Borland Software Corporation-goodwill and other intangible assets

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Chapter 02 - Financial Reporting and Analysis

Chapter 2
Financial Reporting and
Financial statements are the most visible products of a company‘s financial reporting process. The financial reporting process is governed by accounting rules and standards, managerial incentives, and enforcement and monitoring mechanisms. It is important for a user of financial information to understand the financial reporting environment along with the accounting information presented in financial statements. In this chapter, the concepts underlying financial reporting are discussed with special emphasis on accounting rules. Next the purpose of financial reporting is discussed – its objectives and how these objectives determine
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There are several sources of information available to users.
These include statutory financial reports and alternative information sources such as economic information and industry information. Statutory financial reports are prepared according to the set of generally accepted accounting principles (GAAP). A regulatory hierarchy that includes the Securities and Exchange Commission, the American Institute of Certified Public Accountants, and the Financial Accounting Standards Board promulgates these principles. GAAP is also influenced in some industries by specialized industry practices. Managers prepare the statutory financial reports. Thus, the reports are subject to manipulation based on incentives of managers to present the company in its best light. However, the ability of managers

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