Qualitative Characteristics And Appropriate Accounting Standards Accounting Essay


Fiscal statements have ever been of of import concern for organisations. These fiscal statements can be in assorted signifiers such as balance sheet, and income statement etc ( Costales & A ; Szurovy, 1993 ) . The determinations of inclusion and exclusion of certain features in these fiscal statements have ever been a point of treatment. Therefore, it becomes important to understand what all to include in these fiscal statements.

Here in our essay, we are traveling to discussion the application of the chief qualitative features and appropriate accounting criterions that result in fiscal statements that convey a true and just position. The treatment makes usage of the fiscal statements of Cadbury plc, for the twelvemonth 2008. From the fiscal statement of the company, we can observe that the company merely considers its Cadbury trade name in its fiscal records. However, there are other trade names excessively associated with the company, which are ignored by them. Therefore, it becomes important to understand if it is important to include trade name in the fiscal records of an organisation. The below subdivision of this essay aims to reply this inquiry at manus, farther followed by decision at the terminal.

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Fiscal statements are the method of representation of the operating, fiscal and investing place of the company ( Peterson & A ; Fabozzi, 1999 ) . These fiscal statements are of import to show the company ‘s wellness ( Gill & A ; Chatton, 1999 ) . They demonstrate the market value of the company. Therefore, companies involve in this undertaking in a serious mode. However, it is of import to observe, what to include in these fiscal statements, and what non to include.

We are populating in the Branded Age of society ( Stiff, 2006 ) . This means, that our day-to-day activities are straight affected by the pick of merchandises based on trade name. We purchase our rinsing soap based on our trust on a trade name ; we wear apparels based on trade name pick ; we eat nutrient based on trade name pick. Or in all, all the things we use straight or indirectly, are consumed due to their trade name value associated. This raised the point of how to measure trade name in exact ( Ray, 2010 ) . Based on the trade name rating, we can do a right determination to measure the assets ( both touchable and intangible ) of the company. The intangible assets are besides important as they are formed after immense attempts put by the company. The company shall non disregard these net incomes.

However, there are some at odds state of affairss, which act against the importance of rating of trade name in an organisation. Such as, shall the trade name value be considered negative, in instance of negative hard currency flow? Is it a good thought to portion the trade name value with stockholders, and stakeholders? Who is the right authorization to measure trade name, internal governments of the company, or some adept house? These all inquiries raise a concern to happen a just value method by which we can measure the trade name value of an organisation. The companies normally follow their ain form of trade name rating. However, there should be some standard technique to measure the trade name. This can assist a batch to understand the exact worth of the company including its touchable and intangible assets.

There are several techniques for trade name rating. The inter-brand rating technique of UK is rather celebrated tool to measure trade name ( Ray, 2010 ) . However, it does non see the estimated net incomes from this intangible plus. This acts as the loophole for the technique. This is the ground, the technique failed in US ( Ray 2010 ) . The method makes usage of the past net incomes merely, in malice of the importance of trade name for future earning. However, the research workers argued that the trade name value does non hold an consequence on the financials of an organisation, and shall non be included in the fiscal statements, but shall merely be considered when the company is sold off ( Ray, 2010 ) .

This is of import to make up one’s mind, whether the intangible assets such as good will of a company shall be included in the balance sheet or non ( Ryland, 2009 ) . Trade names are an of import type of intangible assets for an organisation. Companies claim that trade name, if acquired from other companies, shall be included in the balance sheet. However, those trade names, which are generated internally, shall non be included in the balance sheets. This form seems to be widely in credence. However, some companies even valuate their ain trade names.

In malice of the figure of trade names associated with Cadbury plc, the organisation merely considers its trade name Cadbury in its balance sheet, and ignores the trade names such as Halls and Trident, and Dentyne etc. ( Cadbury, 2008 ) . This raises an of import point, what are the grounds for sing some trade names, and disregarding others from the balance sheet. The trade names, which are acquired after the twelvemonth 1986, are merely considered in the balance sheet of the company ( Cadbury, 2008 ) . Therefore, the company considers trade name as an of import factor in their balance sheets. However, the company is of the sentiment that the trade name value does non deprecate with due class of clip. They consider that the trade name value remains fixed for indefinite period.

There are several instances, which demand the trade name rating to be of of import concern. In instance of amalgamation and acquisition, 90 % of the monetary value that a company wage, is for the intangible assets of the company, of which trade name forms a noteworthy part ( Doyle, 2008 ) . In add-on, during the franchising and licensing, the company needs to measure its trade name, to make up one’s mind the right rate of royalty ( Doyle, 2008 ) . This forms the new criterion to understand how to measure the trade name. Cadbury excessively shall understand this, and measure their trade name ‘s royalty rate that is expected in the hereafter. Based on this, the company shall calculate out the trade name ‘s value.

As per the trade name rating company, BrandFinance, located in UK ; rating of trade name should be done on the royalty alleviation method, as its rating based on cost incurred and that due to market rating are non plenty for appropriate rating ( Davis, 2009 ) .

