Victoria University - BAO5535: Accounting Issue Research Report

This report addresses the debate between historical cost and fair value accounting for non-financial assets, a key issue in contemporary accounting. It references the IASB Framework and IFRS 13, highlighting the free choice between these methods for property, plant, equipment (PPE), and intangible assets. The report summarizes the positive accounting theory and its contribution to different accounting research. It explains how positive accounting theory helps in finding a different aspect of research in accounting concepts. It mainly focusses upon the financial reporting choice which is made by the management by using the statistical processing and economic model in regards to different agency cost. It also discusses research questions related to the current IASB Framework and IFRS 13 Fair Value measurements. The report explores variations in valuation practices and the implications of these choices, providing insights into how managers use accounting policies in earning management and the influence of debt-equity, bonus, and political cost hypotheses. Furthermore, the paper published by Idil Kaya states about the positive accounting theory and show its contribution upon the different accounting research. The report examines the factors influencing these choices, including administrative costs, political pressures, and capital structure, and their impact on financial reporting. It also examines different schemes in which an entity applies with the help of PAT in regards of the Bonus Scheme. The report aims to help students understand the complexities and implications of these accounting methods.

Running head: ISSUE IN CONTEMPORARY ACCOUNTING
Issue in Contemporary Accounting
Name of the Student
Name of the University
Author Note

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ISSUE IN CONTEMPORARY ACCOUNTING
Table of Contents
Question NO 2............................................................................................................................3
Reference....................................................................................................................................5

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ISSUE IN CONTEMPORARY ACCOUNTING
Question NO 2
The paper published by Idil Kaya states about the positive accounting theory and
show its contribution upon the different accounting research. It develops an understanding of
how positive accounting theory helps in finding a different aspect of research in accounting
concepts. It mainly focusses upon the financial reporting choice which is made by the
management by using the statistical processing and economic model in regards to different
agency cost (Kaya 2017). The research state about the behaviour of manager and
opportunistic attitude which the managers have in regards to the choice made by them related
to different accounting policy that has been used by the managers in earning management. It
also tries to explain the management policy in regards to the cost of capital and another
related cost.
The paper published by Osho, Auugustine E and Ayorinde, Florence states about the
positive accounting theory help the management to select proper accounting policy done by
the management in regards to its business activities. It also emphasis upon how the entity can
incorporate the new accounting standard in their business activities. The term definite in
theory denotes how the entity can carry proper procedure related to a real-life event in the
business (Edogbanya and Kamardin 2014). As per the different researcher positive
accounting is very different in comparison to the conservative accounting as the conservative
accounting can have a limited option to the entity. Conservative accounting is not able to
have proper amount of recognition in regards to the losses incurred by the entity. The primary
role of positive accounting is to suggest a proper accounting policy which helps the
management to carry proper amount of business in the industry. It helps the managers to
analyse the entity performance and able to carry proper amount of strategies in their business
activities (Peters and Bagshaw 2014). Some of the schemes in which an entity applies with
the help of PAT in regards of the Bonus Scheme as this scheme state that if the accounting

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ISSUE IN CONTEMPORARY ACCOUNTING
manager of the company is having some incentive in regards of their performance and ability
to give a proper accounting performance to its financial users. Another Hypothesis is Debt-
Equity Hypothesis as it states that the management will represent their financial statement in
such a way that it will able to show a better position of the firm in the industry. They will
show all the balance in such a way that it will indicate a better overall performance of the
entity in their business activities.
Another Hypothesis is Political Cost Hypothesis, this hypothesis state that the
managers will able to make their financial report in such a way that it will not able to attract
any political party or any regulators to exploit the entity books of accounts (Mande 2014).
Due to this factor the managers will not represent their financial statement accurately in their
business activities.
Some other research state the reason why managers go for PAT instead of any other
accounting concepts as in PAT the entity can have to have control over the administrative
cost in the business. The entity can attract many political parties as the more significant the
firm became, the more it able to attract the parties in their business activities. These signify
the larger firm always try to display a small amount of income in their financial statement.
Another reason is that the capital structure as the company capital structure is directly
affected by the accounting policies followed by the entity. Bonus payment is also a reason to
select PAT in their accounting as with the help of it the entity can maximise the bonus
payment method in their business activities. Proper execution of accounting policy helps the
entity to have a proper amount of earning in their business activities.

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ISSUE IN CONTEMPORARY ACCOUNTING
Reference
Edogbanya, A. and Kamardin, H., 2014. Adoption of international financial reporting
standards in Nigeria: Concepts and issues. Journal of Advance Management Science, 2.
Kaya, İdil. (2017). Accounting Choices in Corporate Financial Reporting: A Literature
Review of Positive Accounting Theory. 10.5772/intechopen.68962.
Mande, B., 2014. Emerging Nations and Financial Reporting Complex: A case for IFRS
adoption in Nigeria. Journal of Finance, Accounting & Management, 5(2).
Peters, G.T. and Bagshaw, K.B., 2014. Corporate governance mechanisms and financial
performance of listed firms in Nigeria: A content analysis. Global Journal of Contemporary
Research in Accounting, Auditing and Business Ethics, 1(2), pp.103-128.