Advanced Accounting Notes Advanced - StudentVIP
University of Western SydneyAdvancedAccountingNotesUnit 2002672014AdvancedAccountingNotesUnit 200267Chapters refer to the prescribed text: Rankin, M, Stanton, P, McGowan, S, Ferlauto, K &Tilling, M 2012, Contemporary issues inAdvancedAccounting0
Advanced AccountingTopic: Introduction to advanced accountingChapter 1What is theory?Theory helps explain a phenomena, a situation etc. It helps explain an opinion.Positive theory- Describes- Explains- Predicts- Uses deductive reasoningNormative theory- Suggests- Recommends- Uses inductive reasoning (this is thetype of reasoning accountants tendto use)Why do we use theories in accounting?In accounting we use theories for the following reasons:1)2)3)4)To explain what is happening in the accounting practiceTo describe what is happening in the accounting practiceTo predict what may happen in the accounting practiceRecommend or suggest what should happen in the accounting practicePositive theory explainedPositive research seeks to predict and explain particular phenomena. The associatedtheories of positive research are positive accounting theories (PAT). Positive theories aredeveloped through some form of deductive logical reasoning. Thus, the explanation andprediction of particular phenomena is assessed based on observation – that is observinghow the theory’s predictions correspond with the observed facts.Normative theory explainedNormative theories prescribe particular actions. It is based on what the researcher believesshould occur in particular circumstances. As it is not based on observation it cannot beevaluated on whether they reflect actual accounting practice. They may rather suggestradical changes in the way things are done.1
Topic: The Conceptual FrameworkChapter 2What is the Conceptual Framework (CF)?The CF is a set of guidelines we use as accountants to prepare financial reports. The CF is anormative theory, which is used to apply theory to practice. It consists of a coherent systemof concepts, which are guidelines to the accounting standards used for financial reporting.Under paragraph 12 of the CF, talks about “helping users make useful decisions”, this isknown as the decision usefulness theory, which explains how it helps stakeholders makedecisions about organisations.The CF as normative theoryThe CF is a normative theory in that it seeks to guide individuals in selecting the mostappropriate accounting policies for given sets of circumstances. The CF is seen as anormative theory in that it provides guidance on how assets, liabilities, expenses, incomeand equity should be defined recognised and measured.Difference between CF and Accounting StandardsConceptual Framework- Designed to provide guidance andapply to a wide range of decisions- Concerned with General PurposeFinancial Statements (GPFSs)Accounting Standards- Specific requirements for a particulararea- May go beyond the CF- Are mandatory- Sometimes conflict with theframeworkNote: The CF is used as guidance for setting Accounting standards.Structure and components of the CFWhat is the purpose of financial statements?Who are they prepared for?-Concerned with GPFS- prepare financial information useful toexisting and potential investors, lenders andother creditors in making decisions.- FSs should provide information that: Help predict the future Provide feedback on previousdecisions Accountability and stewardship- Existing and potential investors- Lenders- Other creditors2
What assumptions are to be made whenpreparing financial statements?What type of information should beincluded?What are the elements that make upfinancial statements?When should the elements of financialstatements be included?-Normally prepared on theassumption that an entity is a goingconcern and will continue inoperation for the foreseeable futureFundamental qualitative characteristics:- Relevance- Faithful representationEnhancing qualitative characteristics:- Comparability- Verifiability- Timeliness- Understandability- Assets- Liabilities- Equity- Income- ExpensesThe elements should be included if theymeet the two criteria below:- Probability; and- MeasurabilityPros and Cons of the CFBenefits- Technical benefits: Basis for setting accounting rules Helps individuals prepare, audit oruse FSs- Political benefits: Prevents political interference insetting accounting standards- Professional benefits: Protects the professional status ofaccounting and accountantsProblems and Criticisms- Its ambiguous, principles can be toovague therefore leaving room foralternative interpretations- Its descriptive not prescriptive- The concept of faithfulrepresentation is inappropriate Realist view: FSs arerepresentationally faithful as long asthey provide and objective picture ofan entity’s resources Social constructionist view: althoughthe world is as it is, we asaccountants information andtherefore create reality.3
