Questions related to different accounting frameworks Essay

Accounting Conceptual Framework is a set of theoretical rules which are by and large accepted as guidelines in fixing fiscal statements. One of the intents of holding an accounting conceptual model is to give guidelines for the criterion compositors when they are coming up with new criterions or revising bing accounting criterions. Besides, it is besides really utile when preparing and scrutinizing the fiscal statements. This model is being used by many different types of users include Board of IASB ( International Accounting Standard Board ) for the development of future international accounting criterions every bit good as advancing harmonisation of accounting criterions throughout the states. Besides, it is besides really utile for the national criterion puting organic structures to help the development of national criterions. Furthermore, this model states that the investors are the chief users of the fiscal statements in doing economic determination and the fiscal statements need to foretell an entity ‘s future hard currency flows. Besides, this accounting conceptual model is used to guarantee that the fiscal statements prepared are apprehensible, relevant, dependable and comparable. Other that that, it besides acts as a frame of mention to work out accounting jobs that had non appeared in the current statute law or accounting criterions. Not merely that, the model is used to assist the IASB by supplying a footing for cut downing the figure of alternate accounting interventions permitted by IFRS. Another intent of the model is to supply information to other parties that are interested in the work of the IASB.

( B )

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The IASB model highlights the importance of four qualitative features needed to bring forth utile fiscal statements to the users. The four qualitative features are understandability, relevancy, dependability and comparison. Comprehensibility means that the user possessing simple concern, economic and accounting cognition will be able to understand the fiscal statements and be able to use their cognition to understand the information given decently. However, users are assumed to hold a sensible cognition of concern and accounting, and a willingness to analyze the information with sensible diligence. Information about complex affairs should non be excluded simply on the evidences that it may be excessively hard for certain users to understand. Understandability is enhanced when information is classified, characterized and presented clearly. Overwhelming users with unnecessarily drawn-out narrations or irrelevant information can diminish the comprehensibility of fiscal information and strip it of its utility.

Other than that, the accounting conceptual model besides requires the fiscal statements to be relevant. Information is said to be relevant if it is capable of doing a difference in the determinations made by the user. It helps users measure yesteryear, nowadays or future events. In this qualitative feature, it is being divided into materiality and seasonableness constructs. In regard of materiality, information is said to be material if its skip or misstatement could act upon the economic determinations of the user. For illustration, a case was filed against you for a big sum of money. You should unwrap this information as a contingent liability, with look of your positions and those of your attorneies. Meanwhile, the seasonableness construct states that information is relevant if it is provided in clip to act upon user ‘s determinations. Information must be made available to determination shapers before it loses its capacity to act upon determinations. For illustration, a company needs to supply the latest information to the bank when they are using loan or bespeak an addition of capital from the stockholders.

Furthermore, dependability is one of the qualitative feature that is mentioned in accounting conceptual model. Information has dependability when it is free from material mistake and prejudice. Reliable information should besides dependably represent that which it purports to stand for or could be sensible expected to stand for. For illustration, balance sheet should merely supply information that is required in the balance sheet points and excess or inaccurate information should non be included unless it is proved that it meets the definition of any headers under balance sheet points. Besides, it besides includes economic substance which being expressed as demoing the economic substance of minutess instead than their legal signifier. For illustration, finance rental for the usage of a machine should be classified as an plus by the leaseholder. Although the leaseholder does non have the machinery, well all the hazard and wagess incidental to the ownership of the plus is transferred from the lease giver to the leaseholder. Reliability besides includes prudence which is the inclusion of a grade of cautiousness when doing estimations under conditions of uncertainness. It ensures that assets and income are non overstated and liabilities and disbursals are non unostentatious. However, prudence should non be intentionally used to understate net income or make inordinate commissariats. For illustration, when certain sums of goods are unsold, they will be charged at the production cost alternatively of the merchandising monetary value as the goods has non been sold yet and net income has non been made. Furthermore, the information in the fiscal statements must be sufficiently complete so that it will non misdirect the users to do incorrect determinations. For illustration, in the balance sheet, all the assets should be charged consequently in the balance sheet to carry through the completeness construct and relevant information should non be omitted during the readying of the fiscal statements.

