Comprehensive Report on Accounting Issues, Theories, and Standards

This report delves into various accounting issues impacting multiple industries, exploring their relationship with accounting theories. It examines the new accountant's limited licensing regime, its implications across different countries, and the role of the Australian Securities and Investments Commission (ASIC) in surveillance and compliance. The report analyzes positive accounting theory, agency theory, and normative accounting theory, highlighting their assumptions and applications. Furthermore, it discusses the Financial Accounting Standards Board's (FASB) exposure draft, focusing on customer accounting for implementation costs in cloud computing arrangements, disclosure requirements, and proposed amendments to Subtopic 350-40. The report emphasizes the public interest aspect of the draft and its potential impact on financial reporting transparency and customer trust.

Running head: ACCOUNTING 1
Accounting
Name
Institution

ACCOUNTING 2
Part 1: Article and Issues
Introduction
In this article, various accounting issues that affect multiple industries are looked at and
how the issues relate to the accounting theories. The theories assumptions and implications on
these industries are also examined at.
Body
This article explains how the new accountant's limited licensing regime works and its
effects in various countries. The project was conducted by the Australian Securities and
Investments Commission (ASIC) and in there surveillance, they used accountants not operating
under an Australian financial service (AFS) but those who were identified as providing financial
product advice in breach of the new licensing regime. Also, those that established a self-managed
superannuation fund (SMSF) (Ramsay & Webster 2017).
In their surveillance they looked for accountants:
 whose applications for licenses had been rejected or withdrawn by the ASIC,
 That had reports of malpractice, who advertised themselves on social media as providing SMSF
services.
 That was referred by Australian Taxation Office
After direct contacts with the accountants, they were able to come up with ninety-four
potential targets. In their findings in the surveillance, they realized that unlicensed accountants
providing financial product advice were not as many as people generally tend to think. The
perception of non-compliance of accountants is due to many reasons. First, they do not provide
any referrals details or licensing details on their websites. This makes people assume that they

ACCOUNTING 3
are unlicensed. Second, most accountants failed to update information on their website about the
SMSF services they provided a while back. Thus we found services that the accountant no longer
offered (Schaltegger & Burritt 2017).
On 26 targets the ASIC took further action because they noticed that they were working
with an AFS license. Most of these targets, however, did not provide any licensing information
on their website and one of them had no licensing information under the Financial Advisers
Register (FAR). Therefore, they were sent letters asking them to add these details on their
websites (Kaya 2017).
On 51 targets, the ASIC noticed that they indicated on their websites that they are not
providing financial product service concerning SMSF's. They were provided with letters asking
them to update their services on their sites and 13 accountants did (Price 2017).
Five targets were referred to the AISC Misconduct and Breach Reporting because they
had issues of malpractice. The ASIC however kept surveillance on five targets where they were
concerned about the provision of unlicensed financial advice about SMSFs.
To ensure that accountants are meeting the compliance the ASIC offers a few key areas
to follow. This only relates to those accountants that hold a limited AFS license or are an
authorized representative of an AFS license. These key areas are
1. Keep FAR up to date. The AFS license holders are required to keep information on
FAR on their websites up to date, and this includes information such as financial advisors that
are authorized, superannuation and life insurance.
2. Keep your website up to date. Accountants are advised to ensure that the information
on their sites is accurate and up to date. This is essential to consumers because they will use the
website to assess the services provided. In cases of inadequate information, one may confuse.

ACCOUNTING 4
3. Ensure good record keeping. Accountants are advised to keep records of all their
information. This is because it is essential in that it protects the accountant and the clients.
4. Always respond to ASIC notices. When the ASIC sends the accountant notices
requiring specific information, he or she must comply and provide all that is asked for. It ensures
that standards in the advice industry are maintained.
5. Familiarize oneself with the ASIC guidance for accountants. The ASIC has a vast
range of guidelines for accountants that want to set up an SMSF. It helps accountants meet all
compliance regulations and also maintain them. The guidance is also available at the dispose of
the accountant so that if they want to refer to it, they can be able to reach it (Barrios 2017).
The ASIC concluded that there are not a large number of unlicensed accountants offering
SMSF product service as perceived. Also, they will continue monitoring the provision of SMSF
product advice (Smith 2017).
The issues presented in this article relate to various theories as shown below
Positive accounting theory
The theory of positive accounting states that in accounting practice, one will try and
predict it and also offer an explanation for it (de Villiers & Maroun, 2017). In this article, we see
that the ASIC at first predicted that many accountants would be operating unlicensed and
unauthorized but after conducting the surveillance, they realized that this was not the case.
Therefore this cause relates to the theory because the ASIC came up with a prediction of the non-
compliance of the accountants and even tried to explain as to why this was the cause.
This theory has the following assumptions
One assumption is that one can predict accounting practices. A good example is when the
ASIC predicts that they are likely to find many accountants that are offering financial product

