Finance

Institutional structure may require that the form and content of financial statements be developed around the distinctive model of the organization.  This would involve having a different mindset that will ensure that an integrated financial report is prepared. As such the form and content of the financial statement will present the model of the specific organization carrying out the reporting work.  A significant impact is that the financial statements may contrast the reporting based on established compliance.  The integrated financial statements must cover all the contents following the various laid down principles so as to enable stakeholders including capital providers to make decisions about the value and stewardship of the business (Jones, 2015).

The material information or data are retained in the financial statements so that all the relevant financial data is included, even if the form of presentation changes. To align with the institutional structure, the financial statements are well designed so that material financial data that shows performance follows naturally. For instance, an organization that is investing in assets base may feel frustrated that rules on financial reporting places their investments in the class of cost instead of asset. Woodside Petroleum Company indicates creation of new gas and oil may be reported .Annual reconciliation of proved dry gas and oil reserves is done to show a total of 1,292.4 MMbbl, to indicate the unique structure of reporting (Woodside Petroleum, 2011). This shows key performance metric unique to this company.

Cost of capital refers means the opportunity cost realized for making a given investment or cost used to acquire funds for financing business operations. Marginal cost of capital refers to the cost of extra unit of certain raised capital. Cost of capital forms a major part of process of capital budgeting, and affects the capital structure of a company.  Obtaining capital is a logic decision of return on this capital is higher than cost (Brigham, & Houston, 2013).

References

Jones, S. (Ed.). (2015). The Routledge companion to financial accounting theory. Routledge.

 

Brigham, E. F., & Houston, J. F. (2013). Fundamentals of financial management. Mason, Ohio: South-Western Cengage Learning.445-446

Woodside Petroleum,(2011).Annual Report