The Critical Analysis of Profit for its Allocation Decision-Making

Renáta Pakšiová

Abstract


The decrease of the business property can cause a reduction in the production ability of the enterprise to the extent causing an involuntary closing of business activities. It is usually caused not only by the reported loss, but also by the greater distribution of profits, as is the amount of the real level of the enterprise's distributable profit. A thorough analysis of the reported accounting profit described in this paper should be the starting point for the allocation of profit. It is important to be able to identify and assign a portion of the accounting profit, corresponding to the non-realised profit and fictitious profit, where eventual release outside the enterprise threatens the future performance of the enterprise. These portions of the reported profit do not correspond to the actually made, realised and real production, which is a necessary condition to achieve a real profit to possible safety division to investors.


Keywords


analysis of profit, production ability, profit allocation, decision-making

JEL Codes


D24, G32, M11, M40

Full Text:

PDF

References


Act no. 431/2002 Coll. on Accounting, as amended (2016).

Ball, R., Kothari, S. P., and Robin, A., 2000. The Effect of International Institutional Factors on Properties of Accounting Earnings. Journal of Accounting and Economics, 29(1), 1-51. doi: http://dx.doi.org/10.1016/S0165-4101(00)00012-4

Ball, R., Robin, A., and Wu, J. S., 2003. Incentives versus Standards: Properties of Accounting Income in Four East Asian Countries. Journal of Accounting and Economics, 36(1-3), 235-270. doi: http://dx.doi.org/j.jacceco.2003.10.003

Bednarova, B., and Slosarova, A., 2015. Ocenovanie ako metodicky prostriedok uctovnictva (1st ed. ed.). Bratislava: Wolters Kluwer.

Directive 2013/34/EU of the EP and of the Council, On the annual financial statements consolidated financial statements and related reports of certain types of undertakings, amending

Directive 2006/43/EC of the European Parliament and of the Council and repeating council Directives 78/660/EEC and 83/449/EEC as amended. Cong. Rec. (2016).

Glautier, M. W. E., and Unterdown, B., 1991. Accounting: Theory and Practice (4th ed. ed.). London: Pitman.

Houqe, M. N., van Zijl, T., Dunstan, K., and Waresul Karim, A.

K. M., 2012. The Effect of IFRS Adoption and Investor Protection on Earnings Quality around the World. The International Journal of Accounting, 47(3), 333-355. doi: http://dx.doi.org/10.1016/j.intacc.2012.07.003

Istrate, C., Georgescu, I. E., Carp, M., Robu, I. B., and Pavaloaia, L., 2015. Accruals Earnings Management in Emerging Markets under the Transition to IFRS: The Case of Romanian Listed Companies. Transformations in Business & Economics, 14, 393-411.

Jeanjean, T., and Stolowy, H., 2008. Do Accounting Standards Matter? An Exploratory Analysis of Earnings Management before and after IFRS Adoption. Journal of Accounting and Public Policy, 27(6), 480-494. doi: http://dx.doi.org/10.1016/j.jaccpubpol.2008.09.008

Kosovska, I., Varyova, I., Krajciova, R., Ferenczi Vanova, A., and Bojnansky, J., 2017. Profit or loss in commercial companies and its allocation in the process of global harmonization. Účtovníctvo a audítorstvo v procese svetovej harmonizácie, 83-87. http://kuaa.sk/uploads/Profit%20or%20loss%20in%20commercial%20companies%20and%20its%20allocation%20in%20the%20process%20of%20global%20harmonization.pdf.

Krajciova, R., Ferenczi Vanova, A., Kosovska, I., and Varyova, I., 2017. Double taxation of profit distribution in the Slovak Republic: Consistency with the EU law? . Účtovníctvo a audítorstvo v procese svetovej harmonizácie, 93-97. http://kuaa.sk/uploads/Double%20taxation%20of%20profit%20distribution%20in%20the%20Slovak%20Republic,%20Consistency%20with%20the%20EU%20law.pdf.

Kubascikova, Z., and Paksiova, R., 2014. Risk in finance from the perspective of an accounting theory Paper presented at the Finance and risk 2014 Bratislava.

