This report covers the historical events that led to the formation of accounting and financial reporting bodies in the United States of America.
The report also discusses the political processes and cultural factors that that have influenced the formulation of accounting and financial reporting standards in U.S.A. Covidien Company financial and non-financial information is also analysed in the report.
Executive Summary
Covidien is a public company incorporated in the United States of America. The company operates in a pharmaceutical medical business environment. The mission of Covidien Company is to create and deliver innovative healthcare solutions developed in ethical collaboration with medical professionals which enhance the quality of life for patients and improve outcomes for our customers and our shareholders. This company is publicly listed in the American Stock Market (United States Securities and Exchange Commission 2011).
Paper outlineLetter of transmittal
Executive summaryIntroductionFinancial reporting environment in the United States of America
Description of financial and non-financial reporting of Covidien Company
ConclusionReferences List
Financial Reporting Environment
Introduction
Financial reporting is a process of communicating financial information of public or private government and non-profit organization to the public (Alexander & Britton 2004). Interest groups require financial information when making investment decisions. From these information interest groups are able to compare financial performance of different companies. Therefore it is of importance that standard financial reporting is adopted and used by the private and public companies as well as not-for profit organizations. Standard financial reporting is important in providing this information to the interest groups (Alexander & Britton 2004). The Generally Accepted Accounting Principles (GAAP) is a body that is charged with the responsibility of facilitating the standardization of financial reporting rules. GAAP provides both specific and broad rules that companies should use when reporting financial information to the public in the United States of America (Kieso Weygandt & Warfiled 2012).
Financial reporting environment in the United States of America
The great depression era witnessed the crash of United States of America market stocks due to the inflated prices of stocks (Spiceland 2009). This increased pressure on the establishment of standard accounting procedure to curb any future effects to the companies operating in the United States. This led to the formation of Securities and Exchange Commission (SEC) which was mandated to set accounting and reporting standards. All publicly trading companies were expected to comply with the set rules that were developed by SEC. SEC however delegated the responsibility to American Institute of Certified Accountants (AICPA) a private sector entity but retained it authority in setting standards (Spiceland 2009).
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