., & Robbins, S. (2007). Fundamentals of human resource management (9th ed.). Retrieved from The University of Phoenix eBook Collection.

Exploiting the Network: Synergy, Product Placement

The media industries have a suggestive and coercive power on society, embodied within the artifacts, images, and brands we consume. As these industries diversify, so do the products and the avenues in which they are offered. Synergy allows corporations the power to maximize advertising through a variety of cross-market promotional mechanisms, proliferating their products or logos exponentially. Initially, this essay requires an explanation of the use of synergy and cross-market advertising. Subsequently, I will illustrate how television shows such as Nickelodeon’s SpongeBob SquarePants and MTV’s The Osbournes and Total Live Request (TRL), use the vast internal synergistic network of their parent company Viacom. Such programming appears to exploit its viewer-ship through commodification – product placement, branding, and celebrity endorsements. Synergy: The True Meaning of Cross-Market Advertising â€Å"We are reaching a position where the challenge for the 1990s should be to seek a greater understanding of the best ways, creatively, to exploit the potential for media synergy†(Confer, 10) The concept of synergy is not new, however evidence suggests it has only been fully realized and exploited over the last decade. Synergy is created through the integration or combination of different but complimentary business interests, each feeding off the other. Ultimately, large corporations or conglomerates are diversifying their market interests rather than specializing. This diversification benefits the company by offering a new strata of opportunities thereby complimenting its existing functionality. An example of this is a movie production company allying or buying out a major video game provider. The synergy created from such a merger allows for a film and a video game to use the same characters, story line or premise. Synergy works for two reasons. Primarily, synergy is an engine that provides cross-marketing and cross-selling opportunities, which would allow for greater sales, exceeding what would be possible from each division separately. (Hesmondhalgh, 141). Secondly, corporations also â€Å"plan and design texts, in order to encourage subsidiary spin-off texts† (Hesmondhalgh, 239). Even if these texts or preplanned products are not of great quality or a commercial success, they will still sell thus generating profit. This is because there is a pre-existing, underlying product network that has already been established through the fan base. If synergy can be classified as the â€Å"the ability to keep cash flows inside a corporate family† (Klein, 148), through its internal use of cross-market production, promotion, and sales; Sumner Redstone’s Viacom is a perfect example of synergy at work. The Viacom Empire has tapped into many markets throughout the entertainment and media industry. Viacom’s major subsidiaries include: Nickelodeon – children’s cartoon network; MTV – music network; NBC – television network; and Paramount – movie production company, which also runs numerous theme parks all over North America. Klein, 2000, comments on this phenomenon as â€Å"synergy nirvana† (160). According to Klein, ‘synergy nirvana’ is attained when a conglomerate works internally to â€Å"successfully†¦churn out related versions of the same product, like molded Play-Doh, into different shapes: toys, books, theme parks, magazines, television specials, movies, candies, CDs, CD-ROMs, superstores, comics, and mega-musicals† (161). Basically, ‘synergy nirvana’ is the proliferation of standardized products in different packaging, through a preexisting framework of cross-market advertising; which is done on a vast scale through the exploitation of many different mediums and industries in the name of profit. ‘Synergy’ is Viacom’s number one marketing tool for it allows them to link the vastness of their empire together, into a culmination, dissemination and consumption of products, images, ideals, and brands. Furthermore, ‘synergy’ in programming, such as SpongeBob SquarePants and The Osbournes, has evident implications for the viewer-ship. SpongeBob SquarePants: The Future of Product Placement â€Å"Nickelodeon has more children between the ages of two to eleven watching than the four major networks combined†¦ This is significant in the competition for the children’s advertising market, which averages about $500 million a year† (Roman, 223). SpongeBob SquarePants is a lovable, animated sea sponge that manages to find himself in undersea trouble during every episode. The â€Å"cartoon† (Mittell, 18) runs every â€Å"Saturday morning† (Mittell, 18) on Nickelodeon and is syndicated to most major television networks due to its incredible popularity among children viewers. What started out in 1999, as a comical concept for a children’s television program, has grown seemingly overnight into a ‘juggernaut’. Nickelodeon cannot only boast that it is â€Å"the number one rated program among children 2-11†, but according to Nielson ratings, â€Å"53. 7 million viewers tune into the show each month†¦including 22. 1 million kids 2-11, [and] 12. 