Still too much rope

Article Abstract:

The Accounting Standards Board's (ASB) proposed standard on the structure of financial statements is designed to minimize fraudulent financial reporting. The new standard will make it difficult for companies to claim losses from operations already sold or hide profits or gains from acquisitions or divestments. Unfortunately, the draft reporting standard has serious flaws the most significant of which may be the issue of reporting earnings per share (EPS). The draft contains a formula for the computation of EPS, but permits companies to employ any method that they choose provided that they can justify the action to their shareholders. In the past, laxity in enforcing rules has enabled companies to bend reporting standards to suit their own purposes. The ASB must prove that it is more effective than its predecessor, the Accounting Standards Committee, in combating financial reporting abuses.

Laws, regulations and rules, Column, Accounting and auditing, Accounting Standards Board, Corporation reports, Company reports, Earnings per share

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Avoiding bankruptcy

Article Abstract:

Scotland has not felt the full brunt of the UK recession, but there was an increase in the number of bankruptcies in Scotland in 1990. There were 959 liquidations, receiverships, and administrations in 1990, representing a 17% increase over 1989. The accounting firm Gerber, Landa and Gee (Glasgow, Scotland) estimates that bankruptcies could number as many as 1,200 by 1992. Corporate managers must be aware of danger signals that foreshadow the possibility of an impending bankruptcy. Bankruptcy primarily is the result of a cash flow problem. To uncover the causes of a bankruptcy, management requires cash flow projections and forecasts of trading activity. Data must be updated constantly, and corrective action must be taken immediately when problems are uncovered. Management must not try to mislead financiers, but should be open with troubling information.

Methods, Economic aspects, Prevention, Scotland, Financial management, Bankruptcy

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ESOP fables

Article Abstract:

British companies are missing out on the numerous benefits of Employee Share Ownership Plans (ESOPs) long enjoyed by their American counterparts largely due to stringent legislation. The 1989 Finance Act's extremely restrictive requirements regarding the setting up of a statutory ESOP, including its equal application to all employees, serve to discourage companies from using such a scheme. Relaxations in current ESOP rules will enable both private and public companies that want to widen share ownership to enjoy the advantages shared ownership plans offer. Aside from tax breaks for both companies and employees, ESOPs can also buy the shares of company founders, help employees realize profit from their shares, and eliminate the danger of diluting earnings per share.

United Kingdom, Evaluation, Compensation and benefits, Cover Story, Corporations, Employee stock ownership plans, Corporations, British

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