Alibaba s Dominant Business Model Essay - 1470 Words

Alibaba’s dominant business model is an exchange. Piccoli, in his textbook, defines exchanges as â€Å"Exchanges are organizations that create a marketplace for buyers and sellers to come together and transact. Thus, an exchange does not take control of inventory or worry about fulfillment. Rather the exchange provides a â€Å"market making† service and is compensated with fees, commission on sales, or consulting fees on more complex business-to-business transactions. The prototypical example of an exchange is eBay. Others include Alibaba.com and Ariba—both mainly targeting the business-to-business domain.† (Piccoli, pg 170) Principally, Alibaba is a Chinese business to business e-commerce company. Alibaba focuses on suppliers and buyers trading both domestically and internationally. The business to business marketplaces provide a platform to facilitate e-commerce between business sellers, whom Alibaba refers to as â€Å"suppliers†, and wholesale buyers. Suppliers and buyers would use the marketplaces to establish their presence online, identify potential trading partners and conduct business with each other. Suppliers and some buyers would use the marketplaces to host their company profiles and catalogs in standardized formats known as â€Å"storefronts† and post â€Å"listings† such as products, services and trade leads. Users could view storefronts and listings in over 30 industry categories and nearly 5,000 product categories by either searching for keywords or browse through theShow MoreRelatedA Short Note On The E Commerce Market1973 Words   |  8 Pagesanalyze the fact ors that led to Alibaba sustaining its leadership position in the Chinese e-commerce market. During the late 1990’s and early 2000’s, the internet was not very popular in China and people were ignorant to its proper use. 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However, with the emergence of Alibaba owned subsidiary Taobao.com (Taobao), eBay Eachnet soon lost its stronghold on the market. This factor combined with a rigid Chinese ecommerce market drove eBay to withdraw business dealings in the country in 2006. Yet, the goal of a successful longstanding ecommerce venture has never been far from the companies plan. In 2013 the ecommerceRead MoreComparative Ebay and Taobao3114 Words   |  13 PagesA Comparative Study between eBay and Taobao in Chinese Online Auction Market BSAD 415:66 Electronic Business Prof. G. Trites Jie Yue (Kathy) 200706289 June 10, 2008 1 Introduction Being the largest online trading company, eBay has launched websites across the world, including thirty other countries in addition to its original U.S. website. China, with its large online market, is one of these countries. In 2003, after its cooperation with Eachnet, the first C2C online companyRead MoreTaobao vs. Ebay China8878 Words   |  36 PagesCASE: IB-88 DATE: 01/04/10 TAOBAO VS. EBAY CHINA Ten to 15 years from now, I think China can be eBay s largest market on a global basis†¦. We think China has tremendous long-term potential and we want to do everything we can to maintain 1 our No. 1 position. — Meg Whitman, eBay CEO, 2004 By 2008, Jack Ma, CEO of Alibaba.com Inc., was in a position to consider how to fortify Taobao’s dominant position in China’s online consumer-to-consumer (C2C) market. Ma and his company had come a long way sinceRead MoreBaidu Valuation at IPO9089 Words   |  37 Pagesand the strength of Baidu’s business model and strategic position. BACKGROUND ON CHINA’S ADVERTISING AND ONLINE ADVERTISING MARKETS Advertising Market From 1995 to 2005 China’s advertising market grew at a compounded annual growth rate (CAGR) of 17 percent, which was substantially higher than China’s nominal annual GDP growth rate of 11 percent over the same period. 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Free Technology Essay JIT Outsourcing Free Essays

string(455) " between JIT which is the outsourcing company and Outsourcing Solutions which is the service provider, such interaction would be useful in avoiding what McCray \(2008\) described as poor cultural clash between the client and the service provider, the cultural clash which arises from the outsourcing decision to CPMI is not only limited to language barriers and interaction, but the fact that CPMI staff did not understand Japanese protocol of behaviour\." 1). Analysis of JIT Outsourcing Case Study There are scores of empirical outcomes which shows that outsourcing decision brings enormous advantages to an organisation (See e.g. We will write a custom essay sample on Free Technology Essay: JIT Outsourcing or any similar topic only for you Order Now Mann and Borga, 2004; Yeaple, 2006). As the authors note, while outsourcing brings enormous cost advantages, it also allows firms to focus on other important strategic areas of their business, thus improving their strategic capability and strength in other areas. McCray (2008) on the other hand argues that the problem with outsourcing is that very often, there tends to be poor change management and effective governance structure. In his in-depth qualitative examination of the problems with outsourcing, McCray further identified that the following problems arise from outsourcing processes. Post contract processes and decisions not understood Poor mutual understanding of the Contract Loss of key talent or poor knowledge transfers Cultural Clash between the Client and the Service provider In another delineation of the outsourcing process by Adams (2009) he suggests that many issues emerge from outsourcing because potential service providers are wrongly identified or selected. The author therefore laid emphasis on the identification process and how credible