Businesses large and small, public and private, for profit and nonprofit organizations have keep financial recording. Collecting, recording and maintaining this information called accounting. Accounting function helps managers of organization to make decisions and planning and for moving an organization forward in a financially sound manner and it helps to increase transparency of the companies.
This is an analytical report written for Contemporary Issues in Financial Accounting Assignment given to us based on Dilemma. The analysis is mostly focused on the Charities Vs Public listed Companies and its differences affect their respective governance structure. The report will also include Importance of Transparency, Voluntary and Mandatory disclosure, environmental risk management and possible challenges when reporting Financials under IASB Conceptual framework and how these challenges might overcome. The report it includes how a Non -Executive Board Member assist in addressing the apparent internal control deficiencies.
2. CHARITIES VS PUBLIC LISTED COMPANIES
A company is a form of a business organization. From them companies which are formed for non-commercial purpose such as charities. It is different in terms regulation with listed companies. Charities are not public companies. Therefore they are not subject to listing rules, depending upon countries rule, they may be subject to audit. They are recognized by country’s charity authority, to operate and receive the concessions that charitable statuses confess.
Charity Company often involves favorable tax treatment and different reporting requirements. Unlike them, listed companies are subject to all the provision of company law and listing rules that apply, such as committee s...
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.... They have satisfied themselves financial information produced is accurate of the financial control system of risk management as defensible.
In order to achieve agreed company strategy and objectives of Magey Foundation it is important to appoint non-executive director. They will play central role in strengthening performance of company and developing companies internal control strategies. NED can bring external knowledge and experience to the Magey Foundation. They can providing an external check on whether company strategy is appropriate and achievable. As non-executives members are Independence, they will helps to ensure that board and sub-committee decisions are acceptable to shareholders or not. To safeguard the assets of the Magey Foundation,it is necessary to ensure they are optimally utilized and protected from misuse, fraud and misappropriation or theft.
Being identified as a nonprofit, doesn’t necessarily mean it will be a charitable organization. Though the term has been applied to most nonprofit organizations, the fact is most nonprofits is structured using the economic model. The economic model is based on the traditional model of management designed to deal with the complexity of managing an organization (Bradshaw & Hayday, 2007, p. 4). This model acquires funding from multiple sources such as; individuals, government grants, corporations, and foundations. Though an nonprofit organizations may be identified by the Internal Revenue Service (IRS) as tax-exempt, it may use the same economic model and framework as a for-profit organization. According to Brainard & Siplon, (2004), the nonprofit economic model often mimics that of the private sector by using organized professionals to help determine the goals and vision of the organization (p. 439). It is widely believed that most nonprofits use the economic model along with an aggressive...
Financial accounting is utilized to present the monetary wellbeing of an association to its outer stakeholders. Governing body, stakeholders, fiscal foundations and different gurus are the crowd for financial accounting reports. Financial accounting shows a particular time in the past and empowers the gathering of people to perceive how the organization has performed. Financial accounting reports must be recorded on a twelve-month groundwork, and for publically exchanged organizations, the twelve-month report must be made a piece of people in general record (Francis, 2014).
Yetman, M. H., & Yetman, R. J. (2012). The effects of governance on the accuracy of charitable expenses reported by nonprofit organizations. Contemporary Accounting Research, 29(3), 738-767. doi:10.1111/j.1911-3846.2011.01121.x
How to define a nonprofit organization? According to Anheier (2000), nonprofit organizations vary greatly in the legal and organizational forms, that is, they are different in terms with associations, foundation and company, etc. Some of them have the model just like government agency, and others can be close to business enterprises [(Ruth, T. (2011), Young, D. (1983)]. Despite these differences, there is a growing consensus on the common characteristics shared by the nonprofit organizations among the researchers (Salamon & Anheier, 1997). They are the following: organized, private, nonprofit, self-government and voluntary. The first, organized means the nonprofit organizations must have institutional reality, which separate them from the informal entities. The second part is private. This character distinguishes them from the government. Non-profit describes the distribution mode that they did not return any profits generated by operating activities to the owners or counterparts. This is the biggest difference between the profit organizations. The last is voluntary. It means the nonprofit organizations have some degree of voluntary in operating and management activities. They are not mandatory to engage in certain activities.
By using their existing expertise, resources and facilities the efficiency of their philanthropic initiatives may be enhanced. However, this type of philanthropy usually addresses areas with little relevance to the company’s stakeholders. Because of its internal focus, constricted philanthropy often tends to neglect stakeholder needs and expectations. Charitable activities are often restricted to the company’s core operations, utilizing their own products, services and unique skills of their employees.
Although codes of ethics encourage better practice, higher standards, and attempt to hold NGOs and nonprofit organizations accountable, they do not include incentives or consequences (Sidel, 2005). However, they do include suggestions and most importantly resources. For example, the National Council of Nonprofits, Ethical Fundraising includes resources for how to handle gifts appropriately, suggestions for transparency, how to decline conditional gifts appropriately, and more. Since one of the largest issues in NGOs and nonprofit organizations includes funding and expenditures, finances are the main focus for codes of ethics. Therefore, one of the key tools for gaining trust and accountability in NGOs and nonprofit organizations is be transparency. The National Council of Nonprofits
Charities are not required to report their resources by fund. The accounting equation is Assets = Liabilities + Net Assets. Net Assets are reported in three classes, which are different from the financial reporting for government.
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
Managerial accounting has changed over the years. Managerial accounting focuses on more than the financial aspect. We will be looking at how managerial accounting affects the business world today. Business also look to the economy, federal taxes, and the financial market so it can make the best decisions for their business.
Non-profit organizations do not belong to the commercial sector or the public sector, but occupy an intermediate position. It gives them greater flexibility in their work, but requires from manager’s considerable skills and experience in their management.
On 11th September 2014 US lawmakers have sent a letter in which they have urged the House of Representatives to preserve cash-flow accounting method. The legislators have stated that the shift towards accrual accounting could be detrimental to businesses that have developed their business strategies on cash basis for years. Their argument in defence of cash accounting was that it allows a firm to have more disposable income at a time, increasing growth possibilities for small businesses. Moreover, being less complex, the method requires less funds to be spent on accounting processes. On the other hand, Fayez Choudhury suggested that government public sector’s cash accounting does not represent the true economic health of the government by
Accounting dates back as far as first centuries, is the language of business. As everything has gone through many changes, accounting has also changed many times through out the centuries. It went from the use of abacus to the most advanced softwares, and computers. With these drastic improvements nowadays accounting, financial accounting and management are facing big challenges. From the presentation of the reports to communication to the users, investors, and owners, the accounting field has gained totally a new shape from two decades ago. Today with the dynamic change in every aspect of life, the accounting field has to act fast and be able to adapt these new changes and challenges in order to survive.
Nonprofit managerial accounting adapts the techniques of for-profit analytical analysis to a nonprofit environment to find solutions to managerial
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
Corporate governance is the set of guidelines that determines the control and organization of a particular company. The company’s board of directors is in charge of approving and reviewing changes to this set of formally established guidelines. Companies have to keep in mind the interests of multiple stakeholders, parties who have an interest in the company. Some of these stakeholders include customers, shareholders, management, and suppliers. Corporate governance’s focus is concentrated on the rights and obligations of three stakeholder groups in particular: the board of directors, management, and shareholders. Corporate governance determines how power is split between these three stakeholders. A company’s board of directors is the main stakeholder that influences the corporate governance of a company (Corporate Governance).