I want you to write an essay of up to 900 words answering a question. There are two questions, and you are expected to choose one of them to answer. This assignment does not require a reference list or in-text citations. I attached some great examples. I hope you accomplish this assignment wonderfully. Thank you in advance for your work!
Question 4
Why is there often a notable difference between the book value of a company, as measured by its financial statements, and the market value of company, as measured by the stock market? Does this mean that one of the fundamental information qualities of financial reporting, namely faithful representation is not achieved? Provide the rationale for why accounting standard setters put such a strong emphasis on verifiability for items to be included in the financial statements. Critically discuss whether such a reliance on verifiability enhances or retracts from the informational value of financial statements, particularly when they are used by decision-makers who are capital providers to a business (e.g shareholders, lenders and suppliers). Please ensure in your answer to use examples of real companies to demonstrate your key points within your critical discussion.
Question 5
We are currently living through uncertain times, and this presents
challenges for businesses when producing their financial statements. Provide the rationale behind why accounting standard setters require the use of the prudence concept in situations of uncertainty. Critically discuss whether such a reliance on prudence enhances or retracts from the informational value of financial statement, particularly when they are used by decision-makers who capital providers to a business (e.g shareholders, lenders and suppliers). In your answer, ensure to offer specific examples applied to real or hypothetical businesses to demonstrate how the prudence concept is applied to assure that assets or revenues are not overstated, likewise, that liabilities and expenses are not understated.
