Reference no: EM131139277
Discussion- Please tell me you view point on this article with cited sources
The company I examined for this discussion is NIKE, INC.
The four parts annual report for 2015 includes items such as; Part I list of Business, Risk Factors, Unresolved Staff Comments, Properties, Legal Proceedings, and Mine Safety Disclosures. Part II list of Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, Selected Financial Data on page 80, Management's Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures about Market Risk, Financial Statements and Supplementary Data, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure, Controls and Procedures. Part III Directors, Executive Officers and Corporate Governance, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Relationships and Related Transactions and Director Independence, Principal Accountant Fees and Services.
A brief definition of retained earnings as profits generated by a company that are not distributed to stockholders (shareholders) as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset).
After research I believe the best business decision for a company to retain their earnings since it will allow them to growth and expand.
An important convention. As we can see from the application of accounting standards and accounting policies, the preparation of accounts involves a high degree of judgment. Where decisions are required about the appropriateness of a particular accounting judgement, the "materiality" convention suggests that this should only be an issue if the judgement is "significant" or "material" to a user of the accounts. The concept of "materiality" is an important issue for auditors of financial accounts. The disadvantage of materiality concept leaves an accountant with no practical guideline to indicate how accountants should apply materiality threshold. One of the limitations on decision making is how much information is needed to disclose on the face of a company's financial statements or as a note. The advantage of materiality concept is that it gives the accountant full disclosure of the information and is judgment.
References:
Annual Report:
https://s1.q4cdn.com/806093406/files/doc_financials/2015/ar/docs/nike-2015-form-10K.pdf
Retained earnings
https://www.businessdictionary.com/definition/retained-earnings.html#ixzz4EPZvCknU
Materiality Concept
https://www.tutor2u.net/business/reference/accounting-concepts-and-conventions