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Why do companies use different depreciation methods for financial reporting?
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Why do companies use different depreciation methods for tax reporting and financial reporting?
Answer:Companies make different accounting choices for tax reporting and general financial reporting, because different incentives are in place. A profitable firm will most likely want to minimize income tax. As a result, management will make accounting choices that minimize net income, and as a result, minimize tax payments. Accounting choices that reduce taxable income include for example accelerated depreciation (instead of straight line) and LIFO (as opposed to FIFO).For general purpose financial reporting, management may want to show a more realistic picture of firm profitability (instead of showing the (legally) lowest possible net income number). So, accounting choices that are made for tax purposes are not always repeated for the general financial reporting.
Why companies consolidate their subsidiaries for financial reporting purposes?
Subsidiary companies are also part of group of companies so parent company is required to show the financial statements of group as a whole so that's why consolidated financial statements are prepared
What is the difference between reporting and non reporting entities?
A "non-reporting" entity refers to companies whose stock is publicly traded but which is exempt from reporting to the Securities & Exchange Commission. Usually these companies report publicly by posting financial information on the OTC Markets website voluntarily. These postings, however, are not subject to audit requirements or more generally to SEC reporting requirements. A "reporting" entity refers to companies whose stock is publicly traded and must file financial and other information with the Securities & Exchange Commission.
How does GAAP affect financial reporting?
How does GAAP affect financial reporting?
For GAAP purposes may combined financial statements be issued for affiliated companies which have different reporting periods for tax purposes?
I think its to make persons in a organization aware of certain changes.
Why do many companies use straight-line depreciation for financial reporting?
Simplicity, knowing year in and year out what the amounts will be is easy to record and easy on the auditors and accounting department. Forecasting for financial statements and budgeting are all simplified by use of SL Depreciation.
Why do companies use different depreciation methods for tax reporting and financial reporting?
Answer:Companies make different accounting choices for tax reporting and general financial reporting, because different incentives are in place. A profitable firm will most likely want to minimize income tax. As a result, management will make accounting choices that minimize net income, and as a result, minimize tax payments. Accounting choices that reduce taxable income include for example accelerated depreciation (instead of straight line) and LIFO (as opposed to FIFO).For general purpose financial reporting, management may want to show a more realistic picture of firm profitability (instead of showing the (legally) lowest possible net income number). So, accounting choices that are made for tax purposes are not always repeated for the general financial reporting.
Why companies consolidate their subsidiaries for financial reporting purposes?
Subsidiary companies are also part of group of companies so parent company is required to show the financial statements of group as a whole so that's why consolidated financial statements are prepared
What are some topics for an accounting project?
Some topics for an accounting project include the evaluation of internal control system, and the impact of different methods of depreciation. The effects of financial accounting reporting on business management can also be an accounting project topic.
What is the difference between reporting and non reporting entities?
A "non-reporting" entity refers to companies whose stock is publicly traded but which is exempt from reporting to the Securities & Exchange Commission. Usually these companies report publicly by posting financial information on the OTC Markets website voluntarily. These postings, however, are not subject to audit requirements or more generally to SEC reporting requirements. A "reporting" entity refers to companies whose stock is publicly traded and must file financial and other information with the Securities & Exchange Commission.
If deprection is not charged What is effect on financial statement?
If depreciation is not charged profit and the balance sheet total will be higher. In the UK, Financial Reporting Standard (FRS) 15 states that depreciation must be charged on all fixed assets. The only exeption is where an asset is held as an investment property and fair value adjustments are made.
The standards and rules that are recognized as a general guide for financial reporting are called?
you may be thinking of Generally Accepted Accounting Principles (GAPP). These rules are pertinent to US companies. Internationally we have IFRS- International Financial Reporting Standards
For GAAP purposes may combined financial statements be issued for affiliated companies which have different reporting periods for tax purposes?
I think its to make persons in a organization aware of certain changes.
What are the advantages of straight line methods?
Straight-line depreciation methods are easy to understand and calculate, providing a constant depreciation expense each year. This method is widely accepted and used by companies for financial reporting purposes, as it provides a systematic and consistent way to allocate the cost of an asset over its useful life. Additionally, straight-line depreciation offers a clear and predictable rate of depreciation, making it easier for businesses to budget and plan for future expenses.
How does GAAP affect financial reporting?
How does GAAP affect financial reporting?
When was Financial Reporting Council created?
Financial Reporting Council was created in 1990.
Why do you think some companies only report the financial health of the organization once a year while others report bi-annually or even quarterly?
Companies choose to report their financial health with different frequencies based on several factors. Those reporting annually typically have less frequent performance fluctuations and may incur lower costs related to financial reporting. Companies opting to report bi-annually may have moderate to high performance fluctuations, but still prefer a longer reporting period to evaluate trends. Lastly, companies reporting quarterly usually have high performance fluctuations and may benefit from closer monitoring and communication with stakeholders, given the importance of up-to-date financial information. The frequency of reporting ultimately depends on the nature, size, and needs of the company.
