Name:Jimoh Azeez Lasisi
Matric No: 000901064
Dept.: Dept.: Business Administration
Programme: MBA (Executive)
Course: ACC 810 (Financial Accounting for Business) Users of Financial Statement, Their Information Needs and possible Conflict
Title:Users of Financial Statement
1 Management and Employees/Trade Union : Profit Margin, The proportion of Value added that goes to employees, The prospect of the business being able to guarantee job security, etc
2 Government/Tax Authorities: Profit Margin & Tax Liabilities
3 Suppliers/Lenders and Shareholders: Profitability & Cash flow Forecast
4 Customers and Management: Profit Margin& Prices
5 Management andNon-governmental organisation/ Welfare groups: Profit Margin and Statement of Donations to NGOs
Possible Conflicts of Interest. While employees usually use profitability to justify the need for wage and salary increase, senior management worries that large profit will increase the wage demand , so they ensure that reports show only a small percentage of the total income.
While tax authorities wants to get the maximum tax possible from the business for government to perform their role in the state, management wants to pay a lower tax thereby engaging in tax avoidance and in extreme cases tax evasion. Note that while tax avoidance is lawful, tax evasion is not.
While suppliers and Lenders require conservative approach in the financial statement about cash flow generating ability of the business and its profitability, shareholders on their part favours optimistic profitability and cash flow forecast .
While customers are on the lookout for the profit margin which the business is making on their transactions to be able to determine if there is a rip-off and on the basis of that negotiate for price reduction and discount, management rather wants to increase prices to further improve profit margin.
While NGOs and welfare groups seek to be on the lookout for the...