7 million between 9-14† (Olson, blogcritics. rg). With such commercial success and an immense viewer ship, Nickelodeon’s SpongeBob SquarePants uses synergistic principals of massive product placement to have free rein and ‘seep into every pore’ of consumer culture. SpongeBob employs Viacom’s cross platform synergies to network and gain access to most children’s homes. The motivation is a given when children between the ages of 2 – 11 are not only watching between 24 – 28 hours of television a week (Roman, 74), but are â€Å"responsible for either spending or influencing the spending of $100 billion annually† (Roman, 74). This is clearly an influential and lucrative market. SpongeBob SquarePants should be the archetype for synergistic corporate product placement. With SpongeBob’s insurgence into popular culture, there have been similar synergistic trends of product placement. Support for this notion is found through looking back to 2004, days before the premier of the SpongeBob SquarePants movie in New York. Paramount, another Viacom subsidiary, launched a brand new SpongeBob SquarePants amusement park theme ride to coincide with the movie launch. Additionally, Burger King (also owned by Viacom), released a SpongeBob SquarePants value meal that comes with SpongeBob SquarePants plastic figurines from the movie – ‘collect all 42. ’ Nickelodeon, the Viacom subsidiary that operates SpongeBob must not be ignored. Nickelodeon aired a 24-hour SpongeBob SquarePants Marathon that hyped up kids for the movie and forced unsuspecting parents to shell out $12 a ticket. Furthermore, during the Marathon’s commercial breaks, SpongeBob advised the viewers to eat SpongeBob value meals, collect all 67 figurines, and go to Paramount Theme Parks to try his new ride. SpongeBob has saturated the market with his yellow sponginess, which must be overpowering to any parent; he can be found everywhere, in every nuance of daily life. Since the movie, product placements and cross-promotional marketing have skyrocketed. SpongeBob now has a line of clothing, DVD box sets, bed linens, and bowling balls with a real tenpin set. Of course a 5 year old needs a bowling ball and set of bowling pins with SpongeBob SquarePants on them – SpongeBob said so! MTV: Branding a Nation â€Å"MTV is associated with the forces of freedom and democracy around the world. When the Berlin Wall came down, there were East German guards holding MTV umbrellas† – Sumner Redstone, CEO of Viacom MTV is known for hosting different music video programs 24 hours a day, 7 days a week. In 1998, MTV was watched in â€Å"273. 5 million household worldwide† (Klein, 120), where it was reported, â€Å"85% of them watched everyday† (Klein, 120). The station offers a host television shows, including TRL and The Osbournes, that entrance its youthful audience through flashy music videos and the celebrities portrayed. MTV’s popularity, since its inception in the early 1980s, is as a self-perpetuating â€Å"fully branded media integration† (Klein, 44). Klein, 2000, writes: From the beginning, MTV has not been just a marketing machine for products it advertises around the clock; it has also been a twenty-four-hour advertisement for MTV itself†¦[where] viewers didn’t watch individual shows, they simply watched MTV†¦Advertisers didn’t want to just advertise on MTV, they wanted to co-brand with the station (44). Today, advertiser branding can be seen throughout MTV. As MTV endeavors to diversify in a changing market place, video shows like TRL are coupled with reality-based television shows intimately linked to ‘celerity’ including The Anna Nichol Smith Show or The Osbournes’. Beyond these shows lack of merit, their entire function is product branding and celebrity endorsements. Even though The Osbournes’ are a revival to the â€Å"original early 1950s format of the American sitcom† (Gillan, 55), I cannot fathom that product branding, product placement, and celebrity endorsements were as prevalent on national television in the 1950s as they are in modern programming. Within the first ten minutes of the show, the audience can blatantly see a mansion full of expensive electronics, furniture, and cars – at a closer look, the brand names facing the camera and are a part of the Viacom conglomerate in a myriad of ways. All The Osbournes offer the predominately teen audience (other than a few less brain cells) is copious amounts of product branding though celebrity endorsement. Product branding on MTV is a big issue. Much like the red carpet on Oscar night, where the predominant question on everyone’s lips is ‘who are you wearing? ’ MTV offers its audience the same intellectual stimulation, especially when all that its audience sees are ‘hella-cool’ rock stars and all the ‘bling’ they wear throughout their music videos, interviews, and award ceremonies. No wonder the Y generation is all about over consumption and bad taste. As we have entered the 21st Century, multi-media conglomerates have risen to great power in our society. They offer the consumer the media and entertainment that they desire. However through internal synergistic networks, these companies, such as Viacom, can link the lucrative children’s market or the 24-hour advertising nature of MTV, to all other aspects of their company. As consumers, we neglect what these companies are telling us to do – to consume – in order to watch our favourite programs. We refuse to witness how the realities of consumerism, and sickening nature that these corporations control the very artifacts and images that we relate to and enjoy for their own personal profit.