ACCOUNTING 5
advice without a license. Another example is the case where the accountants predict that their
consumers will know that they provide expert advice without having to include licensing
information. They, therefore, assume that they will acquire clientele without having to add such
type of information on their websites. The theory thus does not offer solutions that are 100%
effective because they are only predictions (Silva et al. 2017).
Another assumption is that providing an explanation for the prediction then they are
effective which might not be the case because the forecast may not be sufficient.
Agency theory
This theory focuses on two relationships in an accounting practice. These are the
principal of business which in this case is the accountant and the agents of business which in this
case is the ASIC. The primary focus of these two relationships is to solve problems that exist
between them that may arise due to a conflict of interests or objectives (Evans & Tourish2017).
This theory relates to this article in the case of the ASIC and the accountant. When the
ASIC sends notices to an accountant, and they do not respond, then it will cause conflict between
the two bodies. It may cause the accountant standards of issuing advice not to be maintained. The
accountant is therefore asked to always respond to notices from the ASIC to avoid unnecessary
conflict (Shogren et al.2017).
This theory has the following assumptions
It ignores the risks present. In most cases, the principal is the one that faces many risks as
compared to the agent, and the theory does not address this. For example, if the accountant is
found with misconduct or malpractice, their license will be revoked by the ASIC. In this case,
the ASIC does not face any risks (Trottier & Gordon 2017).

ACCOUNTING 6
Another assumption is it does not take into account business with a third party. The
theory only focuses on two relationships in this case that between the ASIC and the accountants.
The theory thus does not cater to relationships that include more than three parties.
Normative accounting theory
In this theory, a person will look at all the accounting systems available and chooses one
that is best suited to accomplish one's goals and objectives. It relates to this article in that the
accountant will have to come up with an accounting system that ensures that they meet the
compliance regulations of ASIC. The accountant needs to ensure that their website provides
adequate, sufficient information on their licensing and also referrals on the advisors plus up to
date services. All these can be a tedious task, and thus they need to choose an accounting system
that will ensure they accomplish all these.
This theory has the following assumptions
It assumes that one accounting theory can be superior to another. In this theory, it
suggests that one accounting system surpasses the other and therefore should be the most
appropriate. However, this may not be the case because each accounting system is unique and
can be used to achieve different objectives. In this case, the accounting system that the
accountant will use to make sure that all information is updated on the website might not be
appropriate to solve another problem. Therefore each is unique in its way (Beams et al. 2017)
Another assumption is that whatever results is scientific when it is not. It is correct to say
it is not an applicable theory.
CONCLUSION
The ASIC encourages accountants that offer financial product advice to comply to avoid
problems in the future. They ask accountants to ensure that the information that is provided on

ACCOUNTING 7
their websites to be accurate, up to date and correct. In cases where they do not know what to do,
they need to follow the guidance in the ASIC's guidance for accountancy.
Finally, they ask accountants to reply to notices sent to them. These notices are crucial,
and they need to provide any information that they are asked to by the ASIC. This ensures that
they maintain excellent standards and a good relationship.

ACCOUNTING 8
Part 2:
Introduction
This paper represents the Financial Accounting Standards Boards exposure draft issued on
March 1st 2018 for comments on the proposed changes in Subtopic 350-40. The proposed
amendments are outlined in three major areas that are: Customer’s accounting for
implementation costs in a cloud computing arrangement, disclosures for implementation costs
and cloud computing arrangements. The board invites comments on all the matters in the
exposure draft until April 30th 2018.
B.Exposure Draft
The exposure draft expresses the following views
 It assists entities in knowing the fees paid for upfront costs by their customers in a
hosting arrangement. These they do by providing directions for assessing whether the
arrangement is inclusive of license software. Under the Subtopic 350-40, it states that if
an arrangement is inclusive of license software, then the fees are accounted for by the
customer. In this case, the software license is recognized as an intangible asset, and also it
is liable to the extent that the license is recognized. On the other hand, if the arrangement
is not inclusive of a software license, then the company is the one that is responsible for
the fees of the service.
 One change that was made from the previous standards was the fees required for upfront
activities. Several companies requested the company to provide instructions on how to
account for the necessary fees for upfront activities in a cloud computing arrangement
(Manish & O'Reilly2018).