True and fair view in accounting P 1.1: AASB 101 paragraph 15; tells us that FSs shall present fairly the financialposition performance and cash flow of the entity.The Australian Corporations Law s297, 295 paragraph 3 part c; talks about faithfulrepresentationThe CF: Qualitative Characteristics; faithful representationWhat is the decision usefulness theory and why is it such an important theory?The CF defines the objective of decision usefulness theory that financial information aboutthe reporting entity is useful to existing and potential investors, lenders and other creditorsin making decisions about providing resources to the entity.This is an important theory in that it helps provide information useful to users in makingdecisions. The decision usefulness theory helps us to predict what may happen in the futurealthough financial statements do not necessarily provide information in relation to thefuture; they help users make predictions upon these. This theory also helps providefeedback on previous decisions. Information in financial statements can help decidewhether past decisions were correct and the information used to make those decisionswhere appropriate. Thus this helps users to assess whether better decisions can be made inthe future.Topic: Measurement issues and the theory of decision usefulnessChapter 4Supporting evidence: Whittington ArticleWhy do we measure things?To provide information for users to make decisions.What theories link to measurement?-Decision usefulness theoryCF as a normative theoryWhat is measurement issues facing accountants?There are a number of measurement challenges that accountants face especially whenaccounting for social and environmental aspects of accounting. The three key issuessurrounding measurement in a social and environmental perspective:-What needs to be measured and accounted for?4
-How can discretion and subjectivity associated with the estimation of values bemanaged?What are the consequences associated with accounting for social and environmentalaspects of the entity.One of the most significant challenges is coping with measurement in the context ofaccounting for green assets and other environmental and sustainability issues. Challenges liein the measurement issues and controversy surrounding how intangible assets areaccounted for. Challenge is how to measure and account for water as a limited naturalresource with a view to sustainability.How can theories help us resolve these dilemmas?Should our CF and standards allow choices of measurement methods?How does this choice of measurement methods connect to ideas of decision usefulness?The measurement methods used to produce accounting information impact on the qualityand thus usefulness of accounting information The decision usefulness theory is ofsignificance as financial statements produced containing good quality information willenable users to make appropriate decisions in order to fulfil the decision useful objective.However, poor quality information could potentially mislead users and lead them to makeinappropriate decisions. This in effect will give the impression that management has notperformed to the best of their abilities and have not managed the resources of the entityeffectively and efficiently. Therefore, it is crucial to provide information using measurementmethods that is both beneficial to users and accurately depicts the performance ofmanagement.How do we measure patents (i.e. intangible assets)?Cost approach is the best valuation technique for patents. Intangible assets use estimationvaluations to measure them.5
Topic: Measurement: The Fair Value debateChapter 10Supporting evidence: L & L article 2009Fair value vs historical costMain two types of measurement:Fair valueAdvantage- Relevant (as it based on presentvalue)Historical costAdvantage- Comparable- Reliable (since asset price cannot bechanged)Disadvantage- Problems with reliability: as themarket changes- Involves subjectivity in tier 2 and 3- Tier 1 does not always work becauseof inefficient marketsDisadvantage- Problems with relevance3 tiers of Fair valueTier 1Tier 2Tier 3Active market: use active market priceAdjust: if no active market then look at a similar assets to set priceEstimate: use calculator to put a value to that asset e.g. intangibles, biologicalassets etc.Why is the fair value debate so important?The fair value debate has become important as a result of the GFC. Standard setting hasmoved increasingly towards the use of fair value. Current accounting standards allow arange of measures – mixed measurement system and this is likely to change. It is importantto be aware of the strengths and weaknesses of fair value accounting (FVA) as the increasedadoption of FVA is likely to affect the future careers of accountants.Arguments for and against fair valueFOR--Faithful representation – quotedmarket price set by forces outsidethe entity for tier 1Relevant – useful, how much we payor receive for an item now is relevantAGAINST- Ignores the going concernassumption – measures values asthough the entity was intending tosell off all assets and liquidate- value depends on circumstances e.g.6