Final Exam Term Paper Example | Topics and Well Written Essays - 750 words - 2

Final Exam - Term Paper Example For example a juvenile may be required to avoid committing any form of crime. Discretionary conditions refer to the requirements that may not result in revocation of probation and depends on the judge’s decision (Del, 2006). For example: the juvenile may be required to stay at home during weekends. 3. Knowledge includes legal rules regarding juvenile probation system such as the age limit of the offender to be recognized as a juvenile delinquent (Del, 2006). Knowledge of rehabilitation programs for delinquents such as knowledge of group rehabilitation programs. Skills include the ability to work with delinquents. For example probation officers may be required to communicate with juveniles in an empathetic manner. 4. Various roles and duties of juvenile probation officers include managing cases of different juvenile offenders (Del, 2006). Furthermore they have to provide recommendations regarding the conditions that govern the probation period. They even have to facilitate the juveniles in following as well as understanding their probation conditions. They have to develop standards of supervising juveniles and remain in contact with families looking after them. 5. Miranda warnings are guidelines that the police officers have to provide to suspects regarding their silence and their confessions. These warnings are provided while suspects are in custody and are going to be interrogated (Del, 2006). In case of juvenile suspects, they are to be provided with Miranda warnings as soon as they are arrested. The probation officer reads Miranda warnings to juvenile suspect, right before interrogating the suspect. 6. There are various cases that reveal the conditions required for testing school athletes for drug testing. These conditions include the voluntary participation of the student in the test and there needs to be a purpose for conducting a drug test such as the purpose of identifying whether a student is eligible to take part in

Finance Assessment Essay Example | Topics and Well Written Essays - 3250 words

Finance Assessment - Essay Example In this concept one stocks performance is benchmarked by the performance of another stock. The returns which will be generated are compared relatively to other stocks of similar nature operating in the markets (Gitman, 2003). The major difference between both the absolute and relative return is that absolute return is concerned about the returns which are generated from one particular asset or stock, whereas in relative return the stock is compared or benchmarked with the measures of other stocks. The most debated concept of Security Analysis and Portfolio Management is about the understanding whether a portfolio has been properly analyzed for the returns which the investors will get or understanding the relative performance of that particular stock in the markets (Deloitte, 2010). The investors need to redefine the definition of risk, how it is measured and how to deal with it and for this reason; investors create a portfolio of different stocks and securities. Alpha and Beta are th e tools used by the investors to assess their portfolios and measure whether or not their investments are generating the expected returns considering the risk they are taking. Assessing a portfolio in terms of both Alpha and Beta, the investor will have more control over the portfolio and he will maximize the returns by minimizing risk (Koba, 2012). The measurement of an investment on risk adjusted basis is called Alpha. Investors seek to minimize risk and increase returns (Loth, 2007). The stock prices are subject to volatility. The price risk associated to a portfolio determines the return expected by the investor. The additional return which an investor gets on a portfolio apart from the benchmark set is called Alpha. A negative Alpha of a portfolio shows underperformance (Faulkenberry, n.d.). Beta is a tool which is used to measure the volatility of risk associated to a portfolio as compared to the performance of the market. Regression analysis is used to calculate Beta. In othe r terms Beta is the propensity of investment return to respond to the market volatility. The lower the value of Beta, lesser will be the volatility of the stock with respect to the market. Both Alpha and Beta are popular tools used for the measurement of volatility. Alpha compares the asset returns on the investment to the risk adjusted expected returns whereas Beta is the movement of the asset along with the benchmark that has been set by the market. Alpha is very important for assessing the growth and the returns that are associated to the portfolio. It depends on the structure of the portfolio, the investor and the market which is being analyzed that which factor either the Beta or the Alpha will be critically significant for the investor (Seeking Alpha, 2011). With the varying school of thoughts the perceptions of the importance of Alpha or Beta vary. Alpha and Beta alone do not possess the potential to assess the risk instantly and adjust the portfolio for the returns. Alpha al one is not sufficient to assess the skills which are derived from the leverage of the portfolio. It is not suitable for a risk averse investor and may end up being a misleading performance measure for the investors. The value of Alpha itself is not sufficient for the assessment of the stock but it can be used if a benchmark of the portfolio is set. Beta does not possess this benefit. The direction of the market cannot be assessed by the benchmark Beta set for the portfolio. The use of Alpha and the speculations made by using it are very consistent. The

