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ACC307 Accounting Theory Assignment

   

Added on  2020-05-11

8 Pages2043 Words45 Views
Running head: ACCOUNTING THEORYAccounting TheoryName of the StudentName of the UniversityAuthor’s Note

1ACCOUNTING THEORYIntroductionThis particular essay takes an honest attempt to analyse and evaluate various aspects ofthe concept of conceptual framework in the process of accounting. In this context, it needs to bementioned that the main aim of conceptual framework is to bring different kinds of positivechange in the process of accounting so that the accountants of the companies do not have to faceany kind of trouble at the time of carrying on the accounting operations for their companies(aasb.gov.au 2017). Thus, it can be seen that conceptual framework has an important role to playin the accounting process of the companies. In the recent years, some of the major attempts ofthe conceptual framework to bring some radical changes in the accounting process have failed.In this context, it needs to be mentioned that the success of the steps of conceptual frameworkdepends on the implementation of these changes in the company and all these changes must bematched with the accounting disclosure principle of the companies. Thus, it is needed for thecompanies to follow the principle of conceptual framework at the time of accounting operationsof the companies (ifrs.org 2017).AnalysisFrom the above analysis, it can be said that conceptual framework is one of the majorconcepts in accounting. It has been seen that the International Accounting Standard Board(IASB) has been taking some of the major steps to bring radical changes in the conceptualframework of accounting (ifrs.org 2017). In this context, it needs to be mentioned that thebusiness organizations prepare the financial statements of their companies so that majorstakeholders of the companies like shareholders, investors and others can know about thefinancial health of the companies. In every country all over the world, the business organizationsare needed to publish their financial statements on a yearly basis. However, differences can beseen among the financial statements of the companies across different nations. In spite of thisfact, some common features can be seen in every financial statement of the companies all overthe world. They are different kinds of accounting concepts, disclosure requirements and others.In order to bring coordination among the financial statements of the companies, IASB hasproposed some of the major changes in the conceptual framework under the financial reportingof International Financial Regulatory Standards (IFRS) (Abeysekera 2013). For this purpose,

2ACCOUNTING THEORYIASB has published an exposure draft describing the proposed changes in the conceptualframework. Some of those major changes are described in this part. First, IASB has proposed forthe adoption of appropriate measurement base for measuring the values of the assets andliabilities of the companies. In this context, it needs to be mentioned that the businessorganizations have to considered all the factors at the time of the selection of the measurementbases of the assets and liabilities. The second change has been proposed in the reporting of theincome and expenses of the companies. It has been proposed that the business organizations needto report all the income and expenses of the companies in the comprehensive income statementsof the companies (Weil, Schipper and Francis 2013).The next change is regarding the definition of accounting building blocks of the financialstatements of the companies; that are assets, liabilities, equity, income and expenses. The nextchange is considered as one of the major changes in the conceptual framework of the companies.As per this particular change, the business organizations are required to report greater amount ofliabilities in their financial statements (Zhang and Andrew 2014). There are many instances allover the world that many business organizations have not disclosed all the amount of theirliabilities in the financial statements of the companies. There are many implications of this actionby the companies as it has its effect on the financial statements of the companies. In this context,it needs to be mentioned that the business organizations publish the annual financial statementsso that the investors can get all the necessary financial information about the company (Murphyand O’Connell 2013). It is a common fact that the reporting of large amount of liabilities willaffect the financial health of the companies. Large amount of liabilities implies that the companyis mostly dependent on debts. It is common that after knowing this fact, the investors will be lessinterested in making investments in those companies. This can be considered as one of the majorreasons for the failure of the radical steps by IASB. There are instances of many of thecompanies where the companies have not shown the full amount of their business liabilities inorder to attract the attention of the investors. The implementation of this change will make thingsdifficult for the companies, as they have to report all amount of their liabilities in their financialstatements (Gebhardt, Mora and Wagenhofer 2014).For the above reason, a great level of lobby can be seen against the implementation ofthis particular change. In this context, it needs to be mentioned that with the help of bringing

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