Financial Accounting Essay Example | Topics and Well Written Essays - 1250 words

Financial Accounting - Essay Example Further analysis shows that not only the Gross Margins have gone up by 1.73%, but there is huge decrease in operating expenses by 6.18% of revenue in 2005 comparing 2004.This efficiency in operating activities has been attained because of under noted contribution: The other contributor to increase in net margins is the ‘other incomes’ by 0.49%; whereas provision for taxation has snatched 2.16% of net margins. A summary showing various effects on net margin is drawn as under: Total stockholders equity has increased by $2390m, mainly because of increase in 2005 retained earnings by 1.58% as compared to 2004. There is no preferred capital and the entire equity belongs to common stockholders. The increase in stockholders equity is not as high as in increase in the net income. In nutshell, contribution of the increase in net income played the major role resulting into tremendous hike in ROE for 2005. The increases in sales and efficiency shown in the reduction of operating costs have caused a double effect in boosting the net earnings. Though total stockholders’ equity also rose in 2005 but this high was mainly caused by increase in retained earnings affected by net earning increase, maintaining the major effect resulting into increased net earnings on ROE At present The Financial Accounting Standard Board (FASB) is the body that formally issues accounting pronouncements in US. In fact FASB replaced Accounting Principal Board (APB) as the primary private body setting accounting standards for US; and in 1973 FASB formally succeeded American Institute of Certified Public Accountants (AICPA) as accounting standard body. The GASB is the other body setting accounting standards for states and municipal entities. Auditing Standard Board of AICPA issued SAS 91, which in fact formally recognized FASB pronouncements within auditing standards structures. FASB issues Statement of Financial