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Now that you have a better understanding of Managerial Accounting, compare the reports managers use to those used in GAAP financial statements. Typically, management reports are not included in financial statements issued to investors. Do you believe that investors should have access to managerial reports? If managerial reports were available to investors what would be the pros and cons of releasing such information?
Your paper should include an analysis of Activity Based Costing compared to Traditionally costing, and absorption costing compared to traditional costing methods used in GAAP reports. Provide personal experience if it relates, or provide real world scenarios or hypotheticals
Expert Answer
Ans:
In my opinion investor shouldn’t have access to managerial reports as it contains secret business information like production methods, internal capital management access to such report to investor means competitors will also have access to such reports which will not good for company future prospect.
But it has certain advantage also:
1. it will increase the investor reliability towards the report issued by the management.
2. Costing methods like acticity costing, P/E analysis gives more accurate reporting when compared to traditional costing methods and GAAP reports, Because here each business,product are separately analysed based on services used by them so investors can really rely which product is benefical and which aren’t for the entity.
Cons are:
1. Confidentiality of business is hugely affected.
2, it makes decision making process cumbersome and lenghty.
In a hypothettical scenario , if company is in a business of unique products and releases its coting reports so everyone will aware of its rawmaterial used , product process actual margin , so many competitors will jump into the project and its uniqueness will dilute.
