Current Developments in Accounting Thought

This article discusses the current developments in accounting thought, focusing on the role of information technology in fighting money laundering and fraud. It also explores ways to reduce money fraud and laundering in South Africa and the use of technology in mitigating these issues. The article further examines an exposure draft on stock compensation and revenue from contracts with customers issued by the Financial Accounting Standards Board.

Running head: CURRENT DEVELOPMENTS IN ACCOUNTING THOUGHT 1
Current Developments in Accounting Thought
Name
Affiliation
Date

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Question 1
Introduction
According to the assignment by the senior partner of the company, I was required to
make a review of the upcoming accounting standards and provide a report to the partners on the
proposed standards and the opinions of other industry players on the changes. In this case, the
current exposure draft that I choose is; "IT has a crucial role to play in the fight against money
laundering." the new article was posted by “Fintech News South Africa” and published by
Anusha Singh on 15, April 2019. The article indicates that there is a high rate of money fraud
and laundering across the world. The article illustrates that Information Technology is supposed
to be adopted in order to fight the financial problem (Das, 2017). Also, various financial
institutions are required to take part in the fight of money-fraud and laundering by involving
various. However, if various international standards and practices are applied with the help of
technological, the risks and losses that arise as a result of money laundering and fraud will be
mitigated. In the accounting field, the issue of money fraud and laundering is a new problem.
The impacts of money fraud are realized if reports are made in the news. As a result of money
frauds and laundering, financing of terrorists is becoming a very big issue in South Africa
because it provides a chance to the criminals to continue with their crime. Also, it gives the
terrorists an opportunity to enjoy their acts of destruction with the help of the money obtained
from money laundering to support their activities of terrorism (Anginer, &Kunt, 2014).
In this case, it is noted that money fraud and laundering are connected to financing
terrorist in that, the criminal activity connected to fraud generate funds that are laundered.
Therefore, money fraud move hand in hand with money laundering. Money fraud is regarded as
an offense or crime related to money laundering (Dowding, 2017). Therefore, it is the
responsibility of the various financial institutions to prevent the occurrence of money fraud and
laundering. However, various countries have not been in the position to take a step to ensure that
the issue of money laundering is solved with other connected criminal activities. In various
financial institutions, departments are used to safeguard the institution from all sorts of money
around and laundering. However, most of the financial groups required to protect the institutions
about money fraud and laundering don't work together to jointly reduce the problem. The article

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illustrates that money fraud has less time required to demonstrate the value for money as it
quantifies in dollars (Drew, 2017).
Ways of reducing money fraud and laundering
In order to reduce the rate of money fraud and laundering in South Africa, various
interventions need to be implemented by all financial institutions so as to reduce the activity and
its related effects. Therefore, the measures that could be adopted include the following, first,
verifying the customer's identity. In this case, it is always very important for the financial
institutions to properly authenticate and validate the details of their customers. Customer
authentication is aimed at identifying the people the institutions are operating with. This helps to
identify the various possible risk that may arise when dealing with an individual (Gartland,2017).
Also, financial institutions are required to carry out "Customer Due Diligence (CDD)." In this
case, CDD involves collecting customer facts so as to assist financial institutions to determine
the various risks associated with the customer such as terrorist financing and money laundering.
Additionally, financial institutions are required to have good tools so as to monitor the
transaction of the customers so that suspicious or unusual practices can be easily monitored,
investigated and identified. In South Africa, most financial institutions find it challenging to
identify money fraud and laundering as a result of the existence of many money-intensive
businesses and enterprises. Also, financial institutions are required to carefully verify the details
of various beneficiaries taking part in the businesses and their money source so as to stop all
sorts of criminal activities (Fay andNegangard, 2017).
All the challenges faced by financial institutions in trying to verify their customers'
identity can best be solved by technology. The technology uses various solutions and products to
aid in reducing money fraud and financing of the terrorist. Also, technology provides the best
solution to ensuring that proper customer checks are performed such as CDD and KYC. The
checks are supposed to be done regularly so as to notice various changes that may result in
money laundering and fraud. In addition, individuals who can be easily corrupted or bribes are
supposed to be watched carefully so as to avoid all sorts of money fraud and money laundering
(Goldmann, 2016).
Second, criteria, in the process of considering the use of technology to reduce or mitigate
money fraud and laundering, financial institutions are required to make sure that the solutions

