University Financial Accounting Theory Case Study - ACCT6007

This case study examines key concepts in financial accounting theory, focusing on the AASB conceptual framework and accounting theories. The analysis addresses three tasks: defining the qualitative characteristics of faithful representation and relevance and their importance; applying positive accounting theory to a company experiencing financial difficulties; and discussing public interest and capture theories in the context of corporate social responsibility. The study emphasizes the significance of both relevance and faithful representation in financial decision-making, the role of positive accounting theory in analyzing and improving accounting practices, and the impact of public and capture theories on corporate regulations and market forces.

Financial Accounting
Theory
Name of the Student
Name of the University
Author’s Note

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TASK 1
- The standard aims at
providing financial information
to all stakeholders to assist
them in making better
financial decisions.
- The two qualitative features,
which help in achieving the
aim of the framework are:
1. Faithful Representation
2. Relevance. MM.DD.20XX

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Case Analysis
- The qualitative characteristics of the conceptual framework
relevance and faithful representation are equally important at
the time of making an appropriate financial decision.
- For initiating an effective application of the framework it is
vital that the information is able to identify all the economic
phenomenon and then take into account the relevant ones.
- To have an unfaithful information on relevant phenomena or a
faithful representation on irrelevant phenomena become
equally unusable for the users at the time of decision making.
- Hence, choosing one characteristics over the other would be
fruitless act as the information would become useless to the
use. Therefore, both the characteristics that is Relevance and
Faithful Representation are equally important and neither can
be ignored. MM.DD.20XX

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TASK 2
- 2DayFM radio network was
expecting a downgrade in its
profit for the month of May and
a full-year profit to fall below 10
percent of the previous year’s
net profit after tax.
- This meant that the company
was engaged in activities that
increased expenses for the
company without a definite
return
- The earnings of the company is
falling below 3.5 times, which is
slipping below the danger zone.

CASE ANALYSIS
- Positive Accounting theory would help the company in analysing the past
accounting methods and policy, thereafter taking the necessary steps to
minimise the expenses.
- The earnings of the company is falling below 3.5 times, which is slipping
below the danger zone. This is mainly due to the inability of the company to
control its expenses. Right actions at the right time would allow the
company to regain its position back in the market and positive accounting
theory will help the company in doing so.
- This theory would allow the company to take into considerations various
accounting policies and help it revising the methods used in order to
enhance the productivity and effectiveness of the company.
- Positive Accounting theory would help the company scrutinising all the
activities and boost the overall revenue of the company by controlling
expenses. MM.DD.20XXADD A FOOTER5

Task 3
The government of Australia in
the year 2016 made an enquiry
and investigated about the
corporate social responsibility
to resolve the issue regarding
the amendment of the social
and environmental
responsibility as a new
regulation.
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Case Analysis
- The public interest theory assumes that the economic regulations and market forces
are derived from the demand that are arisen in the public in order to achieve desirable
results.
- capture theory states that the personal or business benefits of financial institution and
actions taken by these industries affect the regulations made by the government,
which indicates that the legislature bodies and actions taken by them are highly
dependent on various industries and the actions taken by them in daily practices
- The public interest theory and the capture theory that public actions determine and
change the flow of market forces, in this case too, if a company is engaged in activities
that harm the environment and becoming socially responsible.
- Public will stop their consumptions from that company, shareholders will stop investing
and workers would prefer leaving the company. The company would end up making
loss and revenue will fall drastically

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