Page 442 - Introduction to Business

416 PART 4 Accounting

Case in Point

DaimlerChrysler: Accounting for Costs
and Benefits of Technology and Innovation

Using the latest technology is often environment as a part of its social responsibility to
essential to a business firm’s ability to compete in the promote sustainable mobility.
marketplace. Before a company adopts new At the annual Environmental Press Conference held
technology, the company must first assess the costs in Stuttgart, Germany, DaimlerChrysler presented the
and benefits of doing so. Accountants in a business world’s first synthetic diesel fuel, which does not affect
firm are often called upon to assimilate information the CO balance in the atmosphere during driving.
2
regarding the costs of incorporating new technologies The world’s first commercial fleet test with fuel
and to estimate the potential revenues that the new cell vehicles—30 Mercedes-Benz city buses with fuel
technologies will help generate. These costs and cell drive in ten European cities—are the CUTE and
revenues ultimately will have an impact on a ECTOS projects, both supported by the European
company’s financial performance, which will then be Commission.
reflected in the financial statements.
Source: DaimlerChrysler website: http://www.daimlerchrysler.com,
Technological expertise, speed, and flexibility October 1, 2003.
have made DaimlerChrysler a driving force behind
Questions
progress in the automotive industry. Around 28,000
employees are working worldwide on the research 1. Is use of new technology an important issue in the
and development of technical innovations. auto industry?
DaimlerChrysler registers around 2,000 patents every 2. Is it essential that a business firm adopt every new
year. Improving technology is considered essential in technology that is developed?
the face of an increasingly tough global competition. 3. How can a company determine if a new
With the initiative “Energy for the Future,” technology should be used or not used in
DaimlerChrysler is illustrating its commitment to the company operations?

decisions. For example, the net income figure is shown on both the income state-
ment and the statement of retained earnings. Retained earnings are shown on the
statement of retained earnings and the balance sheet. Cash is shown on the balance
sheet and the statement of cash flows.

reality If you were to prepare financial statements for yourself, what would
CH ECK they look like?

Auditing the Financial Statements

LEARNING OBJECTIVE 3
Describe the contribution of auditing to the usefulness of financial reporting.
People who rely on financial statements are very concerned about the validity of
the reports they receive. The management of a firm has the primary responsibility
for designing its accounting information system (AIS). A key concern for a firm’s
management is the reliability and integrity of the reports produced by the AIS.
Many business firms have a separate internal audit function charged with the
responsibility of ensuring that the internal control structure, especially that related
to the AIS, is operating effectively. In the case of publicly traded companies, users
of its annual financial statements (such as investors) need some form of assurance
that the statements do not contain material misstatements, either intentional or
unintentional. Assurance is provided by the independent external auditor who

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.