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Financial Analysts Need Sharper Accounting Tools - Article Review

Autor:   •  November 25, 2011  •  Article Review  •  871 Words (4 Pages)  •  1,403 Views

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In his article, “Financial Analysts Need Sharper Accounting Tools”, published online in June, 2011, volume 25, No.2, David Mosso, a Vice Chairman of the Financial Accounting Standard Board and also the Chairman of the Federal Accounting Standard Advisory Board discussed the implications of a wealth accounting model on comparability for several key aspects of financial analysis such as restraining, accounting manipulation, and unifying merger and acquisition accounting (p.419). The paper’s purpose was also to focus on two technical matters that the author has not fully developed: first, the implication of wealth accounting model for the practice of financial analysis and, second, the politics of accounting reform for which financial analysis and academic accountants should join force to lead a reform effort, which are major roles. In addition, in this article, David Mosso also wanted to convince the Securities and Exchange Commission and the Financial Accounting Standard Board to increase the interests of investors and creditors above the interest of corporate financial statement that they now seem to favor. The general structure of the article, which was well organized and easy to read, includes three parts: part one, wealth accounting and financial analysis of individual companies, part two, wealth accounting and the capital market at large and, part three, the politics of accounting reform.

It is important for financial analysts to have sharper accounting tools which are wealth accounting model that the author proposed and have developed in his professional career. Moreover, he also wanted to appear as an accounting standard-setter with substantial experiences in the accounting field. Also, the author assumed that his readers would be all of the financial analysts, academic accountants such as CFA or CPA, people who work for Securities and Exchange Commission and the Financial Accounting Standards Board, anyone who majors in finance, accounting, and anyone who owns a business and needs to know about the wealth accounting model to analyze their financial statements.

The structure of the article was written quite obviously clear. In the introduction, the author, David Mosso, pointed out that the accounting model known as U.S Generally Accepted Accounting Principles, or GAPP, was now obsolete and needed to be updated to meet the needs of fast-changing modern economies. As a result, he has proposed a new accounting model built around the two-prong objectives of measuring a company’s wealth and diagnosing its financial health. He has also developed his model by focusing on the contrast between the proposed wealth model and the GAAP model with emphasis on technical accounting issues. The primary purpose of his model was to facilitate the diagnosis


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