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Paper on Accounting Theory and Issues

   

Added on  2020-05-28

14 Pages3184 Words112 Views
Accounting Theory and Issues 1ACCOUNTING THEORY AND ISSUESby(Student’s Name)Professor’s NameInstitutionLocation of InstitutionCourseDate

Accounting Theory and Issues 2Executive Summary The conceptual accounting framework is considered as objectives and ideas which result in the development of a consistent set of standards and rules. The primary objective of the conceptual framework is, therefore, to guide accountants on the procedures and policies for the preparation of accounting financial information in the various company. This paper seeks to giveinsight into the accounting system of Evolution Mining Company. It discusses how the company has complied with the fundamental qualitative characteristics of financial information including those features which enhances the qualitative characteristics such as timeliness, understandability and comparability. The other focus of the paper is on the accounting problems faced by the Evolution Mining Company as discussed in the paper below. Moreover, the paper has highlighted on the key recommendations to be used by the companyto prevent accounting problems and such recommendations entail, the enhancement of the qualitative characteristics of accounting information. The paper concludes by giving an overviewof whether the company has complied with the qualitative characteristics of accounting information or not as required by the Australian Security Exchange.IntroductionEvolution Mining Limited is an Australian gold miner company established in 2011 as a mid-tiergold producer with the merging of Conquest Mining Ltd and Catalpa Resources Ltd as well as the concurrent acquisition of Newcrest Mining's interests in the Cracow and Mt Rawdon mines. Since its establishment, the company has grown through acquisition; acquiring Cowal and Mungari in July and August of 2015 respectively as well as Ernest Henry in November 2016. Having created a reputation for consistency and reliability Evolution has won several accolades such as Craig Oliver Award, 2016 Miner of the Year to mention a few (Piper, 2018 p.33).

Accounting Theory and Issues 3Conceptual FrameworkThe conceptual framework for financial reporting creates the concepts that lie in financial reporting. Financing reporting provides information useful to both the potential and existing investors, creditors and others in the making decisions on resource allocation and investments. It is also useful in evaluating prospects of cash flow and the provision of information on resources of a business organization including claims. The key conceptual framework elements include relevance, faithful representation, understandability and comparability. An information should berelevant in decisions relating to allocation of resources, investment and credit allocation.An information which is relevant can make a difference in the decisions of users by helping themin the evaluation of potential past, present and future transaction effects on future cash flows. A faithful representation of the real world economic phenomena is useful in investing, credit resource allocation decisions. Thus the information must be verifiable, neutral and complete. Comparability enhances the financial reporting information usefulness in making investment, credit and resource allocation decisions (Piper, 2018 p.33). Understandability enables users having a reasonable knowledge of business and economic activities and financial accounting to study the information and comprehend its meaning. The critical requirements for a general purpose financial reporting are that one a company must comply with the accounting standards and such a report has to be prepared in accordance with the Australian Accounting Standards.The other requirement is that the general purpose financial reporting should offer an accurate representation of the financial position, cash flows and financial performance of a particular

Accounting Theory and Issues 4company in a structured manner. Moreover, the general purpose financial reporting should also be in a position to provide relevant information which is useful to a variety of users to enable them to make viable economic decisions. Lastly, it is required of the general purpose financial reporting to indicate the results of the stewardship of management of the resources which have been allocated in a particular company. However, to comply and meet the requirements, the financial statements must be prepared on the basis of measurement and recognition criteria which would represent the financial position and performance of an entity faithfully.Critical AnalysisStakeholder TheoryAccording to the theory, the primary aim of the business entity is the creation of value forthe key stakeholders of the company. The executive members of the company should ensure therefore that the various interests of the stakeholders such as employees, customers, shareholders, customers and suppliers are aligned and therefore go together in the same particular direction (Piper, 2018 p.33). The stakeholder theory has however been criticized by different individuals especially in relation to the fiduciary obligations. According to the critics ofthe theory, they argue that the theory results in the breakage of the fiduciary duties which the managers of the company have on shareholders and this has been considered as unethical. However, there are several benefits which have been obtained by the company due to the use of the stakeholder approach. Generally, the primary activity of any particular business entity is not to make profits for the shareholders, but rather it entails the enhancement of the state of the world including the

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