Question

Brainstorm an example of:

1) a financial accounting issue that would be researched before a transaction is finalized

2) an accounting issue that would be researched after a transaction has been executed

3) an accounting issue that would be researched following financial statement issuance

Answer 1

Ans .

1. Brainstorm example for a financial accounting issue that would be researched before a transaction is finalized is the brainstorming related to the matter of raising additional Capital. There will be brainstorming regarding the mode of Capital raising , like equity share issue or preference share or debt issue and comparing the costs of each type of capital  , the targeted gearing ratio, the trend of market , whether to raise directly or through investment bankers etc.

2. An accounting issue that would be researched after a transaction has been executed may be related to the Contingent Liability aspects. There may be an unexpected Adverse verdict for that creates a material damage liability for the company. The company needs to brainstorm on assessing the impact and incorporating it in the financial statement.

3. An accounting issue that would be researched following financial statement issuance can be related to Accounting changes that needs retrospective changes in Assets and liabilities. For example, a company may decide to change its inventory valuation method from FIFO to weighted average method. In this case all the previous period assets and Liabilities to be restated and financial statements are to be examined although those have been already issued.