Company Accounting: Australia-New Zealand, 5th Edition Solution Manual

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Company Accounting 5eSolutions ManualPeter Jubb Stephen Haswell Ian Langfield-SmtihVersion 5.0Chapter 1General introduction1.1Givesomeexamplesofthewaysinwhichcompaniesaffectthefollowing groups, favourably or adversely: shareholders, consumers,governments, employees, creditors, the ‘general public’.The answer to this question is found from the prior experience of students, not in the text. Thequestion is designed to concentrate attention on the benefits and detriments to different groupswithin society of the corporate form. The following table lists some of the aspects that could bementioned.FavourablyAdverselyshareholdersincreased wealth•dividends•share pricerisk of loss due to:•commercial factors•dishonest managementconsumers•an efficient and effectivemechanism for meeting demandsof consumers•effective way of ‘mobilisingcapital’loss of control and bargaining powergovernmentsassist in:•economic development•expanding taxation basemoral hazards:•major company crashes•need for regulatory interventionemployees•opportunities for employment•greater remuneration•scope for advancement•loss of bargaining power•risks of limited liability ofemployer (employee benefits)•loss of self-esteem (small cog inlarge enterprise)creditors•increase potential market•risks of limited liability‘general public’•economic growth•increased standard of living•impact on share values•increased gap between haves andhave nots1.2Towhatextentshouldcompaniesbecompelledtoprovideinformation to the above-mentioned groups?This question builds on question 1.1. As noted on page 4 these questions derive from social andeconomic policy considerations. Ultimately it comes down to personal preferences. However, as wewill see in chapter 3, arguments can be developed in support of such disclosures, for example, onesbased on protection of company members or the general public.

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