--to decision to buy or sell timelyUnderstandable – easy concept tograsp, amount to be received if itemwas sold. What the item is worthfrom a market perspective. However,not so easy for tier 2 and 3Comparable between entities,determined at the same point in time---current market conditionsspecialised assets – not bought andsold on an active market, unique withno value other to entitiesmeasured at current date –influenced by short termsubjective – for items with no activemarket, we form an estimate of fairvaluemarket prices – representexpectations, expectations based onpredictions, predictions may not becorrect volatility in market pricescaused by market correctionsFair value valuation techniquesMarket approach: based on the ability to identify a market for an identical or comparableasset or liability.Income approach: based on converting future cash flows or income and expense into asingle present value.Cost approach: based on an estimate of the cost of replacing the ‘service capacity’ of theasset under consideration. Known as the current replacement cost in accounting theory.What is information asymmetry?This is where managers possess more information about current and future prospects of anentity than people external to the entity for example investors. Therefore, since managerscan choose when and how to communicate this information, this creates volatility in themarket.PAT theory suggests that managers who have possession of this information, are given theincentive to disclose this information in the form of good or bad news to the market, whichfurther supports the volatility of the market and impacts upon the decisions of externalstakeholders to entity in that it directly affects market speculations.7
Advanced Accounting Notes Unit 200267 2014 Advanced Accounting Notes Unit 200267 Chapters refer to the prescribed text: Rankin, M, Stanton, P, McGowan, S, Ferlauto, K & Tilling, M 2012, Contemporary issues in accounting
FINANCIAL ACCOUNTING : MEANING, NATURE AND ROLE OF ACCOUNTING STRUCTURE 1.0 Objective 1.1 Introduction 1.2 Origin and Growth of Accounting 1.3 Meaning of Accounting 1.4 Distinction between Book-Keeping and Accounting 1.5 Distinction between Accounting and Accountancy 1.6 Nature of Accounting 1.7 Objectives of Accounting 1.8 Users of Accounting Information 1.9 Branches of Accounting 1.10 Role .
Accounting Policies, Changes in Accounting Estimates and Errors Objective 1 The objective of this Standard is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and
ACCT 2100 Principles of Accounting 3 Ph.D. Accounting Virginia Tech Yes ACCT 3131 Cost Accounting I 3 Yes Berrigan, Isabel M ACCT 3124 Governmental Accounting 3 M.S. Accounting - Auditing University of New Orleans No ACCT 2100 Principles of Accounting 3 M.S. Accounting University of New Orleans No ACCT 3
Level 3 Accounting OVERVIEW – Course Information page ii General Overview NCEA Level 3 Accounting covers partnership accounting, company accounting, company annual report interpretation, cost accounting, management accounting and decision making. The Accounting Scholarship Standard is one standard with a focus on repo
Accounting Education, (2) Accounting Education, (3) Advances in Accounting Education, (4) Global Perspectives on Accounting Education, (5) Issues in Accounting Education, and (6) The Accounting Educators’ Journal. As noted in Table 1, this article is the 12th in a series of accounting education literature reviews first published in 1986.
Accounting Principles Generally Accepted Accounting Principles (GAAP) are the standard framework of guidelines for financial accounting/preparation of financial statements which has strong tight with the common accounting practices along with the accounting standards. Accounting principles are same as accounting concepts which discussed earlier.
Department of Accounting became the School of Accounting, and in late 1980, our undergraduate accounting program and master of accounting program started being ranked in the top five in the nation. We also moved into the School of Accounting building. In 1990, the School of Accounting changed its name to the Leventhal School of Accounting.
Annual Women’s Day Sunday, August 24 Congratulations on a blessed Youth Day!! Enjoy your break during the month of August. Women’s Day Choir Rehearsals July 31, August 7, 14, 19, 21 . Beginners Andrew Ash Chaz Holder Primary Deion Holder Nia Belton Junior William Ash Deondrea Belton Intermediate RaShaune Finch Jaylin Finch Advanced Rayanna Bibbs Tavin Brinkley Adult #2 Jeffry Martin Joseph .
