Financial accounting theories in a real life Assignment - 1

Financial accounting theories in a real life - Assignment Example incompatible researchers have dissimilar views regarding financial accounting theories (McGraw-Hill, 2006). thither are different types of accounting theories that can be implemented in real life scenario. nonpareil of them is the Repo 105 theory. This theory is used by many of the companies. Moreover, it needs to be mentioned that the misuse of such theories can result in negative functioning of the companies. There are many such cases where improper use of accounting theories result in complete demise of the companies. Financial regulations can play a study role in reducing such cases (Liu & Schaefer, 2011 Eisinger, 2012).The topic intends to discuss the role of Repo 105 scheme in the enhanced performance and subsequent downfall of the Lehman Brothers. The report would further depict the different motives that encourage companies to manipulate their financial accounts with reference to a few well known cases. More over, the report also intends to illustrate the immensity of financial regulations in reducing such cases.Repo 105 is an accounting trick where a company depicts a short-term loan as a ruin of the sales of the company. Moreover, this loan would be further used by the company to repay its liabilities. A repo agreement would include temporary transfer of assets from one troupe to another which would also be accompanied by an agreement of repurchase of the same assets after a particular phase of time. After a certain period of time, the transferee returns the securities to the borrowers, which in turn repays the loan with a considerable interest. It needs to be mentioned that as a part of the exchange process, one caller would receive securities as guarantee for the cash loaned, while the other party would receive cash guarantee for the securities loaned. It has been observed that these agreements are widely used as well as recognised as a legal means of