Advance Financial Accounting & Reporting
Added on 2021-05-30
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Advance financial accounting
Table of ContentsTask A..............................................................................................................................................3Task B..............................................................................................................................................4TASK C...........................................................................................................................................5Task D..............................................................................................................................................7Part A...........................................................................................................................................7Part B...........................................................................................................................................7Part C...........................................................................................................................................8References......................................................................................................................................10
TASK AIn accordance with IASB (2010), there are two key qualitative characteristics in financialstatement which are; relevance and faithful representation. Financial statement information issaid to be relevant when it is able to make a difference in user’s decisions in the financialstatement. Further, relevant information possess expected value or confirmatory. While faithfulrepresentation is referred as the information that states real-world phenomena of the economythat it assumes to represent. Both these characteristics integrate usefulness and meaningfulness inthe financial statement to users (Chan and Vasarhelyi, 2018). In addition, there are someimproving qualitative characteristics, acting as a compliment to these primary characteristics areunderstandability, comparability, timeliness and verifiability. These enhancing qualitativecharacteristics differentiate between beneficial information from non-beneficial information,while they enhance the usefulness in decisions of financial reporting information which isfaithfully represented and relevant. Fair value is considered to ensure a higher level of transparency in the financial reporting,leading to a higher relevance value of accounting data and better ability of the financial market torepresent the true value of the firm. On the other hand, it is argued by critics that fair value ofaccounting is based on models which are non-reliable, thereby its causes confusion regarding theusefulness to the users. The value based on the relevance of financial reporting as per the IAS/IFRS in Europe at thetime of economic crises and its particular connection to fair value accounting is the main issue,particularly in regards with the banking sector, investigation on which is still not donecompletely. By considering this aspect, IASB has operation closely with the standard setters ofUS for a long period, to cover the requirements of IAS/IFRS and US GAAP. Consequently,currently, two accounting standard sets are extremely aligned than they were ever before (Zhangand Andrew, 2014). With this rations, the US Security Exchange Commission (SEC) haspermitted non-US organizations listed on the US market to make use of IFRS. Conversely, whileit is indicated by the research that accounting quality as per the IAS/IFRS usually surpasses thatof domestic accounting amounts based on standards.
There is criticism based on measurements of historical costs which are; recognition ofimpairment losses and recovery on the same seems to lag behind capacity changes. In case thecash flow capacity of asset highly exceeds than its carrying amount, by this capacity can reducematerially prior to the non-recoverability of carrying amount and the recognition of impairmentloss. Along with this, there is the accessibility of alternative depreciation methods; some of themtrace reduction in the capacity to produce cash flows in a close manner as compared to others(Tayeh, Al-Jarrah and Tarhini, 2015). Recognition of impairment losses, but non-recognition ofgains that take place from the assets capability to produce increases in cash flows. Measurementsbased on costs neglect the fact that enterprises might make a decision on selling of an asset thathas value appreciation. The reliability of measures is based on the faithfulness with its represents that it assumes torepresent, integrated with a promise for the user that it represented quality information, whichwill be useful, reliable and relevant for the users (Ioannou and Serafeim, 2017). By this, level ofreliability is also recognized. The overall concept of financial accounting is to form and integratebeneficial information for the accounting information, and they must include these qualities to beused for external financial users. TASK BPublic theory of regulation retains that regulation is supplied in regards to public demand fordriving efficiency within market practices. Further, regulation is expected to benefit society as alarge, instead of a specified interest based on the vest. The regulatory body is assessed to showthe society interest wherein the regulatory regulate instead of the regulators’ private or owninterest. It is assumed by the public theory that the economic markets are extremely fragilehaving a tendency to work in an ineffective manner and own concern while neglecting thesignificance if society. Thus, in order to monitor and control the economic markets theintervention of government is needed(Grunig, 2017). According to theory, the governmentregulates banking authorities making them work for the benefit and interest of society, makingthem eligible to deliver social interest while allocating resources in an effective manner. Publicinterest theory is a reason to establish the legislation which regulates and oblige for the company
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