Question

Lumega Designs Ltd is a small LED lighting company that has recently automated its production line of specialist commercial lighting. It has two shareholders, each of whom is involved in the day-to-day management of the company. Lumega Designs Ltd has only three employees, and assets of $20,000,000. In buying goods and services, the company has a pool of about 100 suppliers from whom it can purchase any of its goods and services. Of these suppliers, it has about 40 trade creditors. None of these suppliers is owed more than $100,000. Lumega Designs Ltd has no other debts.

Required:

Justify whether Lumega Designs Ltd is a reporting entity under the Conceptual Framework. Your answer must discuss the users identified in this case.

Answer 1

Lumega Designs Ltd is a non reporting entity under conceptual frame work.

Organization or companies are classified in two two distinct part. One is reporting entity and another is non reporting entity.  

Public companies and private limited companies with large number of share holders, very large base of employees and large number of interested parties of accounting information called reporting entity. They must have to publish GPFR. Because with out GPFR interested parties are unable to access valuable financial data of the company.

Small private limited companies ,non profit units, very small private companies comes under non reporting entity .They only have to prepare Special purpose financial reports. Very few people depend upon these companies , and for these interested individuals it is really easy to access any financial information about the company.

In this case Lumega Designs ltd have altogether 45 interested individuals who want to access financial reports of the company. They only include two shareholders, three employees and forty trade creditors. So for them it is not required to publish GPFR.