Description of Task
Description of the firm
Located in the UK, Alternative investment market (AIM) is an international organization that deals with the stock exchange for smaller growing companies. Established as a sub market of London Stock exchange, it aimed at creating a more convenient regulatory environment for the targeted medium and smaller companies (Phil p20). The Companies which are trading with AIM ranges from young and venture growing businesses to more developed companies looking to expand. Among the biggest companies in AIM includes, Indus Gas Ltd, Murrbery Group, Gulf Keystone Petroleum, ASOS.com, Cove Energy, Playtech Limited, Songbird Estates Abcam, and African Minerals Limited (Phil p 30).
Presently, AIM has more than 3000 small affiliated companies. Numerous companies prefer AIM since it provides an opportunity for raising funds at admission time and in years to come. In addition, it raises the company profile, place company value, enable existing shareholders to realize their achievement and opportunities for private institutional investors; notably, venture capital trust (Caltalin p 67). AIM’s flexible rules have attracted the attention of foreign companies, such that by2007 AIM had more than 277 oversea companies. Most if not all of these companies joined recently; where a significant proportion deals in technology-related markets (Caltalin p40 ).
Reporting and Regulatory Environment
Despite that, AIM rules do not mandate any disclosure or government corporate code, the companies integrated into its system have to agree to the governance code. The United Kingdom corporate governance code provides effective practices for AIM lager companies and Company Alliance Corporate Governance Code for small and medium companies (PWC p89). The organization has adopted the international financial reporting standard, as adopted in the regulated market of European Union.
Companies can opt to the apply IFRS, where AIM provides financial, operational rules for the companies-incorporated by European Economic Area (EEA) to adopt IFRS by EU or the UK GAAP even if they are not in a regulated market (Raimmodo p55). AIM’s rule 19 requires that companies need to prepare audited accounts by the period of six months of the closing financial year(denoted FNY). In addition, the guideline necessitates for the disclosure of certain AIM transactions, non-cash or cash benefits received, any monetary value paid by AIM to a pension scheme and any other long-term incentives details (Raimmodo p 60).
Two Specific accounting items in firm accounts
Elements of Financial Statements—
This includes assets and liabilities. According to the International Accounting Board (IASB) liabilities and assets are obligations and underlying resources other than inflow and outflow used in a firm (R p74). The uncertainty of assets, loss, and profit, incomprehensive income, and expenses, distribution and contribution to equity are also included. In addition there is accountability of recognition and DE recognition of financial position entity statements, equity, and distinction of liabilities equity instruments and liabilities and measurements (Nick p 40).
Presentation and Disclosures-
These entails primary presentation of financial statements which includes primary financial statements objectives, offsetting and classification, relationship between basic financial statement and concepts of aggregation (Croner p54 ). In addition, the communication principal, disclosure objective and delivery of financial statement in an electronic format are also accounted in such disclosures. In order to meet the requirements of such disclosures the following are general considerations; nature and extent of unknown assets, reporting entity as one, amount recognize in financial statement entity, how effectively and efficiently the entity is managed (Nick p70).
How UK Enforces IFRS
The UK accounting standards have a set of laws that empowers the application and use of IFRS. IFRS is dedicated to work with the European Financial Reporting Advisory Report group (EFRAG) with an aim of influencing the international debate and standards hence promoting global standards (Phil p. 89). The United Kingdom has made jurisdiction on state commitment, as an advancement towards a set of quality international accounting standards. The UK adopted the IFRS through EU in the year 2002 and by 2005, in which the consolidated financial statement was fully adopted. The following are the controlled markets in the UK; BATS Europe Regulated Market, ISDX Main Board, London Metal Exchange, London Stock Exchange, the London International Futures and Options Exchange (LIFFE) and NYSE Euronext London. AIM, which has control of unregulated markets, is also incorporated in IFRS (Phil p96).
Domestic companies trading in financial markets are required to report on IFRS standards. However, there is no permit for companies whose securities do not trade on the public market. Different companies may comply with UK GAAP or IFRS as adopted by EU as recommend by Financial Reporting Council (FRC). UK has adopted IFRS for SME as indicated to Financial Reporting Standard 102 but there is modification needed (Nick p. 108).
Evaluation of Firms Accounts with Key Global Competitors
The firms account meets the international accounting standard since AIM supports IFRS. The company controls a wide range of companies estimated at over 3500in number. Companies that have integrated IFRS uses UK GAAP; which is recommends by international accounting standards. Evidently, AIM allows the growing companies to enjoy the benefit of IFRS, hence presenting themselves to other global competitors and potential markets (Phil p230).
The institution has flourished considerably, given its lie entry m flexible corporate governance approach, host of nominated advisors (increasing number of companies into its practice) and rigorous market entry. Evidently, its low listing costs- with respect to regulatory compliance expense and exchange fees-has enhanced its marketing campaign. It has attracted specific sectors, such as resource industries and mining; which has significantly benefitted from the boom in commodity prices realized from industrialized nations such as Asia. As such, its success has been evidenced by 195 IPOS, with 69 foreign firms (Ernst and Young, p.11)
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