Question

What are the arguments for and against the all-inclusive approach to profit measurement?

What are the arguments for and against the all-inclusive approach to profit measurement?

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Answer #1

Ans: All-inclusive approach to profit measurement:

For: 1. it is simple to prepare as there is no requirement of distinction of items under several heads

2. it is easy to window dress company financials as abnormal items gets merged with normal items. Small Impacts willn't affect company's shares price.

3. All risk and reward are shared with the shareholders.

Against: 1. it is agains the principle of full disclosure.

2. Abnormal items gets merged with normal operation those correct picture of teh business couldn't be reflected.

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