partners or service providers can be selected. Applying some of the authors thought to the present context, it appears that JIT outsourcing suffers from the same challenges identified by the authors quoted above. However, given the company’s ongoing difficulty in managing its helpdesk to meet staff’s expectations, outsourcing can be considered to be a good strategic decision for JIT though, lacking in the appropriate elements and process. More importantly, decision to outsource at JIT did not consider some important elements of successful operations in the post outsourcing process, therefore subjecting the outsourcing motive to questioning. According to Fitzsimmons and Fitzsimons (2008) to achieve cost advantage and operational effectiveness for superior performance, it is very important to consider the 5 elements of operations performance which are â€Å"quality, speed, dependability, flexibility and cost. Rather, the decision of JIT to outsource seemed to only focus solely on cost in the performance hierarchy. While the improvement of service quality was part of the motive for outsourcing the company’s PC helpdesk and data centre as John Smith made clear to the senior management in his presentation, the seriousness and motivation attached to obtaining quality of service after the outsourcing process was absent because much focus was concentrated on cost reduction and less on quality of service. Generally, many authors agree that it is natural for managers to think that outsourcing would mean that the quality of service would improve because they can have more time to monitor quality and achieve better efficiency. But that perception is wrong because outcomes of outsourcing in numerous organisations have consistently shown that quality of service drops after it has been outsourced to an outside party and this could happen for several reasons. Part of the reasons why it dropped in JIT however was because of gaps in the change management process and the governance structure in the post outsourcing regime. In organisational decisions, there must be a learning process especially when it has to deal with change management – in order to avoid disappointment and disasters which may arise as a result (Hammon, 2005). In consonance with existing theories on outsourcing Cullen (2009) a senior consultant who consults for outsourcing projects at Cutter Consortium suggests that the achieve success in any IT outsourcing process. The outsourcing lifecycle in the framework which is in (figure 1) below must be followed reliably by an organisation. Using this framework as an audit of John Smith’s decisions, it is notable that his and the management decision to outsource did not consider the implementation of some stages of the framework such as negotiation, transition and refreshing. While basic negotiation was done, such negotiation was not properly conducted to ensure that it would strictly deliver the requirements of JIT objectively in other service terms which may be outside of the contractual agreement. Lack of sufficient management of the transition stage was also responsible for the problems encountered in the first three months of the data centre off-shoring. Because, if a transition or change management process was properly managed, the loss made by JIT would have been avoided. Secondly, the management concerns governance of the post outsourcing regime. According to Walsh (2003) a good governance structure in the post outsourcing period must include cultural synergy, embodiment of effective communication systems into the two organisational cross communication into and continuous learning through the continuous exchange of information. These suggestions also appear to be missing in the governance structure of JIT during its post outsourcing period. Source: Cullen (2008) Finally, the last building block which concerns refreshing was also missed out by JIT with CPMI because no regular or interval checks are done with the organisation to ensure that everything is fine and it is not going through any problem as a result of the outsourcing management. This only happened on occasions when complaints are made to John Smith and he attempts to speak to the director of CPMI. In addition, the strategic decision of JIT’s senior management did not consider the very important aspect of culture considering that both Japanese and English speakers are within its vertical operations and needed to man the PC helpdesk in order to support the rotational staff at any point in time. Inspite of this requirement, the senior management decided to force English on its business process and still went on to outsource its PC helpdesk to CPMI who did not provide a Japanese speaker that would make it account for rotational staff at every point. Given the choice between CPMI and (the latter) Outsourcing Solution who would provide a fluent Japanese speaker who is also fluent in English, the decision to outsource to CPMI was taken quite wrongfully by senior management because Outsourcing solution would have been of more advantage in terms of meeting JIT’s cultural need. More so, such cultural consideration would have offered a better interaction between JIT which is the outsourcing company and Outsourcing Solutions which is the service provider, such interaction would be useful in avoiding what McCray (2008) described as poor cultural clash between the client and the service provider, the cultural clash which arises from the outsourcing decision to CPMI is not only limited to language barriers and interaction, but the fact that CPMI staff did not understand Japanese protocol of behaviour. You read "Free Technology Essay: JIT Outsourcing" in category "Free Case study samples" To a certain