The trade name has non been considered as the incorporate portion of the balance sheet. Organizations follow their ain regulations and ordinances to measure the trade name. Therefore, the importance of trade name ‘s worth does non go much of import at present times for the stockholders and stakeholder of the company. There is the demand to hold some standard form to measure the trade name, which is of standard form for all the organisations. Then the trade name value would go an of import feature to find the net worth of the company. Investors and stockholders would be able to do better determinations on looking at these figures, which puting in the organisations. The trade name value would therefore go an of import portion of the organisations ‘ fiscal statements. Additionally, the finance section and the selling section would work in a good incorporate mode. The company would therefore be able to bring forth better consequences for its stockholders and stakeholders. This manner, Cadbury plc would be able to bring forth even higher grosss. The company should therefore analyze the rate of royalty expected from each of its associated trade names, and measure all the trade names consequently in its financials statements.


We can reason from above treatment that there are assorted facets associated with fiscal statements of an organisation. These are covered in the fiscal statements, to do a better analysis of the statistics of an organisation. Additionally, trade name, which is one of the most of import facets of gross revenues and selling section, is of import to see. Similar is the instance here. Cadbury plc has considered its trade name Cadbury in its fiscal statements. The organisation considers this trade name as an of import facet for rating. This helps in increasing the stockholder value of the organisation. Therefore, it might pull investings as good. Therefore, the organisation shall be appreciated for its consideration of Cadbury trade name in its balance sheet. However, we have seen that the organisation has ignored some other trade names of them.

This shows that for an organisation, some trade names are of import to measure in balance sheet, while others are non. The treatment besides suggests that the trade names, which are created at that place within an organisation, shall non be included in the fiscal statements. However, those acquired from other organisations shall be considered in these fiscal records. This manner, an organisation can show its right set of assets at that place within.

The companies are suggested to see the trade name in their fiscal records, whether acquired from other beginnings, or generated from at that place within. For this, the company shall measure the expected rate of return from the trade names and see them in the fiscal statements. These values might change with the transition of clip. This manner, the companies would be able to do better determinations in their rating and amalgamation and acquisition techniques. The right appraisal of company ‘s fiscal assets would be made in this attack, sing both qualitative and quantitative assets.


Cadbury ( 2008 ) , Cadbury PLC: Fiscal Statement, Available online at hypertext transfer protocol: //cadburyar2008.production.investis.com/en/siteservices/~/media/Files/C/cadbury-ar-2008/pdf/financial-statement/financial-statements.ashx [ Accessed on 3 December 2010 ]

Dan Stiff ( 2006 ) , Sell the trade name foremost: how to sell your trade name and create permanent client trueness, McGraw-Hill Professional, ISBN: 0071470425, 9780071470421

James O. Gill, Moira Chatton ( 1999 ) , Understanding fiscal statements: A primer of utile information, Cengage Learning, 3rd edition, 3-5

James P. Catty ( 2010 ) , Wiley Guide to Fair Value Under IFRS, John Wiley and Sons, ISBN: 0470597364, 9780470597361, 255-267

John Andrew Davis ( 2009 ) , Competitive Success, How Branding Adds Value, John Wiley and Sons, ISBN: 0470998229, 9780470998229, 44-48

Kamal Ghosh Ray ( 2010 ) , Mergers and Acquisitions: Strategy, Valuation and Integration, PHI Learning Pvt. Ltd. , ISBN: 8120339754, 9788120339750, 188-190

Pamela P. Peterson, Frank J. Fabozzi ( 1999 ) , Analysis of fiscal statements, Analysis of fiscal statements, 54 ( 1 ) , 25-27

Peter Doyle ( 2008 ) , Value-based selling: Selling schemes for corporate growing and stockholder value, John Wiley and Sons, 2nd edition, 335-339

Philip Ryland ( 2009 ) , Essential Investing: An Angstrom to Z Guide, Bloomberg Press, 2nd version, 104-109

S. B. Costales, Geza Szurovy ( 1993 ) , The usher to understanding fiscal statements, McGraw-Hill Professional, 2nd version, 8-10



In Cadbury plc fiscal statements 2008 prior to its acquisition by Kraft Inc. there was a important value of its trade names which could non be capitalised. In an infusion from its 2008 fiscal statements it states ‘ the chief economic and competitory assets of the Group are its trade names, including the Cadbury trade name, some of which are non on the balance sheet are these are internally generated ‘ Cadbury Financial Statements 2008. This is in line with IAS38, Intangible Assets

However, it besides states that ‘the group is a trade name concern and anticipate to get, keep and back up trade name for an indefinite period. ‘

The Framework for The Framework for Preparation and Presentation of Financial Statements states that the ‘application of the chief qualitative features and appropriate accounting criterions consequence in fiscal statements that convey… ..a true and just position ‘ . Explore this statement in visible radiation of the information above from Cadburys Financial Statements.