The paper 'Current Business and Legal Issues' is a good example of a Finance and Accounting Case Study. The report intends to focus on the comparison and contrast of the companies’ equity sections from two dissimilar countries, Germany and Canada. The companies mainly operate under two dissimilar laws, the code law and the common law. The common law manifests openness with little specifications and a little section of the law can be utilized to mean numerous areas within the statement, Prodhan, 1996. The code law alternatively is specific and restricts its applications on the stated sentiment with only the mentioned objects.
The code law allows the application of the compliment objects within the area of restriction. If the specific object or the mentioned person is not touched the code law holds. The nature of law its stipulations and its implementation affect the equity features and the fiscal circulations in the country. This report bases on the determination of the comparison and the contrast between the countries regarding their law modes. The comparison will target the manner of their company's differences and similarities in accounting and finance perspectives, Choi & Meek, 2011.
The contrast will incorporate the differences amongst the particular aspects compared to the companies from the subject countries. Canada practices a common law while Germany practices the code law legal system. The variations in the law systems accompany a significant effect on the companies’ equity and the eventual performance in the international scope. The accounting laws including the tax laws mainly rely on the national codes of the countries. The similarities in the equity systems of companies from the countries will arise from the static principles in accounting finance that never receive alterations from the law systems.
The principles manifest little relationships with the laws governing a state but fully rely on the companies accounting and determines the company’ s financial systems and the outcomes. Generally, the report will target to clarify the notion that there are both similarities and differences amongst the code law and the common law countries, which mainly manifest in the equity sections. The company's equity sections have key components in relation that are worth comparison that entails income smoothing, cost of equity, information uncertainty, and stock returns.
The income smoothing entails the utilization of accounting techniques to solve the net income disparities resulting during dissimilar periods. Common law versus Code law Regulation and enforcement of accounting by law in most countries are the primary purposes of the government. There exist numerous similarities and dissimilarities amid countries regarding the definition of accounting acts and the mode in which it should be performed. There are several countries classified as implementing common law while others are categorized as having a Code legal system.
The two legal systems affect the way and manner in which accounting is done in each state country. Annual financial reports from Discovery Financial services and Airbus Germany, which, operate under different legal systems, are typical examples of the impact of these two legal systems on accounting. Discover Financial Services The annual report of 2010 from Discovery Financial Services indicates a number of items when it comes to equity. As per November 2010, equity of the company was at $6.4 billion as compared to $8.4 billion recorded in the same period in the year 2009.
The decline in equity resulted from the fact that the company adopted statements No. 166 and 167 in the first quarter of the year 2010. This worked to reduce equity by at least $1.3 billion. Thus, redeeming all the shares of the preferred stock that previously provided to the Canadian treasury under the capital purchase program. The month of July also saw the company repurchase a warrant that allowed for the purchase of 20,500,413 on its common stock.
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