Entity Analysis

Question 1

What does it involve?

Answer 1

understanding how the boundaries between entities are defined

Question 2

2 specific concerns

Answer 2

• does the firm have hidden commitments/losses

- entity analysis attempts to answer questions by understanding

Question 3

Entity reporting challenges: Partial control

Answer 3

assessing if one firm has control over another firm is subjective and depends on % ownership, purpose of acquisitions

Question 4

Entity reporting challenges: Control difficult to measure

Answer 4

• Control normally viewed in terms of %, however control can be difficult to determine, but can be difficult to determine for partnerships/joint ventures, franchise, related parties

Question 5

Entity reporting challenges: Defining and measure core performance

Answer 5

• Consolidated accounts provide investors with a good overview of performance