extent, understanding Japanese protocol of behaviour by JIT’s service provider would have helped in avoiding some of the interaction problems which arises between PC helpdesk and members of staff of JIT. In a white paper by the Outsourcing factory (2008), it was suggested that outsourcing companies should concentrate on their corporate culture: i.e. the way business gets done in the company, the values they share and the way people interact. In another poll conducted by Accenture (2007) of 200 U.S. business executives, it was found that adopting cross-cultural communication problems and bridging cultural barriers through the implementation of cross cultural values and programs could increase productivity by an average of 26%. Applying the same to JIT means that taking adequate care of Japanese protocol, language and behaviour in the outsourcing decision would have improved performance of its outsourcing by 26%. To further demonstrate that some of the major problems in the outsourcing process of JIT is a result of the cultural gap between CPMI helpdesk and JIT staff, we may take a lesson from the research work of Gislen et al (2006) who find that between an outsourcing company in Sweden and a service provider in India, there was cultural gap because Indian staff were often scared of conflicts with their partners in Sweden and therefore could not communicate their dissatisfaction and emerging issues succinctly to their Swedish counterpart. Both employees in India and Sweden therefore lacked feedback which would make them be carried along and avoid potential problems in cross business interaction. This evidence suggests possibly that, some of the problems encountered by JIT staff like Bob could not be solved because CPMI staffs were not confident enough to communicate because of the cultural differences or perhaps the gaps in culture or communication styles. Another area where management could have optimised outcome from its outsourcing strategy would have been by having more than two potential service providers for the PC helpdesk that is to be outsourced. Having up five different service vendors would have allowed for better negotiation, comparison and consideration of strength of potential service providers. This would have also allowed for a better cost/benefit analysis and help management to determine the best quality that can be derived from the overall process. Choosing from two service providers is not a smart management decision because it limits management’s view and exposure about the benefits of its potential outsourcing and off shoring especially since it would last for a long period of time. Therefore, following John Smith’s suggestion to outsource, management could have requested for more competitors experienced competitors who have more credence in the industry so as to allow for prudent and good strategic decision which would make the outsourcing process and decision more promising. In addition, the outsourcing process does not reflect the critical show of prudence as much negotiation was not conducted by John Smith and Management before outsourcing and off shoring to CPMI and DR solutions to take over. Some show of prudence, negotiation and conscientiousness could have been displayed by John Smith through the contract initiation process to suit his own company and his outsourcing objective rather than the service provider. For example, John Smith could have negotiated a constant two way communication process and flexibility of service by the provider wherein, he can demand better service from the service provider even when such agreement is not stipulated in the contract agreement. Also to be noted is the fact that John Smith and management decision to outsource to CPMI in particular did not emphasize on experience, strength and deliverability of the service provider. This would have simply helped to avoid the drawbacks and problems faced in the post outsourcing era. Infact, considering cost savings, management would have still been able to save considerable cost if it had outsourced its PC helpdesk to Outsourcing Solutions which would have perhaps provided better service more efficiently because of its experience in the industry. Hosting a long list of fortune 500 companies’ processes is simply a proposition that would have been considered at least to test the waters of outsourcing. 2). Summary of Key Problems Given the outlined analysis of issues emerging from JIT’s outsourcing process, the main problems of JIT’s sourcing strategy could be summarized as thus: The company did not place adequate emphasis on operations performance which are the core of any successful process or project – whether outsourced or retained within the organisation. The performance measures are: â€Å"quality, speed, dependability, flexibility and cost. Rather more emphasis was placed on cost savings and reduction rather than on these overall performance measures. This poor decision reflects in the decision to outsource to CPMI rather than Outsourcing Solutions who has better track record, reference and experience to deliver than CPMI who is only a small company and whose capability cannot be sufficiently proven. The problem with the outsourcing strategy also concerns the fact that less regard was given to cultural gaps. Fixing the Helpdesk problem: Recommendations to John Smith Considering the consequences of the company’s decisions and the problems faced by John Smith, it is recommended that to address the helpdesk problems John Smith should immediately negotiate with the management of CPMI outside the contract for issues of communication and cultural gaps to be addressed. This is very important as pointed out by Radoff (2006) who argues that communication gap can