The truth about convergence of living standards across the world Essay

The truth about convergence of living standards across the world - Essay Example Concerning this, reviewing the academic literature in this issue would make sense. A certain study was able to probe and contribute to the upward spiral number of economic growth literatures by employing other social indicators alternative to per capita income (Hobijn and Franses, 2001; Ciscar and Soria, 2000; Fung, 2009; Welsch and Bonn, 2008). Some of these papers found that the convergence in GDP per capita does not necessarily mean convergence in other social indicators. However, as observed the gap between rich and poor can be examined in real GDP per capita and in living standards. Another study stood in stark contrast with the findings generated by Hobijn and Franses (Neumayer, 2003). In this research, various tests of convergence were employed including regression analysis, the coefficient of variation, kernel density estimates and transition probability matrices. This study contains an argument that convergence should be measured based on the living standards and not in achi evement index. Concerning this, the proponent of the study chose to include life expectancy, infant survival, educational enrolment, literacy and telephone and television availability as important aspects of living standards. Neumayer found that there was a strong evidence to support the convergence of the mentioned aspects of living standards. ... Based on the above findings, it is imperative to consider that economic convergence remains a very important economic issue for more relevant academic explorations. Regarding this, the proponent of this paper tries to understand up to what extent is the hypothesis that there will eventually be convergence of living standards across the world supported by theoretical and empirical research. Per capita GDP (Gross Domestic Product) In many convergence studies, per capita GDP (Gross Domestic Product) is the common measure of the country’s economic growth. After all, it measures the total output of a country by dividing the GDP with the number of people in it (Todaro and Smith, 2011; Angeles, 2008; Egger et al., 2004; ). Based on this logical approach behind the meaning of per capita GDP, many economists find it useful to use it for comparing relative performance between countries. When one wants to know the level of productivity of a certain country, a rise in per capita GDP could potentially signal economic growth. Therefore, per capita income of poor countries should relatively higher than developed countries in order to realize convergence of living standards. However, this argument is widely debatable because there are also many studies trying to point out that there is continuing divergence of living standards all over the world (Cole and Neumayer, 2003; Portnov and Erell, 2004; Allen, 2012; Ravallion and Jalan, 1996; Morgan, 2009; Rakowski, 1994; Decancq et al., 2009). In the first place, there are also many empirical measures associated with finding the living standards. It turns out that per capita GDP is just one of them. Convergence

Explain why the historical cost principle is used to account for Essay

Explain why the historical cost principle is used to account for long-lived assets and how the cost basis is determined. Discuss - Essay Example The GAAP mainly relies on consistency of data conveyed by business financial records. Since historical methods does not depend on the speculated market prices, rather a real transaction that occurred, the cost is regarded as most reliable. For this reason, the historical cost principle is best used for reporting long-lived assets. It is the best method for reporting assets whose disposal may not be done in the near future. Examples of these assets include land, buildings, fixture, equipment and natural resources such as mineral deposits, oil wells and timber tracks. Under the historical cost principle, assets are recorded at acquisition cost as indicated on the balance sheet. In accounting for purchases of long-term assets, interest expense is subtracted from the original cost or cost of acquisition. The book value of long-term assets can be calculated by getting the accumulated depreciation subtracted from acquisition cost. To estimate an asset’s useful life, important variab les such as acquisition cost, depreciation expense per year and salvage value should be determined. The following methods are used to estimate asset’s useful life; straight-line depreciation method, production method and double (declining) methods. Useful life can then be calculated as follows: Asset impairment Asset impairment refers to an abrupt deterioration in the usefulness of a long-term asset often caused by damage effects on the asset, obsolescence due to the ever-changing technology or a change in the county’s laws prohibiting the use of an asset. It occurs when the future benefit of an asset known as market value is below the recorded book value (cost-accumulated depreciation). When impairment occurs, the current market value of the asset should be written down and a loss recognized. First, long-lived assets are selected for purposes of performing impairment testing as well as establishing the net book value. Secondly, determine the level of impairment by fin ding the total undiscounted cash flows expected from the selected assets. The net book and the undiscounted cash flow figures are then compared with intent of establishing which of the values have higher figures. If the net book value is higher than the undiscounted cash flow value, then the amount of variance is determined and recorded. Common Asset Depreciation Methods Depreciation refers to two main concepts; i. Diminished value of assets also called fair value This principle or concept has an impact on the balance sheet of a firm or a business entity. ii. Depreciation with corresponding principle, which is the allocation of the asset cost to periods upon which that particular asset is in use. This affects the net gain of reported assets. It is worth noting that when computing depreciation using a particular method, the cost of an asset is allocated to that period the use of an asset covers or is used. The expense is vital for purposes of financial reporting and taxation. In choo sing a suitable method of computing depreciation, value of assets, the type and periods upon which the asset is used is important. These computing methods are specified in laws and statutes or accounting standards that vary from one country to another. It is important to note that some depreciation computing methods exists, but the common methods include; fixed percentage depreciation method, straight-line computing method and declining balance. It is also