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Final Project Financial Reporting
You are expected to use diverse sources of information and to carry out an original analysis rather than summarise or rehash existing work. You are also encouraged to use situations and data from your own experience where possible.
For this module, your course project should reveal mastery in the application of the financial reporting and analysis concepts emphasised in the course. This involves reporting on a specific organisation within an industry and the financial reporting and accounting practices relevant to the chosen firm. The project should be submitted in the form of a formal business report that provides a detailed analysis of the regulatory environment in which the selected company operates, its capital structure, underlying tax system and financial reporting regulations, plus corporate governance structure. You will also be required to conduct a thorough financial analysis of the organisation.
For this project, you have selected a company to research with regards to significant financial reporting and analysis issues.
The Final Project is due this week. For this project your tasks are as follows:
? Analyse the regulatory environment of the country in which the chosen organisation is based, identifying the major elements and regulations that affect financial reporting and how this may differ from other countries.
? Analyse the selected organisation in regards to capital structure and off balance sheet financing.
? Evaluate the tax system and major regulations affecting the chosen organisation.
? Analyse the organisation?s use and reporting of intangible assets and financial instruments.
? Conduct a thorough financial statement analysis on the selected organisation.
? Analyse of the corporate governance structures of the chosen organisation.
? Describe the organisation?s exposure to foreign currency exchange risk.
The Final Project should be 2,500-3,000 words in length. Calculations and supporting documentation should be included in appendices and are not included in the total word count. Where appropriate, students should use references to support their positions. Citations should be in Harvard Referencing format.
I have recommended that you should be looking for at least one reference for each of the specified subject areas and I also thought I would follow up my Proposal reviews by encouraging you to email me if you have any questions regarding the subject areas or the Final Report.
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Check My Assignment!BELOW IS THE PROJECT OUTLINE
Dell Company
A. Regulatory Environment
I. In the US, there are numerous regulations that affects technology companies such as Dell. In this section, the fact that Dell, Inc. operates under the Generally Accepted Accounting Principles will be given consideration. Usually, in other countries the companies operate under the International Financial Reporting Standards (IFRS).
II. The regulations are also expensive in compliance as companies must transform data tracking and gathering systems, report functions, and sometimes their organizational structure(Moreno, 2014). The regulations hugely affect revenue and profitability. For instance, they increase the capital ratio requirements and limit various activities and products within the companies(Moreno, 2014).
III. The major elements and regulations that hugely impact companies in the US are those related to the GAAP. For example, they differ from countries that adopt IFR principles on matters related to revenue and expense recognition. However, the US has worked towards consolidating the two standards.
B. Analysis of capital structure and off balance sheet financing.
I. Under this section the main purpose will be to determine whether the proportion of debt to equity enables Dell Company to create wealth without having to jeopardize the entire firm.
II. For illustration purposes, I will compare the financial figures of Dell for three years starting 2013 to 2016. Under the illustration, I will consider whether long-term debt provided a small or large amount of total financing. Also, I will consider whether debt as a proportion of total assets and equity is relatively stable during the three years of operation.
III. In analyzing capital structure in relation to the off balance sheet financing, assessing the pros and cons of the financial factors (long term debt and current assets) will be given special consideration since it is the major purpose of a capital structure analysis. That is because the balance sheet reports how funds are acquired and allocated.
C. Evaluation of the tax system and major regulations affecting Dell and other tech companies.
I. Introduction of the major regulations affecting Dell and other technology firms in the US that reduces their competitiveness in relation to other companies in the world. The element of double taxation will also be discussed especially for companies that operate at an international level such as Dell.
II. The federal government taxes the United States resident international companies based on their worldwide income at the same rate that is applied to domestic firms. The current rate stand at 35%. The major disadvantage to be considered is that companies pay taxes on their profits in the US and abroad less the foreign tax that they have paid. However, companies must ensure that in case they decide not to pay US tax on foreign profits they should not bring the profits earned to the US shores to reinvest them( Sahadi , 2014).
III. In some cases, firms may take advantage of other approaches to reduce the liability such as through cross-crediting or using excess credits from income earned in high-tax countries to offset US tax due on income earned in low-tax countries.
IV. Another issue to be discussed is whether international companies pay tax on income of their foreign subsidiaries when they repatriate the income which leads to a delay of taxation commonly referred to as deferral. As a result, many international companies tend to shift their income to low tax countries and avoid high-tax countries such as the US. The US has the highest tax rate among developed countries( Sahadi , 2014).
D. Analysis of Dell?s use and reporting of intangible assets and financial instruments.
I. Intangible assets refers to patents, copyrights, franchises, licenses and trademarks. Dell Company has numerous intangible assets that they must report in their financial statements. A good example is goodwill that is reported through the balance sheet.
II. In Dell and other companies, the fact that intangibles purchased from other parties are recorded at cost will be given consideration. Here, capitalization of assets will be discussed. Capitalization involves treating costs as capital and not expenses.
III. Distinguishing between financial instruments and intangible assets. The two are often confused where intangible assets may be treated as financial instruments when they are not.
E. Analysis of the corporate governance structures of the chosen organization
I. Corporate governance definition. A set of rules and practices through which a company is directed and controlled. At a large part, it involves balancing the interests of a business?s stakeholders.
II. Here, the role and values of the company and that of the board of management will be discussed since it contributes to how a company treats its stakeholders.
III. The corporate governance structure of the organization will be outlined.
F. Description of the organization?s exposure to foreign currency exchange risk.
I. Definition of foreign currency exchange risk. It is the financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. It is a huge risk for companies that operate in different countries such as Dell.
II. The measures that Dell has put in place to minimize the risk of foreign currency will be discussed. For example, Dell maintains that it employs different policies and procedures to manage the risks a good example being foreign currency hedging activities.
Bibliography
Sahadi , J. (2014, August 14). 7 things you absolutely must know about corporate taxes. Retrieved from A CNN Website: http://money.cnn.com/2014/08/14/news/economy/corporate-taxes-inversion/
Moreno, K. (2014, August 12). Regulatory Environment Has More Impact on Business Than the Economy, Say U.S. CEOs. Retrieved from A Forbes Website: https://www.forbes.com/sites/forbesinsights/2014/08/12/regulatory-environment-has-more-impact-on-business-than-the-economy-say-u-s-ceos/#5bc6872f684d