lead to big disaster for the outsourcing firm. For the remaining terms of the contract if more than 6 months, John Smith can partner with the management of CPMI to arrange a short course where staff will be trained and given the knowledge of Japanese Protocol Behaviour so as to immediately address the problems faced by helpdesk staff and Japanese Executives. Quelin and Duhamel (2003) consider this as organisational learning and a way of synchronising partners’ needs with each other for effective performance. The Short course would be short term solution. However on the longer term, John Smith should consider other service providers by reviewing the offers of up to five different potential outsourcing partners. He should therefore decide based on their deliverability, flexibility and experience as well as capability, while considering the quality they can deliver and their ability to make his cost savings objectives achievable. More importantly, a well articulated explanation to management about the dangers of forcing English on rotational staffs would be necessary for John Smith so as to ensure that future service providers have the capability to understand Japanese Protocol Behaviour and bridge cross cultural gaps in outsourcing operations. John Smith must also importantly focus on ensuring that the rest of the helpdesk staff are properly trained and motivated through flexible working hours so as to reduce the instance of less motivation and less performance which can still occur after major processes have been outsourced. Finally, it would be pertinent to state that all of the recommendations are important. However, it is advised that for optimum and effective performance to be achieved with immediate effect, he should place emphasis on renegotiating with CPMI management and arrange possible short term courses on Japanese protocol behaviours and business ethics as well as service delivery and performance. This is only recommended as quick short term solution to last within the remaining period of the contract. However, to find lasting solution, it is recommended that the option of new potential service providers should be considered while emphasis should be placed on the 5 elements of operations performance mentioned earlier. With the new service provider, flexibility and quality of service should be given high priority so as to ensure that cost savings is not the only advantage derived from the company’s outsourcing process. Finally, on an ongoing basis, John Smith should implement a continuous training program where remaining employees will be given up to date skills so as to ensure that they are in line with new developments from their service partners to whom they have outsourced their helpdesk. Offshoring Recommendations On the long list as to whether off-shoring should be considered or not for both data centre and the PC helpdesk, it can be argued that off-shoring is a perfect decision for the data centre because of its nature and structure and particularly because of the operational risks involved in managing a data centre which is becoming high in the growing technological world of today. More so, many off-shoring firms have more competence and professional capability in managing IT systems than companies like JIT whose primary activities are in other areas. Off-shoring the data centre will indeed allow management to bear less secondary operational risks and challenges that is associated with data management. For a certain fee, management can cut down costs while improving the quality of its data management when handled by a third party. In considering the off-shoring decision however, management must place emphasis on the quality and past performance of vendors who will be given the data centre operation to manage. Furthermore, according to best business practice – it is advised that up to five vendors should be selected and weighted according to their service offers, flexibility and closeness to the objectives of JIT. It is also advised that the off-shoring process should be conducted in a systematic and gradual approach. A recommended approach would be for John Smith or a chosen manager of JIT to spend at close to two weeks or better still one month in the offshore location so as to understand their working practices and know what the potential challenges might be. In addition, only a once year contract should be first signed by JIT to understand the vendor and learn if the off-shoring process is of benefit to the organisation or has to be relinquished for certain reasons. For the PC helpdesk on the other hand, it is recommended that off-shoring is not the best process because of the need for staff’s personal computers to be checked physically in certain instances. Besides, for other business reasons offshoring the PC helpdesk could cause operational problems and problems which may arise from various instances. It is therefore, advised that PC helpdesk should be retained for outsourcing rather than offshoring. In outsourcing the PC helpdesk, the same care and consciousness advised for data centre offshoring should be exercised because of the risks that might be involved. Also, five outsourcing service providers should be invited to tender their quotes and offers. Such offers, should be gauged to determine whose service best suits JIT’s objectives. During the process, it is very important as recommended to John Smith initially that the five operational performance elements should be included and not only the cost should be considered. The quality of service that will be provided by the vendor should be given utmost priority, followed by cost, flexibility and dependability and speed. For these elements to be found in a potential vendor, the