Financial Reporting Case Writing Considerations

General Financial Reporting Case Writing Considerations Every financial reporting scenario or case study needs to be analyzed and assessed based on its own individual facts and circumstances. There is no “one way” or “template” for analyzing accounting scenarios or cases. However, in most cases there are some general writing considerations that students should consider. Not each consideration will be relevant in every situation and therefore blinding following a “template” is not recommended. A “user” is someone who relies on the financial statements to make a decision. Structure case in professional format. To: From: Re: “Objectives” refer to financial reporting objectives – the financial reporting bias/goal that a user strives to achieve. Overview Users & Objectives • User 1 – State why a user and what is their financial statement objective(s) • User 2 – State why a user and what is their financial statement objective(s) • ECT… Constraints • State what the constraint is and why it is a constraint. • If more than one option, discuss alternative and conclude, with support, on selected constraint. A “constraint” is a formal limitation to the accounting choices prepares can make. These include for example - APSE, IFRS or terms of contracts. Conflict / Ethical Considerations • If conflicting financial reporting objectives among users, state conflict. • Consider any ethical dilemmas Primary User and Primary Objective • • Select and state the primary user of the financial statements and what financial reporting objective will guide decision making, when and only when, choices/alternatives exist. Select and state the secondary user of the financial statements and what financial reporting objective will guide decision making, when and only when, the primary user’s objective cannot be met and choices/alternatives exist. A “primary user” is the person that will most heavily rely on the financial statements to make a decision or is the user with the most power. In many cases, answering the questions “who do you want to please the most….?” will dedicate who the primary user is. © Alex Fisher 2023 | All Rights Reserved – Not to Be Distributed Without Explicit Permission of Alex Fisher 1 General Financial Reporting Case Writing Considerations Analysis Think more. Write less! Issue: State the issue explicitly - could be a statement or a question Rank issues in order of importance (e.g. materiality, impact on objective, degree of complexity, timeliness, ECT.). Analysis: • Think about the type of accounting issue before jumping into an analysis. • There are different types of issues: o o o o Discussion of alternatives ▪ More than one possible answer ▪ Identify possible alternatives, given the facts of the case ▪ Only discuss viable alternatives – given the facts & constraints ▪ Limit yourself generally to viable 1-2 alternatives Application of criteria ▪ Apply a set of criteria (i.e. usually GAAP rules) to case facts Use case facts. State your assumptions. Quantify where possible. Be concise. Application of technical knowledge ▪ Apply specific technical guidance (i.e. usually GAAP rules) to a specific scenario or to explain technically how to account for something Mix of the above Conclusion: • Must be included for each analyzed issue • Must include: o Explicit action statement (e.g. what to do) o Impact on the financial statements (e.g. expenses will increase, assets will decrease) o Impact on the primary/secondary user objective (e.g. decreases bonus, contrary to management objective) Conclusions must be based on facts and consider the constraint. If and only if, the facts and constraint allow for more than one accounting conclusion, then the final choice depends on the financial reporting objective of the primary user. Big Picture Take-Away • Only relevant for certain cases • Consider if any overall takeaway exist o Provide commentary as part of a larger decision o Recalculate financial statement element (e.g. net income) © Alex Fisher 2023 | All Rights Reserved – Not to Be Distributed Without Explicit Permission of Alex Fisher 2