Leuz, C., Nanda, D., and Wysocki, P. D., 2003. Earnings Management and Investor Protection: An International Comparison. Journal of Financial Economics, 69(3), 505-527. doi: http://dx.doi.org/10.1016/S0304-405X(03)00121-1

Leuz, C., and Wysocki, P., 2008. Economic Consequences of Financial Reporting and Disclosure Regulation: A Review and Suggestions for Future Research. from papers.ssrn.com/sol3/papers.cfm?abstract_id=1105398

Markovic, P., Grancicova, K., and Juhaszova, Z., 2013. Financne rozhodovanie o dlhodobej alokacii kapitalu Management trends in theory and practice: scientific papers. EDIS (pp. 247-249). Zilina: University Publishing House, University of Zilina.

Measure of the Ministry of Finance of the Slovak Republic of 3 December 2014, no. MF/23377/2014-74, On defining details of the arrangement, marking, and content specification of items of an individual financial statement and extent of data determined for publication from an individual financial statement for entrepreneurs using double entry bookkeeping for large accounting units and public interest entity, as amended (2016).

Measure of the Ministry of Finance of the Slovak Republic of 3 December 2014, no. MF/23378/2014-74 On defining details of the arrangement, marking, and content specification of items of an individual financial statement and extent of data determined for publication from an individual financial statement for entrepreneurs using double entry bookkeeping for small accounting units, as amended (2016).

Measure of the Ministry of Finance of the Slovak Republic of 16 December 2002, no. 23054/2002-92, On stipulation of details of accounting procedures and framework chart of accounts for entrepreneurs keeping double-entry accounting, as amended (2016).

Paksiova, R., 2014. Majetkova podstata podniku (1st ed. ed.). Bratislava: Ekonom.

Paksiova, R., 2017a. The Preservation of the business property in the context of the commercial code in Slovakia Účtovníctvo a audítorstvo v procese svetovej harmonizácie. Bratislava: Publishing house Ekonom.

Paksiova, R., 2017b. Zisk ako indikátor rastu majetkovej podstaty a jeho analýza Change indicators of the business property and their analysis: proceedings of scientific papers (pp. 100-111). Bratislava: Ekonom.

Paksiova, R., and Kubascikova, Z., 2014. Risks of company´s non-realised profits distribution Managing and Modelling of Financial Risks: 7th International Scientific Conference Proceedings (pp. 598-605). Ostrava: VŠB - Technical University of Ostrava.

Paksiova, R., and Kubascikova, Z., 2015. Business property of company and investments. Procedia Economics and Finance, ACFA Prague 2015, 25(Supplement C), 70-78. doi: www.dx.doi.org/10.1016/S2212-5671(15)00714-5

Prochazka, D., 2017. Specifics of IFRS adoption by central and eastern European Countries: Evidence from research. Scientific Annals of Economics and Business, 64(1), 59-81. doi: http://dx.doi.org/10.1515/saeb-2017-0005

Prochazka, D., and Pelak, J., 2016. Economic Theories of Accounting: The Review of Modern Approaches and their Relevance for Standard-Setting. Politicka Ekonomie(4), 451-467.

Sebestova, J., and Nowakova, K., 2013. Dynamic strategy for sustainable business development: Mania or hazard? Amfiteatru Economic, 15(34), 442-454.

Sebestova, J., and Wagnerova, E., 2007. Vnitřní faktory ovlivňující malé a střední podnikání: případová studie z Moravskoslezského kraje. Journal for economic theory, economic policy, social and economic forecasting, 55(4), 411-424.

Slosarova, A., 2014. Analyza uctovnej zavierky (1st ed. ed.). Bratislava: Ekonom.

Tumpach, M., and Bastincova, A., 2014. Cost and Benefit of Accounting Information in Slovakia: Do We Need to Redefine Relevance? European Financial Systems 2014: Proceedings of the 11th International Scientific Conference (pp. 655-676). Lednice, Czech Republic: Brno: Masaryk University.




DOI: http://dx.doi.org/10.1515/saeb-2017-0039

Refbacks