importance of experience and past performance must be emphasized in the sourcing process. In addition, the company who can blend with JIT’s operations and give tailored service should be given better scrutiny and attention. Lastly, it must be taken into consideration that JIT’s vertical operation comprises Japanese and English speaking staff. Therefore, it must be ensured that all the company’s internal processes, rotational staff and outsourcing partners have capability in Japanese and English behaviour protocol. Outsourcing to vendors who have no understanding of the cultural ethics and behavioural protocols of service users will further leave cultural gaps and communication problems for management to deal with. Indeed, it is a counter productive process when one learns from other past experiences of outsourcing and the cultural problems involved. Additionally, to be educated of the potential risks and dangers involved in the outsourcing process – both in transition and in the proper regime. A learning process is recommended whereby, John Smith spends time in the offshoring company to understand their mode of operation and how it works so as to take the lessons back home into his company’s final contract before performing the final outsourcing. An ongoing governance structure should also be given proper attention such that: in the post outsourcing regime such that communication and other important facets of operations are constantly reviewed from time to time, the performance of the vendor, weaknesses and strengths should also be reviewed so as to constantly ensure that the service offered meets JIT’s objectives and the expectations of all its staff. Conclusion is drawn on the note of the outsourcing factory (2008) which suggests that: â€Å"Whilst price is very important, productivity is even more important, which is why you companies must factor this non tangible aspects, related to outsourcing, into their purchase decisions. They must ensure that the company they are dealing with are mature enough to overcome the cultural barriers as well as the communication/organizational ones. Then, when the deal is signed they should not forget that relationships have to be managed as it will not manage itself†. References Adams, K. (2009). IT outsourcing evolution, past, present and future, Communication of the ACM, pp. 84 – 89 Cullen, S (2008) Key Activities of the Outsourcing Lifecycle: Part I: Senior Consultant, Cutter Consortium. Available at: http://www.cutter.com/content-and-analysis/resource-centers/sourcing-and-vendor/sample-our-research/srcr0901.html Hammon, J. (2005). Change Management in IS Outsourcing: A literature analysis, University of Alicante, San Vicente del Raspeig, Alicante, Spain, pp. 821 – 834. Fitzsimmons, A.J. and Fitzsimons, M. J. (2008). Service Management: McGraw-Hill International Edition Gislen, M. and Venugopal, V. Godwin, U. (2006). Managing the Cultural Challenges for Successful Software Outsourcing. Gislen Software Pvt. Ltd. India, pp. 1 – 6 Mann, M., and Borga, M., (2004). US. International Services, Cross-Border Trade in 2003 and Sales Trough Affiliates in 2002, Survey Current Business, October McCray, J (2008). The problem with Offshoring and Outsourcing: Lessons from organisational experience, Journal of Organisational Strategy 34 (4) pp. 56 90. Outsourcing Factory (2008) Overcome cultural differences in the outsourcing process, Accessed from www.outsourcing-factory.com Quelin, B. and Duhamel, F. (2003). Bringing Together Strategic Outsourcing and Corporate Strategy, European Management Journal Vol. 21. Great Britain. Radoff, S. (2006). Improved Cross-Cultural Communication Increases Global Sourcing Productivity. United States: Acc Walsh, H. (2003). Issues in foreign outsourcing, Information System Management, Volume 14, Issue 2, pp. 27 – 32 Yeaple, E. (2006). Offshoring, Foreign Direct Investment and the structure of US trade, Journal of the European Economic Association, April-May, 4 (2-3), pp. 602-611, Accessed from: www.sciencedirect.com How to cite Free Technology Essay: JIT Outsourcing, Free Case study samples

Accounting Standards rules

Accounting Standards: rules-based vs principle-based system. Essay Advanced Financial Accounting Coverage Introduction There are many methods by which the Accounting Standards are developed. Arguments province that there are two chief systems of ordinance that defines Accounting Standards which are rules-based system and a principle-based system. Baxen which is a public listed company uses local accounting criterions for their fiscal studies. The Directors of Baxen are looking to follow International Financial Reporting Standards for their company. Baxen wants to acquire involved in merchandising with many foreign companies and making merchandising spouses as a subordinate. This study will give you a deep apprehension of why Baxen should follow IFRS in their company and besides a treatment between regulations based and principle-based system. In the recent fiscal crisis carnival value measuring has received its just portion unfavorable judgment. There are statements for and against those just values which are explained in this study. Accounting systems A batch of companies prepare their fiscal statements that are set out by Financial Accounting Standards Board ( FASB ) . Their system is largely principles-based. In the yesteryear there was a batch argument on whether the principles-based is more effectual than the rules-based accounting. Reason behind this argument is because of the unfavorable judgment of the dirts such as Enron and WorldCom. Rules-based system When fixing fiscal statements are many regulations to be followed. The rules-based system is fundamentally a list of