Beruflich Dokumente
Kultur Dokumente
Agency Relationship
W &
E Creative Accounting Practices
L
C
O
M
E
Learning Objectives
Agency Relationship
Why agency Relationship
Sources of conflicts
Ways to minimize this conflict
R Surplus
E
L
A Sole
T Proprietorship
I
O
N Partnership
S
H
I
Corporation
P
Structurer of Agency Relationship
Shareholders Agents
Structure of Agency Relationship
Agent Shareholder
Why Agency Relationship Appears
A
G
E Dependency
N
C
Y
R Specialization
E
L
A
T
I
Decentralization
O
N
S
H
I
P
Sources of Conflicts
A
G
E
N Information Asymmetry
C
Y
R Self Interest
E
L
A
T
I
O The Rotten-Lemon Theory
N
S
H
I
P
In Business Context…
A
G
E
N Whenever a manager owns less than 100% of the
C
Y firm’s equity, a potential agency problem exists.
R
E
L
A Where there is dependency, there is Agency
T
I problem. We can see agency relationship
O
N everywhere in our society. (say, between us and
S
H the hair dresser).
I
P
In Business Context…
A In theory, managers would agree with shareholders’
G
E wealth maximization.
N
C
Y
A Current-Mid-Long terms
C
C
O
U
99 Million Vs 101 Million
N
T
I
N
G
C Techniques of Creative Accounting
R
E 1. Income Smoothing
A
T
I
V a)Extraordinary Gain in the IS & Loss in
E SOCIOE,
A
C
C b)Transferring Product Expense from one year to
O
U
another, (Absorption Costing)
N
T
I c)Shifting / aligning Period Cost as per the
N
G
smoothing Agenda (Advertising, R&D Cost)
C Techniques of Creative Accounting
R
E
A
T 2. Big-Bath (if Loss occurs let it occur severely, so
I
V that next years profit have less possibility to go
E down)
A
C
C
O
U
N 3. Report Fabrication (Fabrication of some certain
T
I financial items like liability items for
N
G
management )