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identified meet given criteria. In the first instance, any solution is supposed to be in the position
to process big data volumes very fast. Also, the financial data is supposed to be of good quality
so as to assist in the effective implementation of the solution. Further, the technology adopted
should be in the position to incorporate transaction analysis, behavioral profiling, screening
capability, and CCD/KYD so as to ensure that the risk of money fraud and laundering are
noticed and mitigated. Anti-money laundering solutions are also required to involve transaction
monitoring by screening payments, transfers, account opening, and investigation on flag
suspects. For example, in case a given account constantly receives a given amount of money
deposit or a single large deposit, it could be flagged automatically. kabir, et al (2017), accounts
that “suddenly become active may also trigger an alert, as could a transaction destined for a
sanctioned country.”In addition, financial institutions are required to keep all records of previous
fraud and laundering activities so that the activity does not continue. Furthermore, financial
institutions are required to implement various regulatory reporting and visualization of data so as
to ensure added value for money (Kohtamäki, 2017).
Last, the use of the new blockchain technology to apply various solutions to money fraud
and laundering. In addition, the technology could be used to investigate the nature of the problem
and its consequences to the financial sector. In most cases, blockchain technology is adopted so
as to improve on how data is governed by ensuring the security of data so that it cannot be
interrupted to avoid all sorts of changes in the system. Also, the technology helps in removing all
sorts of losses in data by ensuring easy access to information thereby making it easy for
customers to view their information. Therefore, the technology is aimed at enhancing the quality
of data and improving the capability of extracting data which helps in improving the intelligence
obtained and assists to carry out investigations of money fraud and laundering (Mahapatra et al,
2017).
As a result of increased technological investment by criminals with an intention of money
laundering, law enforcement organizations and financial institutions are required to do the same.
In fighting money fraud and money laundering, Information Technology plays a bigger role with
its features of detecting various criminal acts. It is always very important to implement solutions
that enable appropriate use of Anti-money laundering strategies by incorporating international
standards. In addition, it is also very important to implement solutions that incorporate

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intelligence by learning from wrong positives and enhance actual rates of reporting and
detection. The most vital aspects are that the financial institutions are supposed to verify their
customers regularly so that they can be in the position to carry out informed decisions towards
their business performance. Therefore, technology plays an important role in simplifying the
process of eliminating money fraud and laundering by removing all sorts of errors created by
human beings. Further, technology helps in adding value to financial institutions by reducing
their operational expenses and increasing investments returns (Directorate OECD Statistics,
2017).
Financial institutions are supposed to protect themselves from all sorts of money fraud /
laundering fraud so as to comply with the requirements of the anti-money laundering act.It isthe
role of the financial institutions to make their best efforts to detect and mitigate all sorts of
money laundering that could affect their financial activities.Also, various financial companies
are supposed to increase their collaboration so as to jointly fight against money fraud and
laundering. However, there are no clear direct ways of cost saving by financial institutions to
mitigate the rate of money fraud and laundering (Meroño et al, 2017).
Question two
Exposure draft
For the purpose of this paper, the chosen exposer draft is"stock compensation and
Revenue from contracts with customers" obtained from Financial Accounting Standards Board.
The FASB board issued the proposal of Accounting Standard update in June 2018. The intention
of the proposal was to improve "Accounting Policies, Changes in Accounting Estimates and
Errors" as a way of carrying out simple initiatives. The objective of the initiative was to improve
or maintain the importance of the information given to various users concerning their financial
statements as a way of reducing complexity and costs in financial records. The amendment
update expanded to the stock compensation that includes transactions of share-based payments
for acquiring services and goods from nonemployees (Tysiac, 2017). In addition, the
amendments intended at requiring the share-based payments given to customers in terms of
selling services or goods should be evaluated under Top 606, "Revenue from Contracts with
customers". In this case, it is understood that the amendment will greatly affect Revenue from
various contractors who offer share-based customer payments. The main provisions in this

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amendment would require various entities that can be adapted to classify and measure the share-
based customer payments by following various guidelines (Johnston, & Van, 2013). In addition,
the amount to be recorded due to reduced revenue would be evaluated considering the basis of
"the grant-date fair value" of customer share-based payments. In this case, the "grant date" refers
to the data at which supplies and customers reach to make a similar understanding about key
conditions and terms of share-based-customer payment awards (Hudson, & Michael, 2013).
The effectiveness of the Amendments.
In this case, the amendment will cater for all the entities that haven't been adopted in the
previous amendments. Also, if the entities adapted to the previous amendments, they would also
be required to make sure that they adapt to the proposed updates. While for all the entities that
have been in the position to adapt to the previous amendments, a similar transition would be
applied to the proposed updates by adjusting the cumulative effect to the retained earnings.
However, the effective date for the proposed amendment will be determined by the board
considering the level of adoption of the previous entities. In addition, the Board will use the
provided comments/ feedback from stakeholders so as to determine the effective amendment of
the proposed update (Smyth et al, 2010).
An assessment of the behavior of the regulator in introducing the exposure draft
Considering the nature of the proposed amendments, the behavior of the regulator in
introducing the exposure draft will be greatly explained by public interests theory. The
amendment of the proposed update seeks at benefiting and protecting the interest of the people
by recognizing their level of share-based customers’ payment transactions. While considering the
subsequent measurements of the proposed update, it aims at changing the intrinsic value or fair
value for all nonpublic entities that support the nature of the liabilities incurred under share-
based customer payments (Deegan, &Unerman, 2011). Also, the behavior of the regulator is
aimed at overcoming various disadvantages that arise as a result of unbalanced market activities,
undesirable market outcomes, imperfect competition, and missing markets. Therefore, the
regulator is looking at improving the allocation of customer payments by maintaining or
facilitating market options. Further, the amendment can be explained by the public interest
theory because it provides various initiatives of reducing complexity and costs that are faced by
consumers in various accounting standards. The behavior of the regulator aimed at ensuring