elaborate regulations that are followed to fix the fiscal statements. A batch of comptrollers prefer the rules-based criterions as if they get brought to tribunal for their judgements of the fiscal statements were wrong in their absence they can acquire off with it. If there are rigorous regulations to fix a fiscal statement so this would cut down in mistakes and besides the opportunities of cases will cut down excessively. It creates truth and reduces mistake which is good for by direction. It can nevertheless do unneeded complexness in the readying of fiscal statements. Principles-based system Principles-based accounting is used as a conceptual footing for comptrollers. Simple aims are used as guidelines to do certain coverage are done at a high criterion. The aims are explained through giving illustrations even though they are used as counsel. Some of the regulations are still ineluctable which means that guidelines can non be used for every state of affairs. The of import facet of principles-based accounting, that their guidelines can be used for assortment of fortunes. An advantage of regulations based accounting is that if everyone adheres to the same regulations that are given, there is less room for reading and originative accounting. Detailed demands can bring on directors to pull strings the statements to accommodate what is compulsory. The disadvantage of holding principles-based guidelines is that the information can be undependable or inconsistent which leads to troubles when comparing it with other companies. When fixing fiscal statements it’s ever vital of which accounting method is best to utilize. It must be certain information that is relevant, dependable and besides comparable across the coverage periods. A batch of treatment has pushed comptrollers towards utilizing principle-based system which is of import that the method is developed to do it more effectual and efficient. International Financial Reporting Standards ( IFRS ) Every state has its ain criterion of fixing the fiscal statements. IFRS are a set of accounting criterions that have been introduced in 2000 after replacing it with IAS ( International Accounting Standards ) . IFRS is seeking to follow all the states to utilize those criterions as it can show a better position to foreign rivals or foreign investors to understand and compare it easier. It is besides good to single companies as it can broad distribute their concern globally as investors would hold an apprehension of it because it uses the same accounting linguistic communication. It would be good for Baxen to follow IFRS as it can back up their company growing globally. It can besides back up them raise capital from aboard as investors would hold a better apprehension of their company. Some companies belief that following those criterions into their companies could outweigh their benefits due to the costs of following IFRS but it clear that those are companies who are non believing of spread outing their concern globally. If Baxen continued to utilize local criterions and so tried to compare their stance with a foreign rival, consequences will be undependable, as different criterions have been used. It is critical to put to derive more profitable result. It’s within the administration to draw it all together and do certain their fiscal statements are good prepared and besides show good input so foreign investors show acute involvement in supplying capital. Fair Value Measurement In fiscal describing one of the approaches companies take is just value accounting. It measures and reports the on-going footing certain assets and liabilities. It estimates the monetary values that it should be sold to alleviate of liabilities. This attack is taken topographic point when the company study indicates lessening in assets or increase in liabilities on the footing of their existent or estimated just market monetary values. Fair value is a important measuring as it shows all todays costs of the company. Historical costing method is critical and benefits company more as it takes everything into history over the twelvemonth. This is done by integrating information with the hard currency flows and their current price reduction rates. Companies are advised to travel by monetary values when market monetary values have similar places available. When those markets monetary values are non available they intend to utilize rating theoretical accounts. They besides mark down any val ues of assets or liabilities that show lessening in the market monetary value. Fair Value measuring limits the company’s ability to pull strings their net income in the fiscal study. There a many incidents where direction intentionally create certain plus gross revenues to increase or diminish net income by deriving or fring gross revenues. The usage of Fair value measuring in additions or losingss from any monetary value alteration of a liability or an plus can be figured out instantly as it is reported within the period in which they occur. Many investors benefit from just value. This is because companies are required to regularly update their figures on their statement. This is perfect as investors would acquire duplicity by companies. This gives a clear image for investors to analyze whether they should maintain puting or non as any losingss on assets or increase on liability would be spotted consecutive off with just value measuring. It besides gives a large image to new investors to see if the sector is making good or non. Cloud Operating System Architecture Essay2.1 The Application: An Example of Consignment Stock Consignment stock is frequently found in the motor industry, whereby the stock is held by a trader but lawfully owned by a maker. The trader