ACCOUNTING 9
 The amendment thus made the change that all upfront costs in a service contract will be
accounted for by the customer in an entity. This only applies to companies that follow the
instructions provided in the Subtopic 350-40.
 The proposed update also aligns the requirements needed to capitalize on upfront costs
that are obtained in an arrangement in a service contract and also those obtained in
developing an internal- use software.
 The amendments in the draft also give directions on the costs that will be acquired in
upfront activities in a service contract and also which will be recognized as an asset.
Also, they give guidance on what fees are required to obtain and develop an internal-use
software license (Levi-Faur, 2017).
 The draft also requires a customer to cover the costs collected for capitalizing upfront
costs for the term of the service contract.
 Also, the exposure draft requires that specific qualitative and quantitative information to
be disclosed about the upfront costs that are associated with the internal-use software in a
hosting arrangement. They believe that this disclosure allows for transparency in an
organization and builds trust between the company and its clients. The disclosures will
also help the customers with the relevant information required for a contract (Hayes &
Reckers 2017).
C. Is it introduced in the ‘public interest’
The FASB exposure draft has been introduced to the interest of the public. This is seen in
some situations.

ACCOUNTING 10
 First, it requires an entity to disclose specific information which is essential since any
customer will have all the information they need before making a decision such as
signing a contract.
 Second, it gives detailed instructions on the fees that are required for upfront activities
which benefits the customer in that they are aware of the charges they will use.
 Third, it allows the license necessary for capitalization of upfront costs to qualify as an
asset. This is of benefit to its customers who acquire the license for an arrangement.
 Lastly, it enables entities to know which arrangements require license software and those
that do not (Dubos 2017).
(Manish & O'Reilly2018).
D. Comment letters
ONE
By the Williams Companies, Inc
The following are the views presented in this comment letter
 The company is public, and in future, we expect to acquire many more cloud computing
arrangements. The board, therefore, believes that the proposed accounting standards
update will be able to guide them in the setting up of these arrangements.
 They support the Board in allowing an entity to cover the costs for upfront activities and
recognizing it as an asset when it includes a software license.
 Also, they believe that allowing for disclosure of specific information for a hosting
arrangement will create transparency between them and their clients (Kelsen, 2017).

ACCOUNTING 11
 The company lastly agrees with the amendment in letting the customer cover the upfront
costs when the arrangement is inclusive of a license. They are ready to put the proposed
changes to use and believe that it will not take a lot of time.
E. Is it against or for regulation?
This letter is for the regulation of the amendments because they agree with the proposed
updates. For example in the letter, the company is ready to implement the amendments in their
organization as soon as possible (Van Gunsteren, 2018).
TWO
By The Virgin Society of CPA's
This comment letter presents the following views.
 The company is involved a lot in the public sector through working collaborations in
public accounting, government, and education. Thus they acknowledge that the Board
should permit for disclosures because this would help a lot in documents such as financial
statements (Friedman, 2017).
 The company also agrees with the proposed updates in capitalizing the upfront costs in a
hosting arrangement for a service contract.
 However, they do not agree that customers should apply the impairment model because it
will bring confusion if it is not consistent.
E. Is it against or for regulation?
The company is both for and against the regulation.
 It is for the regulation since they agree with the proposed amendments and believes it will
benefit the organization.

ACCOUNTING 12
 It is against the regulation because they do not agree with the implementation of the
impairment. An example is the comment 'No. We believe that applying impairment
models should be consistent to avoid confusion. Because capitalization occurs similarly
in both situations, it would be proper to treat impairment similarly.'
THREE
By American Bankers Association
The comment letter presents the following views
 The company supports the FASB draft in guiding how to account for the upfront costs
that are obtained in a cloud computing arrangement and also those that include license
software.
 More specifically, the organization supports the chance to be able to assess upfront costs
that are incurred in an arrangement and even capitalization of the costs.
 In addition to the amendments in the draft the company asks the Board to make some
changes in the following provisions: determination of life, a broad scope of application
and transition flexibility including a modified prospective adoption election (Lin, 2017).
This letter is against the regulation as shown
 The company believes that FASB needs to make a lot of adjustments to the current
proposed accounting standards. For example, the comment ‘ABA supports the broad
application of the standard to similar transactions beyond hosting arrangements, as
proposed.’
E. Is it against or for regulation?