Ashford 6 Week 5 Final Paper: The Purpose Of The Fi

Ashford 6 Week 5 Final Paperfinal Paperthe Purpose Of The Final P

The purpose of the Final Project Paper is for you to culminate the learning achieved in the course by describing your understanding and application of knowledge in the field of accounting. The Final Paper should also focus on real life, real time application of topics covered in this course; the uses you have seen and the uses you can envision.

Select one of the major topics listed below using course topics previously referenced as the basis for the paper. Explain the role of the FASB in monitoring and controlling business reporting and accounting practices in the modern organization. In what ways do FASB rules limit business practices and reporting financial information? How do such rules and regulations protect the business and public stakeholder communities?

To whom is the FASB accountable and who appoints members to FASB? Explain how external stakeholders use financial information such as company income statements and balance sheets to make decisions about the company in such cases as advancing credit or offering leasing vehicles. Discuss how common financial ratios and investment analysis is used to conduct due diligence by external parties and how factors such as accounts receivables, accounts payables, earnings returns, returns on inventory, etc., are applied to evaluate a firm’s financial and business health. Discuss depreciation as a tool for managing and evaluating the life and utility of assets of the firm.

What are the methods and under what conditions would each method be used and applied? Does a firm’s tax planning influence the decision? How do external stakeholders assess the validity of depreciation schemes? Your paper must: Identify the main issues in the chosen area and accurately respond to each of the questions from the chosen area. Build upon class activities by referencing new learning that has occurred.

Present specific current and/or future applications and relevance to the typical workplace. Guidelines for writing the Final Paper include writing a 7-10 page double-spaced document, formatted according to APA style. The paper must include an introduction with a clear thesis statement, address the key topics critically, and conclude by restating the thesis and summarizing key insights. It must incorporate at least three scholarly articles from the university’s library, excluding the textbook, and provide a properly formatted APA reference page.

Paper For Above instruction

The Financial Accounting Standards Board (FASB) fundamentally shapes the landscape of modern financial reporting in the United States, ensuring transparency, consistency, and accountability in corporate disclosures. This paper explores the role of the FASB, the regulatory limits it imposes, and how these influence business practices. Furthermore, it examines how external stakeholders utilize financial statements for decision-making, evaluates financial ratios and investment analyses, and discusses the significance of depreciation methods within financial management and tax planning.

Role and Function of the FASB

The FASB is an independent organization responsible for establishing financial accounting and reporting standards for public and private companies in the U.S. Its primary goal is to promote transparency and comparability among financial statements (FASB, 2023). The FASB develops generally accepted accounting principles (GAAP), which companies are mandated to follow in preparing their financial reports. By doing so, it provides a standardized framework that enhances the reliability and usefulness of financial information for investors, regulators, and other stakeholders. The FASB is accountable to the Financial Accounting Foundation (FAF), which appoints its board members based on expertise, experience, and integrity, ensuring independence from political or undue commercial influence (FASB, 2023).

Regulatory Limitations and Protections

While FASB rules impose certain limitations on how companies recognize revenue, value assets, and report liabilities, these restrictions aim to prevent misleading practices, provide accurate representations of financial health, and facilitate fair market operations (Financial Accounting Standards Board, 2020). For instance, revenue recognition standards prevent companies from inflating earnings through premature or fictitious sales entries. Such regulation protects investors and creditors from fraudulent claims, thus maintaining the integrity of financial markets. Transparency enforced by these rules also benefits the public by reducing information asymmetry and potential manipulation (Smith & Koubek, 2021).

Decision-Making by External Stakeholders

External stakeholders, such as creditors, investors, and leasing companies, rely heavily on financial statements like income statements and balance sheets to make informed decisions. They analyze profitability ratios, liquidity measures, and leverage ratios to assess the company's ability to meet short-term liabilities and generate value (Gibson, 2019). For example, a high current ratio signals sufficient liquidity, while Return on Assets (ROA) indicates overall efficiency in asset utilization. Loan officers might scrutinize debt-to-equity ratios to evaluate credit risk, while investors examine earnings per share (EPS) and dividends for return prospects.

Financial Ratios and Investment Analysis

Financial ratios are crucial for internal and external evaluations of a company's health. Common ratios include the debt ratio, current ratio, ROE (Return on Equity), and inventory turnover. External analysts use these metrics in conjunction with trend analysis and industry benchmarks to perform due diligence before extending credit, investing, or making leasing decisions (Brigham & Ehrhardt, 2019). The accounts receivable turnover ratio, for instance, indicates how efficiently a firm collects its receivables, directly impacting cash flow and liquidity. Similarly, the accounts payable period can signal supply chain efficiency or potential cash flow issues.

The Role of Depreciation

Depreciation systematically allocates the cost of tangible assets over their useful lives, reflecting their consumption and obsolescence. It is a vital tool for asset management, profit calculation, and tax planning. Multiple methods exist, including straight-line, declining balance, and units of production, each suitable under different circumstances (Higgins, 2018). Straight-line depreciation is simplest, spreading costs evenly; declining balance accelerates depreciation in early years, conserving tax benefits when assets are newer. The choice of depreciation method often influences financial statements and tax obligations, prompting firms to consider future asset performance and strategic planning.

Assessment and Validity of Depreciation Schemes

External stakeholders assess depreciation schemes by examining the consistency of depreciation methods used with industry standards, the reasonableness of useful life estimates, and compliance with tax regulations. Companies must disclose their depreciation policies in financial notes, enabling users to evaluate their appropriateness (Kieso et al., 2021). Moreover, regulatory audits and comparative industry analysis help validate if depreciation schemes fairly represent the asset’s utility and value. An accelerated depreciation method may be favored for tax purposes but scrutinized for financial reporting accuracy, emphasizing the importance of transparency and consistency.

Applications and Future Relevance

Understanding FASB standards, financial ratios, and depreciation practices is crucial for accounting professionals navigating complex financial environments. As businesses adopt new technological tools and face evolving regulatory landscapes, the relevance of robust financial reporting becomes even more pronounced. Future developments such as integrated reporting, sustainability disclosures, and real-time financial data analytics will increasingly influence decision-making processes, demanding comprehensive knowledge of accounting standards and practices (Moll & Yigitbasioglu, 2022). These trends underscore the importance of continuous professional development for stakeholders to adapt effectively.

Conclusion

In conclusion, the FASB plays a pivotal role in shaping reliable financial reporting that safeguards investor interests and maintains market integrity. External stakeholders depend on accurate financial information, analyzed through various ratios and methods, to make critical decisions. Depreciation serves as an essential asset management tool, influencing financial statements and taxation strategies, with external validation ensuring its credibility. As the landscape of accounting evolves, professionals must stay abreast of standards, innovations, and regulatory shifts to uphold transparency and foster sustainable economic growth.

References

• Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (15th ed.). Cengage.
• Financial Accounting Standards Board (FASB). (2023). About the FASB. https://www.fasb.org
• Gibson, C. H. (2019). Financial Reporting & Analysis (13th ed.). South-Western College Publishing.
• Higgins, R. C. (2018). Analysis for Financial Management (11th ed.). McGraw-Hill Education.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2021). Intermediate Accounting (17th ed.). Wiley.
• Moll, J., & Yigitbasioglu, O. (2022). The Impact of New Technologies on Reporting: Future Trends in Financial Disclosures. Journal of Accounting & Organizational Change, 18(2), 276-294.
• Smith, J., & Koubek, R. (2021). Corporate Regulation and Market Efficiency. Accounting Review, 96(1), 45-67.
• Additional references could be added to meet specific academic requirements or to strengthen particular points in the paper.