Contemporary Issues in Accounting

This document discusses contemporary issues in accounting, including the conceptual framework, qualitative characteristics, and financial statements. It explores the importance of accurate financial reporting and the role of users in making investment decisions. The document also highlights the need for technical expertise in assessing the true financial position of a company.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary issues in Accounting
Name of Student
Name of the University
Author Note

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CONTEMPORARY ISSUES IN ACCOUNTING

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CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Answer to question 1..................................................................................................................3
Answer to question 2..................................................................................................................3
Answer to question 3..................................................................................................................5
Answer to question 4..................................................................................................................8
Answer to question 5................................................................................................................13
Answers to question 6..............................................................................................................14
References................................................................................................................................15

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CONTEMPORARY ISSUES IN ACCOUNTING
Answer to question 1
The conceptual framework explain the conception that involves in the creation of the
financial statement. The objective of the framework is to:
 Help in the creation of the books of Account in line with the Australian accounting
standards (Macve, 2015).
 Support the auditors in forming a view as to whether business statement follow
Australian accounting standard.
 Help the users of the financial statement in understanding the information included in
financial statement created in conformism with Australian accounting standards.
 The framework proclaimed the following
o The purpose of the financial statement
o The qualitative features
o The acknowledgement and quantification of the component from which the
financial statement are made.
o The conception of capital and capital maintenance.
The company QUBE holding limited has followed all the rules and guidelines of the AASB
in the preparation of its financial statement which is as per the requirement of the conceptual
framework (Henderson, et.al 2015).
Answer to question 2
As per the conceptual framework, the business information is beneficial when it is relevant
and represents faithfully what it indicates to signify. The fundamental qualitative
characteristics are as follow (Francis Pinnuck, and Watanabe 2013).

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Relevance
Relevant information is useful of making a difference in the choice made by the users.
Relevance needs financial information to be associated to an economic conclusion. Financial
information is considered to be important if it has predictive value and confirmatory value.
Predictive value supports users in forecasting or anticipating future result. Confirmatory
value helps users to evaluate and approve earlier predictions or appraisals (CHIMDESSA,
2014).
Faithful representation
The financial data in the business report should signify what it indicate to epitomize. There
are three features of faithful representation.
 Completeness (sufficient or full disclosure of all required data),
 Neutrality (truthfulness and independence from Bias ),
 Free from mistake or error (no erroneousness and inadvertences).
From the analysis of the financial statement it can referred that the company has complied
with the fundamental qualitative characteristic (Karğın, 2013).
The books of account are complete in all respect i.e. the company has provided adequate
disclosure in the footnotes for the necessary transactions.
The financial statement which are prepared by the management of the entity represent
truthfulness. They have been prepared as per the relevant accounting standard and standard
on auditing.

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CONTEMPORARY ISSUES IN ACCOUNTING
The books of account prepared are free from mistake or error. Which imply entity is having a
proper internal control existing within the system which filter the inaccurate and inadvertent
transactions.
The transaction of the entity are implemented in agreement with the management general or
precise authorization.
 Entire transaction are readily recorded in the accurate volume in the suitable accounts
and in the accounting period.
 Assets are protected from the unauthorized admittance, usage.
 The verified assets are matched with the prevailing assets at a judicious interval and
necessary steps is engaged with respects to any variances (Henderson, et.al 2015).
Answer to question 3
Enhancing qualitative characteristics
1. Comparability
This features of the financial statement help the stakeholder of the company like
investor, trader, lenders, and other financial institution to compare the financial
statement of across the entity. For example investor can compare the income
statement of the entity for the different period say 2017 and 2018 to know the
financial performance of the entity (Kieso, eygandt, and Warfield, 2016).

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Statement showing the comprehensive Income
2. Verifiability
This qualitative characteristic of the financial statement, provide assurance to the
users of that the books of account of the company that the information is verifiable
that is it can examined and investigated about its truthfulness (Kieso, eygandt, and
Warfield, 2016).

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CONTEMPORARY ISSUES IN ACCOUNTING
Verification can be done on the financial statement through the notes to account.
3. Timeliness
This qualitative characteristic of the financial statement represents that the decision
maker or the users of the financial statement should be offered the useful information
on a timely basis. There should not be any delay in the delivery of information.
4. Understandability
This features of the financial statement says that the financial statement of the
enterprise should be comprehensible that is the information or company performance
data must be presented clearly and concisely. There should be a proper explanation of
each of the complex items.

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CONTEMPORARY ISSUES IN ACCOUNTING
From the analysis of the above data of the QUBE holding limited. It can be said that the
company financial statement, are supportive of the enhancing qualitative features of the
company like comparability, verifiability, Timeliness, understandability (Siad, 2018).
Answer to question 4.
The users of the financial statement of the QUBE holding uses the different statement of
account of the company to make their investment decision (Murphy and Connell, 2013). Such
statement includes
 Income statement of the company
This is also known as the profit and loss account of the company, this shows the
revenue, expenses and net income or loss for the period. This displays the profit or
Expenses for a specific period of time.

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Statement showing the comparative Income Statement of the company.
 Balance-sheet of the company
It is the important part of the financial statement of an entity which incorporate assets,
liabilities, total borrowing and shareholder fund. Balance sheet is like snapshot of the
company financial position at some particular point of time, which is generally
computed after each six months or one year (Weil, Schipper and Francis, 2013).

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CONTEMPORARY ISSUES IN ACCOUNTING
Statement showing the comparative balance sheet of the company.
 Cash flow statement of the company
A company cash flow statement signify the company total cash inflows and total cash
outflows. From analysis point of view it shows the sources where the entity is making
money for its business and sources where entity is expending more. This is important
for evaluating the liquidity position of the company. Bank and other financial
institution assess the company cash flow statement in order to examine the entity
credit worthiness.

