Financial reporting as an instrument to protect creditors` interest in corporation subsidiaries

Authors

  • Ката Шкарић Јовановић Faculty of Economics, University of Belgrade

Keywords:

Financial reporting, protection of creditors` interest, financial reports of subsidiaries, limitations, parent company, solvency assessment, consolidated financial reports

Abstract

Informing creditors on the assets, liabilities, results and net cash of informing entities in order to make appropriate decisions on investments is considered one of the main objectives of fnancial reporting. Financial reports can fully contribute to protection of creditors` interest only under condition that they present actual state of fnancial and yield position of reporting entity. Financial reports of subsidiaries have limited reference power due to their lack of economic independence. Tey nearly always present fnancial and yield position designed by the measures of a parent company. Creditors of subsidiaries should have this fact in mind when assessing the credit worthiness of debtors which are subsidiaries. Te use of information on fnancial and yield position of a company as a whole cannot completely remove restrictions on informational value of individual reports of subsidiaries, but they can certainly be mitigated.

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Published

2012-02-29

How to Cite

Шкарић Јовановић, К. (2012). Financial reporting as an instrument to protect creditors` interest in corporation subsidiaries. Acta Economica, 10(16), 27–44. Retrieved from http://ae.ef.unibl.org/index.php/AE/article/view/133

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Section

Preliminary Communication