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share-based customer payments in regards to the selling of services and goods in regards to the
revenue contracts of customers (Armstrong et al, 2013).
An outline of the views presented in the comments letters
Various groups of people have responded to the amendment of the proposed update by
considering various factors. In this case, we have obtained comments from four respondents
depending on their comments on the share-based payment for the customer. The responses were
according to the different questions allocated in the exposer draft. The views presented by the
respondents in their commenting letters indicate their levels of disagreement and agreement in
the exposer draft. Sample question and views of respondents are outlined below depending on
the organization or industry (Green, 2012).
Question one: "Do you agree that share-based payment awards issued to customers as
consideration payable should be classified in accordance with the guidance in Topic 718?”
Agreement
According to "price water house Coopers", they agree that the share-based customer
payments awards should be considered as equity instruments and liabilities according to Topic
718. In addition, they indicate that the Topic provides a well-structured guideline of classified
shared-based customer payment awards given to employees as compared to those given to
investors or lenders that provide funding to issuers (Sherman, & Matthew, 2009).
The "California Society of CPA" agrees that the share-based customer payments awards
as payable consideration should be grouped according to the guidelines in "Topic 718."
Disagreements
Jennifer Kimmel disagrees that the concept carried out in proposed update would require
"changes in the measurement of the equity instrument (through the application of Topic 718)
after the grant date that are due to the form of the consideration are not included in the
transaction price". In addition, she argues that any changes as a result of any given consideration
shall be indicated elsewhere in the income statement of the grantor. In other words, Jennifer
Kimmel illustrates that only the current measurements of shared-based customer payment awards
is indicated in the price transaction (Taylor, & Richard, 2013).

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Thomas Spitters also illustrates that "Share-based payment awards issued to customers as
consideration payable should be specified and determined, and then settled according to the
unique and separately specific settlement terms of the share-based payment contract and this
means the nature of the share-based transaction should be followed by disclosure guidelines, not
vice - versa" (Taylor, & Richard, 2013).
Question two: Do you agree that the amendments in this proposed Update provide
sufficient guidance to account for share-based consideration to a customer?
Agreement
The "California Society of CPA" committee agrees that "the guidance in the proposed
update is adequate to account for share-based consideration to a customer."
The "price water house Coopers LLP" also agrees with the amendment of the proposed
update to be the major provisions of sufficient guideline. However, the company indicates that
there exist some aspects of the proposed amendment that should clearly be classified so as to
provide enough guidelines to auditors and preparers (Rose and Nancy, 2014).
Disagreement
Thomas Spitters disagrees that the vendor and customer need to be in the position to
formulate an effective share-based customer payment awards that are more beyond what is
illustrated in the guidance so as to standardize and equalize the disclosure and presentation, not
of real values of shared-based customer payments (Taylor and Richard, 2013).
An application of the theories of regulation and their relevancies
Public interest theory
Public interest theory implies that the institutions or companies are supposed to make the
various changes in the current inconsistency and unethical issues that are faced by the public. In
this exposer draft, the Board has made all the vital recommendations that will be helpful to the
public (customers) to solve their problems. The exposure draft has been in the position to address
the public needs by making the system clear to all consumers. Therefore, it is clear that the
proposed update recommendations tried to make sure that the needs of the public are satisfied. In
this case, the public interest theory is applicable to the disagreement comment of Thomas Spitter

CURRENT DEVELOPMENTS IN ACCOUNTING THOUGHT9
which illustrates that "the vendor and customer need to be in the position to formulate an
effective share-based customer payment awards". In this case, the comment focuses on
standardizing and equalizing the disclosure and presentation of realm values of share-based
payments (Rose and Nancy, 2014).
Private interest theory
The private interest theory illustrates the responsibilities of authorities in decision making
for their own satisfaction and benefits. The authorities do not require the public demands but
rather their demands are based on their satisfaction for self-motives. In the provided exposure
draft, there are no signs of self-motives involved in the Boards who are proposing updating the
amendments. This implies that the exposure draft is not according to the private interest theory as
it is aimed at making a better company. This theory can be applicable to the comment of
"California Society of CPA" which supports the guidance of the proposed amendment as a way
of accounting for the share-based customer payments (Rose and Nancy, 2014).
Capture theory
The capture theory indicates that regulations capture happens to in case the regulatory
agency works according to society and public interests. Therefore, this theory can best be applied
to the second agreement comment of "price water house cooper LLP" that illustrates that there
exist some aspects of the proposed amendment that should clearly be classified so as to provide
enough guidelines to auditors and preparers (Rose and Nancy, 2014).

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Appendix
Figure one: Comment letter

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Figure two:Comment letter

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Figure three:Comment letter

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Figure four:Comment letter

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Figure five: News article