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CONTEMPORARY ISSUES IN ACCOUNTING
Statement showing the cash flow statement of the QUBE holding.
 Financial ratios
These ratio play an important part in the evaluating the company performance and
equating with the related business of the industry. Different ratio shows different
position of the company performance. An investor before making such decision, will
always do ratio analysis of the company in order to assess their performance.

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CONTEMPORARY ISSUES IN ACCOUNTING
Remuneration Framework of Qube’s
These analysis of the financial statement allows the users assess the financial
health of the company with respect to its profitability, financial position.
It help the creditor or the lending financial institution assess the solvency and
creditworthiness of the business. So that they can use this information in deciding to
issue the credit to the company (Macve, 2015).
The investor before making their investment decision, also examine the
various financial ratios of the company in order to assess the performance and market
position of the like liquidity ratio, return on equity, operating performance ratio of the
company.
Liquidity measurement ratios help the users to evaluate the liquidity solvency
of the company. Some of the example are current ratio, quick ratio, cash ratio, cash
conversion cycle, profitability ratio. Example of operating performance ratios are
fixed assets turnover ratio, cash flow coverage ratio, dividend payout ratio.

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CONTEMPORARY ISSUES IN ACCOUNTING
Answer to question 5
User of the financial statement examine the financial statement of the company in
order to make their investment decision (Henderson, et.al 2015). Management of the
organization is accountable for the making of the books of account of the company.
Sometime window dressing has also been done to the financial statement to attract investor in
the company business. Several cases have been identified about the involvement of the fraud
and misrepresentation in the business.
There are possibilities that books of account have been deliberately manipulated to
commit fraud. Such manipulation may be done to avoid the incidence of tax, to withhold
declaration of dividend even if there is sufficient profit in the reserve, defalcation of cash,
fraud are done by the management in order to receive higher remuneration, where salary is
based on the profit (Libby, 2017).
Therefore to assess the true financial position of the company user does not need just
the basic knowledge, they need the technical and practical expertise in
 Determining that the account have been prepared with reference to the entries in the
books of the accounts (Francis, Pinnuck and Watanabe, 2013).
 To know whether the books of account are adequately supported by underlying papers
and documents and by other evidence.
 The data revealed by the statement should be vibrant and explicit.
 Determine that the business statement account are to be appropriately categorized,
pronounced and revealed in conformism with accounting standard.

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CONTEMPORARY ISSUES IN ACCOUNTING
Answers to question 6.
A general purpose financial statement refers to the financial statement which are
prepared as per the general purpose framework (CHIMDESSA, 2014). The terminology
“general purpose financial statement’’ generally includes a Balance sheet ,a statement of
profit and loss account , cash flow statement statement and explanatory material which are
integral part of the financial statements. They may also include supplementary schedule and
disclosure of the financial statement.
However, financial statement do not include such statement as statement by the
chairman, discussion and analysis by management and similar items that may be included in
a annual report. Such financial statement are prepared and presented at least annually and are
directed towards the common information needs of a wide range of users (Barth, 2013).
From the analysis of the financial statement, it can be said that the company has
maintained its books of account as per the general purpose frame work which includes a
Balance sheet, a statement of profit or loss account and cash flow statement.

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References
Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting
Horizons, 28(2), pp.331-352.

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CONTEMPORARY ISSUES IN ACCOUNTING
CHIMDESSA, T., 2014. THE IMPACT OF MICROFINANCE FINANCIAL SERVICES
ON THE ECONOMIC EMPOWERMENT OF WOMEN: THE CASE STUDY OF
WISDOM MICRO FINANCING INSTITUTION SC, AT WOLISO WORDA (Doctoral
dissertation, St. Mary's University).
Francis, J.R., Pinnuck, M.L. and Watanabe, O., 2013. Auditor style and financial statement
comparability. The Accounting Review, 89(2), pp.605-633.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Karğın, S., 2013. The impact of IFRS on the value relevance of accounting information:
Evidence from Turkish firms. International Journal of Economics and Finance, 5(4), pp.71-
80.
Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2016. Intermediate Accounting, Binder
Ready Version. John Wiley & Sons.
Lawson, R.A., Blocher, E.J., Brewer, P.C., Cokins, G., Sorensen, J.E., Stout, D.E., Sundem,
G.L., Wolcott, S.K. and Wouters, M.J., 2013. Focusing accounting curricula on students'
long-run careers: Recommendations for an integrated competency-based framework for
accounting education. Issues in Accounting Education, 29(2), pp.295-317.
Libby, R., 2017. Accounting and human information processing. In The Routledge
Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.

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CONTEMPORARY ISSUES IN ACCOUNTING
Murphy, T. and O’Connell, V., 2013. Discourses surrounding the evolution of the
IASB/FASB Conceptual Framework: What they reveal about the “living law” of
accounting. Accounting, Organizations and Society, 38(1), pp.72-91.
Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public
Sector Accounting Standards of the IFAC. A critical case study. Critical Perspectives on
Accounting, 25(3), pp.272-285.
Owen, G., 2013. Integrated reporting: A review of developments and their implications for
the accounting curriculum. Accounting Education, 22(4), pp.340-356.
Parker, L., 2014. Qualitative perspectives: Through a methodological lens. Qualitative
Research in Accounting & Management, 11(1), pp.13-28.
Siad, H.A., 2018. The effect of financial reporting on investment decision making at Salam
somali bank.
Silverman, D., 2013. Doing qualitative research: A practical handbook. SAGE publications
limited.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.