Financial Reporting Objectives
Walden University
ACCT 6140 ACMG 6140: Current Trends in Accounting
Standard
14:24:53 GMT -05:00
, Marketable security is one way a business can see profits by purchasing it and selling it or
transforming it into cash within a year. Marketable securities are a component of the current asset
in the company's balance sheet and help determine the firms' ability to pay their expenses or
debts when given the need to liquidate assets into cash. How it is reported in the financial
statement may vary depending on how long management intention to hold it or liquidate it.
This paper will focus on some financial report objectives a company might have concerning the
marketable securities, and the potential constraints management might have in trying to meet
the objectives. Further in this paper will also discuss how an accountant should advise and
communicate their advice to management when meeting the objectives given the constraints.
A company's financial reporting objective concerning marketable securities would be to explain
the purpose of the security. Marketable securities are known as current assets and are short- term
investments that can easily convert into cash, so it is essential to report the purpose of the
security. The other objective in acquiring investment is to influence the other company
significantly. The financial report on how influential your company is in the other company can
boost your own company. Finally, the last objective for a company's financial reporting
concerning marketable security is to have control of that company. In summary to these financial
reporting objectives, there are three broad investment categories: passive investment,
investments that result in significant influence, and investments that result in control (Lynch,
2007).
The constraint management would have to meet the required standards set under GAAP. Under
the SFA115, accounting and reporting for investment in equity securities must be in readily
determinable fair values. Companies investing in securities of other entities are required to
14:24:53 GMT -05:00
Walden University
ACCT 6140 ACMG 6140: Current Trends in Accounting
Standard
14:24:53 GMT -05:00
, Marketable security is one way a business can see profits by purchasing it and selling it or
transforming it into cash within a year. Marketable securities are a component of the current asset
in the company's balance sheet and help determine the firms' ability to pay their expenses or
debts when given the need to liquidate assets into cash. How it is reported in the financial
statement may vary depending on how long management intention to hold it or liquidate it.
This paper will focus on some financial report objectives a company might have concerning the
marketable securities, and the potential constraints management might have in trying to meet
the objectives. Further in this paper will also discuss how an accountant should advise and
communicate their advice to management when meeting the objectives given the constraints.
A company's financial reporting objective concerning marketable securities would be to explain
the purpose of the security. Marketable securities are known as current assets and are short- term
investments that can easily convert into cash, so it is essential to report the purpose of the
security. The other objective in acquiring investment is to influence the other company
significantly. The financial report on how influential your company is in the other company can
boost your own company. Finally, the last objective for a company's financial reporting
concerning marketable security is to have control of that company. In summary to these financial
reporting objectives, there are three broad investment categories: passive investment,
investments that result in significant influence, and investments that result in control (Lynch,
2007).
The constraint management would have to meet the required standards set under GAAP. Under
the SFA115, accounting and reporting for investment in equity securities must be in readily
determinable fair values. Companies investing in securities of other entities are required to
14:24:53 GMT -05:00
