Module 7 Emerging and Controversial Issues in International Financial Reporting Omar ElKheshen – kheshen@gmail.com 1 Learning Objectives By the end of this module you should understand: 1. The difficulties involved in accounting for an acquisition and how goodwill arises 2. How goodwill differs from intangible assets and how both are accounted for 3. What impairment means and how to account for it 4. How share options are accounted for and their impact on bottom-line profits 5. How corporate pension obligations are making an impact of both profit and balance sheets 6. The basic principles of financial instruments and how these are captured in corporate financial statements 7. The difference between provisions and contingencies and when companies should account for them 8. Why new topics such as management commentaries and corporate financial reporting are currently under development in the field of financial reporting. Omar ElKheshen – kheshen@gmail.com 2 Agenda 7.1 Introduction 7.2 Business Combinations and Goodwill 7.3 Intangible Assets and their Impairment 7.4 Share-based Payments 7.5 Pension Benefits 7.6 Financial Instruments 7.7 Provisions, Contingent Liabilities and Contingent Assets 7.8 Management Commentary 7.9 Reporting on Corporate Social Responsibility Review Questions Case Studies Omar ElKheshen – kheshen@gmail.com 3 To discuss the controversial issues that attract news headlines, we must first understand the pressure under which the modern company director is operating Companies to grow annually/ quarterly Growth EPS Entire Economy & Capital Markets Profit either Profits or Organically More sales, More profit, More assets Acquisition Taking over other companies Neither type of growth is easy to achieve Omar ElKheshen – kheshen@gmail.com It is difficult for managers to steer their companies towards more and more growth, thus driving them towards adopting the short-termism phenomenon Difficulties Facing Managers Uncertainties

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