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Current Development In Accounting Thought | ACC518

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Current Developments In Accounting (Acc518)

   

Added on  2020-02-24

Current Development In Accounting Thought | ACC518

   

Current Developments In Accounting (Acc518)

   Added on 2020-02-24

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Current Development in Accounting Thought
Current Development In Accounting Thought | ACC518_1
IntroductionThe present paper presents there short critical essays related to the contemporary issues inaccounting. In this context, the first essay aims in demonstrating the knowledge of the qualitativecharacteristics of accounting as mentioned in conceptual framework. The next essay demonstratesknowledge of normative theories in accounting and the last essay is about discussing the building blocksof conceptual framework.Answering Q11. Define CF in accountingAs per the IASB, a non-profit organization responsible for developing global accountingstandards has developed and implemented conceptual accounting framework for improving the qualityof financial reports of business entities. The conceptual framework determines the concepts that help inpreparation and presentation of financial statements to end-users (IFRS Conceptual Framework: About,2017). The main purpose of developing conceptual framework is to provide guidance to the IFRS indeveloping future financial reporting standards and assisting national standard-setting bodies indeveloping accounting standards. The conceptual framework assembles the interrelated concepts ondifferent accounting theories for developing standard-setting and consent accounting principles(Deegan, 2014, p.214). The four major qualitative characteristics of useful financial information as perthe conceptual accounting framework are relevance, reliability, comparability and understandability(International Accounting Standards Board [IASB] 2010, p.xxx).2. Link CF to the objectives of general purpose financial reportingThe objectives of general purpose financial report provide a basis to the development andfoundation of conceptual framework. The major objectives of the general purpose financial reports areto provide useful and credible financial information to the present and future investors of a businessentity. These objectives are linked with the conceptual framework principles of relevance, reliability,comparability and understandability that aim at enhancing the decision-making usefulness of financialstatements (IFRS Foundation, 2015). 3. Link the objectives of general purpose financial reporting to intended usersThe general purpose financial reports aims to provide useful and pertinent information to theend-users for enabling them to make investment decisions. The IASB, in this context, has includedstewardship under its objective of decision-usefulness. The stewardship approach as aligned the general
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purpose financial reporting objectives with those of the intended users. The main objective ofstewardship is to disclose more information about the past events and future performance of a businessentity in financial reporting to support the decision-making process of end-users (Deegan, 2014,p.166).4. Qualitative characteristics of accounting linked to intended usersThe qualitative characteristics of financial information as per the IASB are relevancy,comparability, verifiable, timely and understandable. These are linked to the intended users as thesecharacteristics aims to disclose all the necessary and materialistic financial information to the users forprotecting their interest. The development of financial statements on the basis of these characteristicwill ensure that end-users such as investors and creditors receive all the accurate and realistic financialinformation for making correct decisions regarding their investment (IASB CF, 2015, p.27-30).5. Linking the qualitative characteristics to the objectives of measurementAs per the IASB objectives of measurement, the financial reports should measure all the assetsand liabilities on a uniform basis as per the relevance qualitative characteristics of financial reporting.Also, the fundamental qualitative characteristics of faithful representation have also some implicationsfor measurements as per which financial reports developed must be free from any error. However, thisdoes not imply that measurements should be perfectly accurate but any deviations must be faithfulrepresented during financial reporting. As per the understandability qualitative characteristic, the usersof financial report must be able to develop an understanding of the measurements used (InternationalAccounting Standards Board [IASB] 2013, p.xxx). 6. a. Which is more important: relevance or faithful representationThe relevance and faithful representation are the two main qualitative characteristics offinancial reporting. However, with the increasing incidents about the fraudulent activities in theorganizations due to hiding and concealing of useful information has initiated the debate of determiningthe most important qualitative characteristic of accounting between relevance and faithfulrepresentation. The relevance has been regarded as most important over fair representation as it moreimpact on improving the quality of financial reports by disclosing all the materialistic facts and figures sothat investors realize a true picture of the financial position of a firm (IASB CF, 2015, p.27-30).b. Is it possible for accounting to ever achieve faithful representation?The financial statements must have completeness, neutrality and free from any materialisticerror in order to achieve faithful representation. However, this is not possible in real terms as thebusiness entities are not able to provide accurate value of a reporting firm but only provide anestimation of its value. The financial reports cannot provide all the information required by the potential
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