Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

© 2022. Todd Sayre. This research/review article is distributed under the terms of the Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0). You must give appropriate credit to authors and reference this article if parts of the article are reproduced in any manner. Applicable licensing terms are at https://creativecommons.org/licenses/by-nc-nd/4.0/. Global Journal of Management and Business Research: D Accounting and Auditing Volume 22 Issue 2 Version 1.0 Year 2022 Type: Double Blind Peer Reviewed International Research Journal Publisher: Global Journals Online ISSN: 2249-4588 & Print ISSN: 0975-5853 The Effects of Entity Shielding on Claims to Assets: Implications for Financial Reporting By Todd Sayre Abstract- Strong entity shielding enables corporations to shield firm assets not only from shareholders but also from each shareholder’s personal creditors. This implies that corporations, not shareholders, own the firm assets. This paper tests this implication by examining legal scholarship on shareholder ownership. The results indicate that, unlike sole proprietors, shareholders have no legal claims to firm assets. This result responds to FASB/ISAB convergence discussions regarding whether corporate reports should take a proprietary or entity perspective. Shareholders have no claims to firm assets, yet balance sheets imply shareholders have exclusive claims to net assets, identical to those of sole proprietors. Therefore, the propriety perspective appears inappropriate for corporate balance sheets. The paper discusses how standard setters can use entity shielding to determine claims to firm assets as a principled approach to differentiate reporting perspectives among reporting entities. Keywords: reporting entity; reporting perspective; entity shielding; liquidation protection. GJMBR-D Classification: DDC Code: 346.410666 LCC Code: KD2100 TheEffectsofEntityShieldingonClaimstoAssetsImplicationsforFinancialReporting Strictly as per the compliance and regulations of: