FRA : Reading 31. Financial Reporting Quality

reading: 31. Financial Reporting Quality

 

a. distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items). (page 281) 

Financial reporting quality

- F/S의 자체의 특성을 의미함

- decision useful을 위해 2가지 특성 : relevance, faithful representation

 

quality of result(earnings, CF, balance sheet item)

- sustainability : 미래에도 지속되어야함

 

b. describe a spectrum for assessing financial reporting quality. (page 282)

Financial report quality의 spectrum

	report with FS standard	decision useful	earning quality	bias
1	o	o	high
2	o	o	low
3	o	x	low	실수
4	o	x	x	의도(actively)
5	x	x	x	실수
6	x	x	x	의도(actively)

 

c. distinguish between conservative and aggressive accounting. (page 283) 

Aggressive accounting

- 수익은 빠르게 인식, 손실은 최대한 늦게 인식

 

Conservative accounting

- 수익은 천천히, 손실은 즉각적으로 인식

- earnings smoothing

- 보수적이라고 무조건 좋은 것은 아니다. neutral reporting과 비교하면 bias있기 때문

 

d. describe motivations that might cause management to issue financial reports that are not high quality. (page 285)

motivation

- meet or exceed benchmark : earning guidance, consensus analyst expectation, prior year 보다 높게 하려고 함

- enhance reputaion

- improve future career opportunities

e. describe conditions that are conducive to issuing low-quality, or even fraudulent, financial reports. (page 285)

 

Low-quality를 유발하는 conditions

1.motivation

- 앞 LOS 참고

 

2. opportunities

- weak internal control

- board of directors inadequate oversight

 

3. rationalization (합리화)

- 자신의 잘못된 행동을 합리화 하기위해 내부통제시스템 자체를 바꾸는 등의 행동

 

f. describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms. (page 286) 

Financial reporting의 품질 향상 mechanism

1. regulators에 의한 강제적 행동

2. audit opinion

- clean opinion이 사기가 없다는 것을 guarantee하진 않는 한계

3. private contracts

 

g. describe presentation choices, including non-GAAP measures, that could be used to influence an analyst's opinion. (page 287)

 

h. describe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items. (page 288)

- 경영진이 회계 처리 방법을 활용해서 의도적으로 managing 할 수 있음

ex) 수익인식 시점, Inventory method 등

channel stuffing = 시키지도 않은 상품을 매출했다고 거짓말하고 배에 실어버림으로써 매출증가, A/R을 증가시킴

 

i. describe accounting warning signs and methods for detecting manipulation of information in financial reports. (page 292)