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Investors can use homemade leverage to change an unleveraged firm into a leveraged firm. [ 1 ] [ 2 ] According to the Corporate Finance Institute , "the founding philosophy of homemade leverage is the Modigliani–Miller theorem , which assumes an efficient market and the absence of corporate taxes and bankruptcy costs."
Under the AICPA's Code of Professional Ethics under Rule 203 – Accounting Principles, a member must depart from GAAP if following it would lead to a material misstatement on the financial statements, or otherwise be misleading. In the departure, the member must disclose, if practical, the reasons why compliance with the accounting principle ...
For example, assume a party buys $100 of a 10-year fixed-rate treasury bond and enters into a fixed-for-floating 10-year interest rate swap to convert the payments to floating rate. The derivative is off-balance sheet, so it is ignored for accounting leverage. Accounting leverage is therefore 1 to 1.
The International Ethics Standards Board for Accountants (IESBA) develops and promotes the International Code of Ethics for Professional Accountants (including International Independence Standards). The IESBA also supports debate on issues related to accounting ethics and auditor independence.
Accounting ethics is primarily a field of applied ethics and is part of business ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting was introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent ...
The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts.The issues which arise include the difficulty of establishing a true and fair value of an enterprise and its assets; the moral basis of disclosure and discretion; the standards and laws required to satisfy the political needs of investors, employees and ...
Closely related to leveraging, the ratio is also known as risk, gearing or leverage. The two components are often taken from the firm's balance sheet or statement of financial position (so-called book value ), but the ratio may also be calculated using market values for both, if the company's debt and equity are publicly traded , or using a ...
A code of practice is adopted by a profession (or by a governmental or non-governmental organization) to regulate that profession. A code of practice may be styled as a code of professional responsibility, which will discuss difficult issues and difficult decisions that will often need to be made, and then provide a clear account of what behavior is considered "ethical" or "correct" or "right ...