Compare two finacial statmetns Essay Example | Topics and Well Written Essays - 1000 words

analyse two finacial statmetns - Essay ExampleThe BP financial statements reflect the FIFO methodology, which is first-in, first out when considering recognition of inventories. The first-in represent is represented by the salute of inventory at the start of the fiscal family and then a transfer to the cost of goods exchange represent the oldest costs incurred, based on the volume of inventories sold, leaving the more or less recent costs of inventoried merchandise that was purchased or produced in-house.BP did not have to choose the FIFO method, they could have selected from a weighted average option, which calculates the average cost of the items in the beginning inventory plus purchases made throughout the year (McManus et al, 155). Under this option, the average is calculated in order to derive a cost of goods sold figure and the value associated with ending inventory at the end of the fiscal year.BP could have also chosen the LIFO method, which is last in, first out. The calculations show more recent merchandise costs as cost of goods sold after the items have been sold with the on hand inventory at the end of the year costed to the oldest costs associated with the inventories.Stakeholder-orienting reporting standards atomic number 18 issued by the SEC, the Securities and Exchange Commission. The purpose of filing these financial reports to the SEC are to provide investors a full and fair disclosure of the securities being issued and the issuers occupation activities and financial lieu (Marshal, McManus & Viele, 385). The basic premise of SEC guidelines ensures that the information being presented in the financial reports is congruent to the actual business activities of the organization and is an accurate representation of real-life financial status for the company. This organization acts as a monitoring post to ensure that companies are not inflating earnings or