OVERVIEW AND APPLICATION OF ACCOUNTING POLICIES AND ITS EFFECT ON SHAREHOLDERS’ INVESTMENT IN PUBLIC LIABILITY COMPANIES

OVERVIEW AND APPLICATION OF ACCOUNTING POLICIES AND ITS EFFECT ON SHAREHOLDERS’ INVESTMENT IN PUBLIC LIABILITY COMPANIES

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CHAPTER ONE

INTRODUCTION

1.1        Background of the Study

The disclosure of accounting policies in the statement of accounting standards’ (NASB) is contained in the current accounting standards as at 2001. This policy formulation application development and disclosure has been posing serious problem to many public enterprise over the years. Account ting policies are specific accounting based are the method that have been developed for applying the fundamental accounting concepts and convention to specific financial transaction and item. The fundamental accounting there are often more than one recognized accounting basis for dealing with the particular items for example department straight line method reducing balance and sum of the year digit method, inventory valuation includes FIFO, LIFO or weight average method other area of major accounting principles are on consolidation depreciation, tax and inventories.

There is variation in the implementation of these policies, however any methods or basis adopted and the activity of the policy maker. That is the procedure of policy formulation and attachment and the technical of implementation is a relative to individuals company, but the extend of such disparity is not much for instance, the difference in depreciation against assets.

The policy making process involves a network of relationship among policy makers decision makers individuals firm, and auditor etc.

The network process of accounting policy formulation makes financial reports to become more and more complex that there has been more criticism of the users of the information.

Information supplied should be that which would satisfy the need of this user and such information should also be subjected to an independent chew by an auditor and this will enhance reliance in financial information is prepared as objectively as possible ability to understand information is also very essential financial information should therefore show a true and fair view.

Consequently is one of the basic concept but it is not to be follow slavishly if new and improved technicians indicate a change in methods timelines to update information of more use to recipient than outdate news economy of presentation too many details can obscure.

The importance factors in accounts and comes difficulties in understanding them. Completeness a rounded picture of the company activities is needed.

The inconsistency in policy decision, the conflicts in the implementation of the policies and the disclosure discrepancies between policies and reports have caused to inferior in the formulation of this project topic ‘application of accounting policies in public liability companies and its effect on shareholders find with reference of Beta glass plc.

The research is necessary to finds out the courses of such inconstancies and disparity in accounting policy decision, its practicability.

The efforts on financial statement and reports that distorts the full and fair disclosure of accounting policies and its effects on shareholders’ investment. Therefore any concept that has to do with resources management be it cash or money worth, must be taken into consideration especially, now that fraudulent practices and embezzlement of firms resources in the public, municipal and private sectors are increasingly invading the moral of the accounting profession. Hence any research like this one designed to develop the process of accounting policy formulation, its implementation and disclosure base and concepts can never be detrimental in any sphere of the accounting profession for originating and reliability, this research will provide adequate information as a tool for generation inspite of the fact that the samples of the research are limited to one public limited company.

The Beta glass plc, the problem and prospects associated with the disclosure techniques of the company holds for the other public company or corporation.

1.2        Statement of the Problem

The present state of the act of accounting is such that we have not yet arrived at producing specific financial report for each group users, tailored to their specific needs.

Accounting policies that has been generally accepted have a persuasive impact on the form and content for financial statement.

Information about the accounting policies adopted be a reporting company is essential for financial for the financial statement user and should be disclosed adequately. The referred place to disclosed accounting is under captain summary of significant accounting policies, but in the 2001 annual report of Beta glass plc it is stated on the pages 12 and 13 with the option accounting policies.

1.3        Objectives of the Study

The aim of the disclosure therefore is to bring the five, the needs for unified accounting standards that are generally accounted. The absence of some generally accepted rules each accountant will have to make his rules. Adopts his own accounting policies. In order to achieved his own objectives.

This board principle relates to the basis accounting function of recognition, measurement and full disclosure. It will be difficult to compare one set of accounts with another. It is every me’s interest that the business community uses ones set of rules in accounting for money.

The objectives of the research project under study therefore would be to.

a.   To determine the factor that is generally considered in the determined and set of accounting policies.

b.   To evaluate the effectiveness of accounting concept as tools of achieving the application of accounting policies.

c.   To find out the extent of the impact of political and economic consequences on corporate disclosure.

d.    To determine the adequacy and the manliness of the reporting firm.

e.   To suggest means by which corporate disclosure could be improved to meet the need of the users of the financial information.

f.     If it is to provide a base and authorization sources for further research in the area of corporate disclosure.

1.4        Research Question

For the purpose of this study, the following research questions are formulated.

a.   What factor determine of choice of accounting policies adopted by firm?

b.   To what extends are accounting concepts applicable in the treatment of financial information?

c.   Whether or to political and economic consequences influence the extent or policy disclosure in financial statement?

1.5        Research Hypothesis

Test (1)

  Ho: Resources owners should not be involved in accounting policy decision.

 Hi: Resources owners should be involved in accounting policy decision.

Test (2)

Ho: Accounting policy disclosure is not a function of political economic issues.

Hi: Accounting policy disclosure is a function of political economic issues.

Test (3)

Ho: Government intervention in corporate disclosure is not as a result of its macroeconomic implication rather it is for the security of investors.

Hi: Government inventions is corporate disclosure is a result or its macroeconomic implication rather it is for the security of investors.

Test (4)

Ho: The accounting policies developments are not dependent on the type of the business and available resources.

Hi: The accounting policies development are dependent s on the type of business and available research.

1.6        Significance of the Study 

The accounting system is a management information system (mis) that is responsible for the collection and processing of data to produce information useful to the decision makes in planning and controlling the activities of an organization.

The research focus on the generation of funds amended information which might be useful for developing and harmonizing accounting standard practices and to facilitate the process of setting such standards.

It is hopeful that on completion or this research, the following shall be achieved.

a.       The accounting policy decision making process and factors taken into consideration in the choice of accounting policies should be made more expect.

b.       it will lead to objective application and adherence to accounting concept and policies in processing accounting transaction and information.

c.       It will assists management in setting up a meaningful disclosure to suits the needs of shareholders creditor government and other user of the financial information.

d.       Help management to buffer assist the political economic and social consequences and their influence on corporate disclosure and the entire accounting profession.

e.       It will also stand or a point or reference for management when declining with related financial matter.

f.         It will also help shareholders to know how find is managed and how accounting policies affect dividend.

1.7        Scope and Delimitation

It would have been very investing to carry out this research study on all public liability companies. However due to time and financial sufficiency the study is limited to one major company the Beta glass plc. The study will cover the periods of 2008-2019 in the same vein the discussion should be limited to the types of accounting policies operated by the company and the responses to the research questionnaire developed for the study.


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