Golden Enterprise Ltd. has been operating a restaurant business for the past ten years. Thecompany has ten branches in Accra and is planning to expand its operations to other parts of thecountry. Despite the high growth and profit enjoyed by Golden Enterprise Ltd., the company hasbeen struggling with its financial reports, specifically, the application of the conceptual frameworkwhich requires financial reports to have various qualitative characteristics such as relevance,reliability, consistency, faithful representation, understandability, verifiability and timeliness.In an attempt to ensure that the financial reports meet the various qualitative characteristics, theaccountants publish the reports immediately at the end of each year and distribute them to allshareholders. After the publication, they often find material errors in the published accounts whichresults in the publication of new financial reports to the shareholders. This situation has resultedin shareholders gradually losing trust in the financial reports of Golden Enterprise Ltd. Also, thefinancial reports usually disclose how managers use their salaries, the time periods employeesreport to work, the tips that waiters/waitresses receive from customers and the strategies they useto outsmart competitors. The company also discloses every detail of transactions no matter theamount involved and provides a detailed explanation to every item in the financial reports. Everyyear, Golden Enterprise Ltd. changes how they value their assets using the current inflation rateand other macroeconomic variables that apply.The above scenarios clearly show that Golden Enterprise Ltd. is facing serious challenges withcomplying with all the qualitative characteristics under the conceptual framework.RequiredAs a Level 300 student who has been introduced to the conceptual framework that guides thepreparation of financial statements, discuss how the conflicts in the qualitative characteristics offinancial reports can be resolved by Golden Enterprises Ltd.

Principles : Information provided by financial statements should be relevant and reliable and, if a…

Answered: Golden Enterprise Ltd. has been…

Golden Enterprise Ltd. has been operating a restaurant business for the past ten years. The company has ten branches in Accra and is planning to expand its operations to other parts of the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Golden Enterprise Ltd. has been operating a restaurant business for the past ten years. The
company has ten branches in Accra and is planning to expand its operations to other parts of the
country. Despite the high growth and profit enjoyed by Golden Enterprise Ltd., the company has
been struggling with its financial reports, specifically, the application of the conceptual framework
which requires financial reports to have various qualitative characteristics such as relevance,
reliability, consistency, faithful representation, understandability, verifiability and timeliness.
In an attempt to ensure that the financial reports meet the various qualitative characteristics, the
accountants publish the reports immediately at the end of each year and distribute them to all
shareholders. After the publication, they often find material errors in the published accounts which
results in the publication of new financial reports to the shareholders. This situation has resulted
in shareholders gradually losing trust in the financial reports of Golden Enterprise Ltd. Also, the
financial reports usually disclose how managers use their salaries, the time periods employees
report to work, the tips that waiters/waitresses receive from customers and the strategies they use
to outsmart competitors. The company also discloses every detail of transactions no matter the
amount involved and provides a detailed explanation to every item in the financial reports. Every
year, Golden Enterprise Ltd. changes how they value their assets using the current inflation rate
and other macroeconomic variables that apply.
The above scenarios clearly show that Golden Enterprise Ltd. is facing serious challenges with
complying with all the qualitative characteristics under the conceptual framework.
Required
As a Level 300 student who has been introduced to the conceptual framework that guides the
preparation of financial statements, discuss how the conflicts in the qualitative characteristics of
financial reports can be resolved by Golden Enterprises Ltd.

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