has the stock on premises, and has the right to sell the stock. However, rubric to the stock does non go through to the trader at the clip when the stock was delivered. It means that the franchise in fact has non yet bought the stock and so should non yet include the stock, or any liability to pay for it, in its fiscal statement. So what intervention should be used for the trader? Determining if the stock should be classified as an plus of the trader, involves measuring what the commercial substance of the dealing is. If merely the legal signifier of the dealing was assessed, it might look that the stock is an plus of the maker. However, harmonizing to FRS 5, the substance of the dealing is determined by measuring where the greatest benefit and hazard lies.6 If the maker can non necessitate the trader to return the stock, the trader has no right to return the stock. Consequently, the trader bears the obsolescence hazard and decelerate motion hazard. This indicates that the stock is in substance an plus of the trader. On the other side of the statement, if the trader has the legal right to return the unsold stock without incurring an obsolescence hazard and a slow motion hazard, so the trader does non hold an plus. Therefore, the substance of dealing should be reflected dependably in its fiscal statements non simply the legal signifier of the dealing, peculiarly if the legal signifier of the dealing would show a deceptive position of the fiscal place or consequences of operations of an entity.7 2.2 What would go on if we alternatively took Form over Substance ? In fact, deceitful fiscal coverage normally involves the presentation of signifier over substance. A March 1999 study sponsored by the National Commission on Fraudulent Financial Reporting found that more than half of all fiscal coverage frauds involved overstating gross. For illustration, In March 2000, MicroStrategy ( MSTR ) , a worldwide package company, announced that it was revising its fiscal consequences. Revenue would be lowered by approximately 25 per centum, from $ 205 million to about $ 150 million ; the job was caused by acknowledgment of gross that did non be. The cardinal inquiry in gross acknowledgment is this when is a sale a sale, and when make companies acquire to acknowledge the grosss? The reply varies depending on the industry and nature of the grosss. So, it is of import that substance ( nature ) instead than legal signifier is used to account for a dealing. By entering the substance of minutess, we might cut down the ways in which some companies stretch by and large accepted accounting rules to blow up their value. Part 3 The Arguments of the SOF The grounds presented in the treatment above suggests that the proper contemplation of substance over signifier is indispensable in order to accomplish answerability and transparence in accounting. However there is still much contention over this issue. Some have discussed that SOF should be used as a usher in puting accounting criterions. While others argued substance does non needfully overrule form , the importance of substance was overrated. This attitude is non supported to a great extent in the legal profession.8 In the Department of Trade and Industry s statement on the Argyll Foods instance, it argued that: It is self-evident that any accent on substance over signifier must non be at the disbursal of conformity with the law.9 So how should we best treat the SOF rule? The accounting organic structures in the UK have adopted the position that the of import component in any dealing or state of affairs is the commercial substance and non the legal form.10 The paperss emerging from ED 42 to FRS 5 in the last few old ages develop a model of relevant rules. For illustration, a set of definitions of the elements of fiscal statements. These would enable the substance of minutess and other evens to be identified straight. It is likely to be able to successfully cover with new challenges confronting fiscal histories, including the exigency of new fiscal instruments and gray leasing. It seems that the rule of SOF has indexs set to be an accounting criterion. But, possibly the biggest job of SOF when coupled with the true and just position, is that it so depends to a great extent on the accounting profession s ability to construe sanely commercial world, in many different state of affairss, while still following consistent conventions and dogmas. Therefore, the model of the rule of SOF would non be enforced as a criterion but used to develop single and specific criterions to cover with peculiar areas.11 It would devour far more resources, but would bring forth interventions that were consistent and react adequately to fresh dealing and other event. Specific criterions would besides be easier to implement than general counsel as to the designation of the substance of dealing and other events.12 Decision In decision, We have provided the significance of SOF, and examined the determiners of the substance of minutess. Then, we have explained why the SOF was so of import in accounting through a treatment of the intervention of consignment stock. At the same clip, we have illustrated how fiscal statements can be adversely affected if the company emphasises Form of the minutess instead than Substance of the minutess. We have besides discussed the arguments over SOF, and eventually, we have argued how the rule of SOF would be used as a usher in puting accounting criterions Decision Based on my research and analysis’s there is a batch of information in Financial coverage that include varies ways and systems to make a dependable fiscal statements. It is critical to follow regulations based system as it gives dependable information which are