Accounting Treatment of Complex Transactions

Financial statements are a vital source of information. Thus, accounting standards have been improved over the years to enhance the transparency and quality of business reporting. Today, the representation of financial statement has become complex making it hard for investors to get a clear picture of the performance of the business. There are some complex transactions that an investor may not understand. Additionally, there are complex accounting transactions that companies treat differently such as mergers and acquisitions and divestitures. The complexity of accounting transactions is not only felt by investors but also by corporations. Some transactions such as hedging, pension, and divestitures have been identified as complex accounting transaction. Businesses and investors must understand how these complex operations should be treated to ensure that financial reports offer investors with the accurate representation of the performance company