Exercise – Annual Accounts


Annual Accounts

Sterling Patterson Insurance is a three year old firm engaged selling health insurance in the United States. They specialize in providing Long Term Health Insurance Policies.
The company has set forth a strong expansion strategy which includes a low budget marketing plan. Sterling Patterson sees an opportunity to enter the international market for health insurance. Its strategy includes developing an affiliate program to recruit local agents. The Company’s health insurance marketing efforts will focus on those in upper socioeconomic classes with a proven ability to pay.

(4) Which of the following companies may be most likely required to provide more detailed financial information in the form of annual accounts?

  • (a) Limited liability companies
  • (b) Insurance companies
  • (c) Savings Institutions
  • (d) Barber Shops Limited

Six months from its planned launch in Europe and Asia, Sterling Patterson has realized that it has insufficient knowledge of accounting implications associated with complying with various international regulations. In addition to having a fine marketing plan, Sterling Patterson now realizes it must prepare a path through a maze of various accounting guidelines.

It was most recently determined that the company would increase accounting staff expertise and capabilities in order to avoid potential catastrophes such as failing to meet financial deadlines. It will submit the required annual accounts needed for participation in diverse international markets. Sterling Patterson understands the risk that such failures to disclose might jeopardize potential relationships and investments.

Demonstrate your understanding of annual accounts and how they might impact Sterlings planned expansion, by answering the following questions:

(1) How does information in the annual accounts differ from a basic annual report?

  • (a) Potentially more notes of explanation
  • (b) Increased occasions to illustrate data showing multiple years
  • (c) Requires more effort in identifying interested parties and their concerns
  • (d) All of the above

(2) Which of the following is not a governmental entity regulating the content of annual accounts?

  • (a) International House of Pancakes
  • (b) American Securities Exchange Commission
  • (c) International Accounting Standards Board

(3) What are reasons why more notes, explanations and disclosures might be necessary when doing business in international markets?

  • (a) They may reveal different accounting policies that are applicable
  • (b) They may provide clarification on differing tax rules
  • (c) Valuation rules concerning assets may vary from country-to-country
  • (d) All of the above

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Tim Friesner

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