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Paper Topic:

Corporate Finance

Summary of the Proposed Financial Reporting Overhaul and Business Valuation

Financial statements provide data for analysis and for valuation the principles of valuation are present in discounted cash flow techniques which are analyzing the historical operating performance of the target company , project future operating cash flows after considering anticipated operating enhancements , and discount those estimated flows at the firm 's cost of capital . Financial statements also provide starting point for data collection

Financial Reporting Overhaul

Financial Accounting Standard Board requires companies to present its information about its business activities

separately from the way it finances those activities . Modifications to financial reports should be responsive to the information needs of the valuation models

The Financial Reporting Users Want

The security analyst of the firm must be well learned about the environment and nature of the firm 's accounting reports this could be done by following 12 concepts which are as follows

1 . Financial statements must provide the information needed by suppliers of risk capital

2 . The company must be viewed from the perspective of an equity investor in the company

3 . Fair value information is relevant for financial decision making

4 . Recognition and disclosure must not be based upon measurement reliability alone

5 . All transactions and events must be recognized in the financial statements as they occur

6 . Investors ' information requirements must determine the materiality threshold

7 . Financial reporting must be neutral

8 . All changes in net assets , including fair value changes , must appear in the Statement of Changes in Net...

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