The concluding qualitative step is comparison. Users must be able to compare the fiscal statements of an entity through clip, to place tendencies in its fiscal place and public presentation. This is the chief ground why fiscal statements contain corresponding sums for old periods. Besides that, users must be able to compare fiscal statements of different entities. For illustration, in order for the company to detect closely on the public presentation of the company, it is critical for the direction to compare the fiscal statements with the old records. Therefore, all fiscal statements must be made comparable so that it will non merely assist the direction of the company every bit good as the external users for investing intents. However, comparison should non stand in the manner of improved accounting patterns, normally through new criterions.

Question 1 ( degree Celsius )

It is being agreed that accounting profession usage accounting criterions as a footing to fix fiscal statements. This is to supply comparable, crystalline and dependable information for the investors to warrant the public presentation of the company. Besides, it aims to organize a new unvarying accounting linguistic communication which is designed to convey higher lucidity of their fiscal statements on a planetary footing by guaranting that concerns from all over the universe communicate in the consistent and comparable accounting linguistic communication. Reported fiscal statements prepared under accounting criterions will derive the assurance of the investors and possible investors for determination devising. Besides, this will assist the creditors and providers every bit good as bankers to hold a clearer entree to the public presentation of the company which can be compared with other companies over clip. Furthermore, unvarying accounting criterion, will do it easier for the users to detect the activities, assets, liabilities and public presentation of a company with a consistent and common manner of coverage.

Question 1 ( vitamin D )

From my point of position, it is acceptable to go from accounting criterion if the company is runing in a really specific sector where it is uncommon in usual concern sector. Besides, it is acceptable to go from accounting criterion when it came to a rare instance where it can non follow the bing accounting criterion to fix the fiscal statements. For illustration, the bing accounting criterion merely covers a specific field of concern sector such as nutrient and drinks sector, hence, the company that runs logistic sector might non be able to use the bing accounting criterion as the standard serves different intents for different sectors. Although it is said to be acceptable in theoretical manner but non practical to change from the criterion as it will be really dearly-won to bring forth or revise a new method to fix the fiscal statements. Besides, it is requires the comptroller to explicate to the hearers every bit good as external users sing the alteration of method in fixing fiscal statements. Therefore, it is said to be acceptable to go from accounting criterion every bit long as the fiscal statement reported is true and just.

Question 2

Several issues were raised from harmonisation of accounting criterions due to the barriers to harmonization including the different intents for which the fiscal statements are prepared for. For illustration, in some states, fiscal statements are used wholly for revenue enhancement appraisal while the other is for the mention of investors for determination devising. Besides, different legal system factor is being raised as one of the barriers as this slows down the development of accounting criterions and restricts other options available. Besides, in different states, the fiscal statements are prepared to function different users. For illustration, in United States of America, the investors are given the precedence while in European states, the employees enjoy the privileges. Furthermore, patriotism that practiced in certain states will be a barrier for the harmonisation as some states are unwilling to follow another state ‘s criterion. Besides, cultural differences will decelerate down the procedure of harmonisation as they are unable to accept the alterations of the civilization. For illustration, China that adopts Chinese linguistic communication as their primary linguistic communication is barely recognized accounting criterions that set by western states. Besides, alone fortunes will be portion of the barriers to the harmonisation. Some states may be traveling through unusual fortunes which affect all facets of mundane life to bring forth proper fiscal statements such as hyperinflation or civil war. Last, deficient resources of strong accounting organic structure to supervise the usage of accounting criterions. For illustration, in Malaysia, we have Malaysia Accounting Standard Board ( MASB ) to supervise the patterns of accounting criterions to guarantee that all fiscal studies produced are in conformity with the proper model. Yes, I agree that one accounting criterions for all states as it save cost for all the accounting organic structures in the universe to pass on in one sort of accounting linguistic communication. This can salvage cost as the accounting board does non hold to put and analyse new set of accounting criterions to function similar intents. Besides, this non merely saves cost but will increase the employment chance for accounting in all states. With merely one accounting criterions, all comptrollers can work in any preferred state as all states pattern one type of accounting criterions. If harmonisation is realized, all comptrollers throughout the universe can work without barriers. Besides, possible investors are able to understand the fiscal statements from all over the universe, which would assist to better the economic public presentation of the universe. The possible investors do non hold to larn a different set of accounting criterions to analyze and be after for investing in other state that patterns a different set of accounting criterions. Furthermore, all the accounting resources across the universe can be used to sharpen and revise the lone one accounting criterions so that it can function its intended intent and seek to forestall any unusual accounting jobs from happening. Besides, it helps to minimise the work load of comptrollers if they are working in a keeping company with many subordinate companies across other states that patterns different accounting criterions.


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