The Attributes Of A High Quality Accounting Standard Accounting Essay

Accounting criterions are introduced to do certain good transparence and comparison of concern fiscal statements where all the relevant information is made available to the populace ( European Commission, 2012 ) . Why do we truly necessitate a high quality accounting criterions at the first topographic point? This is because it is of import for people to follow the accounting ordinances made. These are done by increasing public assurance on published fiscal statements and at the same clip, run into the purpose why the accounting criterions formed at the beginning ( US Securities and Exchange Commission, 2000 ) . Accounting criterions need to be in high quality because it is of import for the market economic system operation as any determination devising made for concern operation depends on the information given in the fiscal statements ( US Securities and Exchange Commission, 2000 ) . This essay will cover the features required for high quality criterions. And it will besides cover which features is presence or absence in FRS15 and IAS 16.

There are several features required for an accounting criterion for it to be a high quality criterion. The primary properties are relevant and dependable ( US Securities and Exchange Commission, 2000 ) . Standard should be able to pick up and heighten information provided so that it is available for any concern determination devising. Consistency in criterion ‘s policies and rules are besides required where similar state of affairss can be managing easy utilizing the same rule. By utilizing consistent rules, it helps to better comparison between company informations and information between companies.

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The ability to reflect to existent economic state of affairs is one of the properties of high quality criterions ( Wulff & A ; Koski-Grafer, 1998 ) . Bing able to use in existent state of affairss and non merely based on theoretical state of affairss help to cut down any jobs that may originate in the accounting minutess and at the same clip smooth out the concern operations and informations assemblage ( Knutson & A ; Napolitano, 1998 ) . Flexibility come into topographic point as it is impossible to use all existent concern state of affairss from a stiff accounting criterion ( Wulff & A ; Koski-Grafer, 1998 ) . Another property is that the accounting criterion should be easy understood by the professionals so that they can use it to the minutess without any troubles ( Kaplan & A ; Fender, 1988 ) . When it is easy to understand a certain criterion, it can be used by non merely the local companies but besides the companies overseas. This is of import to companies like multi-national corporations where they have subdivisions all over the universe and needed criterions that can be applied in the states they involved with. For illustration Tesco PLC and Wal-Mart Stores, Inc. where both companies have retail shops all over the universe. Therefore when a wholly different criterion used for each subdivision of the companies ; it is truly difficult to give information for comparison and this affect the determination doing made to alter or better any operations.

FRS 15: Tangible Fixed Assets, and IAS 16: Property, Plant and Equipment, are accounting criterions as suggested from their rubric ; manage the interventions of touchable fixed assets ain by companies. Both criterions contain the intervention on deprecating fixed assets, disposal of fixed assets, reappraisal of fixed assets and so on.

FRS 15 and IAS 16 have specific definitions for touchable fixed assets and the rules footing used in handling fixed assets. These provide consistence that is required in a high quality accounting criterion. For illustration, a particular first measuring of fixed plus is used and this follows throughout the expected life of assets therefore supplying consistent computations throughout the accounting old ages ( Adams, 2001 ) . Consistency is besides applied in reappraisal of plus where when a company privation to revaluate a certain fixed assets for such as machinery equipment, all other similar machinery equipment are besides required to be revaluate ( Adams, 2001 & A ; Accounting Standards Board, 1999 ) . Thus this will maintain all similar assets to be up-to-date with its market value ( Adams, 2001 ) .

Both criterions have certain flexibleness to them. For illustration, there are several methods in ciphering depreciation. Companies can do their ain opinion on which method to take for mensurating their fixed assets depreciation and the disposal value at the initial measuring of the plus. In a manner it helps the professionals to smooth out the measuring suited to their fiscal place. But at the same clip, struggles may originate when the company do a incorrect judgement in its policies and may seek to alter them. Thus a via media is required between flexibleness and following specific rules.

The criterions are besides to a certain grade able to associate to existent economic activities. This applied to the reappraisal of fixed assets to its present market value alternatively of its historical cost ( Eccles & A ; Holt, 2001 ) . Therefore as reference before, it helps to up-to-date the assets involved and at the same clip conveying the companies to its more realistic fiscal place.

The criterions ‘ contents are easy to understand for the professionals. Detailed contents, definitions and rules are available to be used for any state of affairss related to fixed assets. For illustration, thorough definitions on what a fixed plus is, what can be considered direct attributable costs to repair plus or what is an economic life of an plus ( Accounting Standards Board, 1999 ) . The criterions non merely assist the professionals and internal direction but besides the external parties. An easy to understand criterions ‘ content improved the information provided. And at the same clip, aid to unwrap relevant information in fiscal statement in a manner that external parties such as investors are able to understand the company ‘s fiscal place and its public presentation for the accounting period ( Adams, 2001 ) . Thus the information sing fixed assets is dependable for usage in any determination devising.

However, comparison is non to the full presence as a characteristic in these criterions. As reference before there are flexibleness in methods ciphering fixed assets in term of depreciation and in intervention of involvement loan incurred to buy fixed assets. Due to opinion of the professionals and company ‘s policies, different companies may hold different intervention on similar assets therefore comparison weakens as each method reflects otherwise to the companies ‘ fiscal places.

In decision, there are several properties required in a high quality accounting criterion. FRS 15 and IAS 16 have most of the properties. However, farther betterment on the criterions may be required to accommodate to the fast traveling economic system.


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