QUESTION AND ANSWERS 2 Table of Contents 1.Aim of the study......................................................................................................................3 2.Reason for undertaking the study............................................................................................3 3.Findings of the study...............................................................................................................3 4.Implications of the study.........................................................................................................4 Reference....................................................................................................................................5
QUESTION AND ANSWERS 3 1.Aim of the study The aim of this study was to whether financial reporting requires conservatism. This is done in context with the IFRS accounting standards. The aim was to find the explicit and implicit results of following the conservatism approach in recording the assets in the financial statements. This was the majorly done for the firms who are involved in presenting the annual reportsforthegeneral-purposeaccounting.Thishasbeenstudiedincontextwith internationalaccountingalso.Theroleofconservatisminfinancialreportingwas significantly studied in the article.The particular requite has been fulfilled by analysing several accounting concepts and principles. It included the going concern concept, revenue recognition concept and many more such research areas in IASB conceptual framework also. 2.Reason for undertaking the study The major reason for undertaking the study was to know the relevance of the conservatism approach in financial reporting. This has been studied after going through a lot of literature research.It was supported by the IASB and any significant information about this research was missing from the literature. Another reason for undertaking the study is to found the effect of undertaking this approach for the asset's assessment in financial reporting. This has been followed by searching for several studies in the past. There was no proper evidence if this study in the literature. However, it has been measured in the study itself. It was found that this is being chosen on the basis of the need by different organizations. 3.Findings of the study The finding of the study lights sheds on the IASB considerations. According to the IASB, it is notrequiredforfinancialreportingtoincludetheconservativeaccountingoftheir framework. It is linked with the need of the organization and also on their choice. Moreover, there was no significant information in the previous researches for this particular approach of the accounting process. There are multiple revenue recognition examples that lead to the conservatism approach. This is because it records the revenue when it finally occurs. The conservatism approach also follows the understatement of the net assets on the basis of the market value at that particular period of time. It is done by the accountant for the higher level of verification of the financial statement on the basis of recognizing the profit and loss after the revaluation. The need of the conservatism in the “private contracting demand” is being recognized. Apart from this, it has been analysed that there are other forms of conservatism
QUESTION AND ANSWERS 4 requires for this approach (Barker & McGeachin, 2015).It has been designated as the incremental demand. This approach has been employed by the IFRS in accounting standards. 4.Implications of the study The implication of this study is that it provides insights into the conservatism approach in financial reporting. It will help to analyse the effect of the approaching towards conservatism in the recording of the net asset if the organizations. Accountants could acknowledge that how introducing conservatism could provide them good and bad news in the financial statement.
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QUESTION AND ANSWERS 5 Reference Barker, R., & McGeachin, A. (2015). An analysis of concepts and evidence on the question of whether IFRS should be conservative. Abacus, 51(2), 169-207.