Financial Accounting Theory & the Reporting Environment Essay

5. Researchers who develop positive theories and researchers who develop normative theories often do not share the same views about the roles of their respective approaches to theory construction. (a) How do positive and normative theories differ? (b) Can positive theories assist normative theories, or vice versa? If yes, give an example. If not, why not? Normative accounting research makes policy recommendations and is concerned with what should be done in contrast to explaining why current practice is carried out in the manner that it is (positive theory). Normative theorists usually attempt to derive either the ‘true income’ or adopt the ‘decision — usefulness’ approach whereby accounting reports are an input into users’ decisions (e.g., to buy or sell shares, management decisions on the financial wealth of firms, etc.). The major issues are the impact of the changing price environment (prices) and the impact on income, assets, liabilities a nd equity. As a consequence many normative theorists are measurement theorists who attempt to incorporate the effects of inflation into accounting reports. In this sense they take a semantic viewpoint — relating the figures in the accounting reports to actual objects (assets, liabilities) or events (changes in inflation). To some extent the approach of the IASB is a normative approach. Positive accounting theory was a reversion to testing or relating accounting theories back to the ‘facts’ or ‘experiences’ of the real world. Examples of such research were questionnaires and surveys of bank officers or investors regarding their use of financial reports for decision making; or whether inflation adjusted accounting reports actually aided decision making. Current positive accounting research is aimed at explaining the reasons for actual accounting practices and in predicting the role of accounting data in economic, political and social decision making. P ositive theory has expanded accounting theory from the purely decision making focus of normative theorists into analysis of political and economic factors. Using the normative recommendation of IFRS, that fair values should be used in financial statements, a positive theorists would first undertake a number of empirical tests to see if they are actually useful/used by decision makers in their valuation models. In this sense they complement each other – normative theory the deductive analysis with positive theory the empirical verification. 7. Classify the following hypotheses according to whether they are conclusions of positive or normative theories. Explain your answers. (a) Historical cost accounting should be replaced by a market value system. (b) Historical cost accounting provides information used by creditors. (c) Historical cost accounting is used by many managers to allocate costs in determining divisional performance. (a) normative (b) positive (c) positive Page 1 of 37 10. The decision-usefulness approach to theory development can be used to develop theories of accounting. a) Explain what is meant by the decision-usefulness approach to theory development. b) How can the decision-usefulness approach relate to accounting theory formulation? c) Give two examples of decisions that require data obtained from accounting reports. The decision-usefulness approach is an instrumentalist approach (see diagram p.25). In a narrower sense, one direct test of an overall theory of accounting would be to determine whether the output data of the accounting systems, which are constructed on the basis of the overall theory, are useful to users. The data of the accounting systems are utilised by users in their prediction models, and the conclusions (predictions) are then used in their decision models. The problem is that if the prediction is verified, it verifies the prediction model, not the accounting system and its output. There are other variables besides accounting data that affect the prediction. We do not know how the accounting data were utilised. Also, if the decision turns out to be right, it verifies the decision model, not the accounting system. Interpreting the evidence on decision-making is extremely difficult. We do not know how to interpret the evidence to determine that accounting information is useful. Th us, a direct test is virtually impossible. Accounting standard setters usually determine usefulness with the weaker, more direct tests which are usually advanced by accounting committee setting bodies and include: relevance, verifiability, freedom from bias, timeliness, comparability, reliability and understandability. Some decisions: To invest in a firm’s stock (i) (ii) To loan funds to a firm (iii) To purchase or buy an asset. GHTHH Chapter 4 1. How do conceptual frameworks of accounting attempt to create a theory of accounting? Describe the components of the IASB Framework and how they contribute to a theory of accounting. Conceptual frameworks (such as those developed in the United States, Australia and at the IASC/IASB) do not employ the term ‘theory’ because of the difficulty of demonstrating logical consistency and in gathering empirical evidence to corroborate the theory. However, by following a structured program of inter-related concepts, accounting regulators aim to use the conceptual framework to achieve consistent accounting standards that will replace ad hoc solutions to specific problems. In this context, the components of the conceptual framework can be viewed as the building blocks of a theory of accounting. The components of the IASB/Australian Framework are: objectives of financial statements; qualitative characteristics of financial information (such as relevance, reliability, comparability, timeliness and understandability); and definitions of the basic elements of accounting reports (such as assets, liabilities, equity, revenue, expenses and profit) and principles and ru les of recognition and measurement of the basic elements, and the nature of the information to be displayed in financial reports. (Refer page 55 of text) 3. What does the IASB Framework describe as the basic objective of accounting? What are its implications? Stewardship looks primarily to the past, asking the question: What happened? Decision making looks to consequences in the future, asking the question: What will happen? A decision-making approach sees accounting information as inputs for the decision-making prediction models of users. If so, then we are concerned about what kind of accounting information is relevant to decision makers. Some believe that current value is implied. Also that statement of financial position accounts and their amounts are as important as those in the income statement. Traditional accounting emphasises income. Page 2 of 37 6. Explain the role of accounting in relation to: (a) individuals (b) firms (c) the Australian economy. Accounting information helps to efficiently allocate capital in the economy. The successful operation of a free economy depends, to a large extent, on the good judgements made by individuals about their investment opportunities and the investment opportunities of firms. People need information to decide where to invest or lend, and at what price. In relation to firms, accounting information forms the basis for many contracts, such as debt contracts that include covenants specifying that the firm will not allow its leverage ratio to exceed a certain level, or management compensation plans that provide managers with bonuses based on reported corporate earnings. As such, the firm’s cash flows are tied to accounting numbers. Since the value of the firm is the present value of all future cash flows and those cash flows are tied to accounting numbers, accounting numbers determine the value of the firm. In relation to the economy, accounting information plays a vital role in the equitable allocation of capital, and it contributes to the effective performance of the price system. The effective operation of our economy means that efficient and inefficient companies must be identified, so that resources are channelled to the former and away from the latter in order to have a ‘successful’ economic system. What would happen, after a long period of time, if ‘incorrect’ information is reported? The economic system would become inefficient (because of the existence of many inefficient firms), causing serious economic problems to all. 7. Can accounting ever provide an unbiased map of economic reality? Why or why not? Yes. Criticisms of neutrality or freedom from bias take two forms. First, some argue it is a state of mind that is not attainable, because all of us are affected by personal values that have been shaped by our particular beliefs, traditions, environment, background and personality. Granted that this is true, it is still meaningful to speak of neutrality or freedom from bias. We recognise the existence of these influences on our perceptions. The idea is to control them within an acceptable range. Second, some contend that neutrality or freedom from bias is not operational, because we cannot be expected to read other people’s minds. However, it is possible to translate neutrality or freedom from bias into operational terms by establishing specific control devices that are external and subject to examination. Control devices are the means by which the notion of objectivity receives operational meaning. Control devices have to do with making public or external what is essentially inter nal or introspective. Rules and procedures under the heading of disclosure, consistency, comparability, and materiality as well as GAAP are practical control devices. In the accounting literature, practical control devices under the heading of objectivity have taken the following three forms: ï‚ · to make specific and precise the concepts and procedures of accounting, and to obtain general agreement on them ï‚ · to determine a consensus of the measure among a number of experts ï‚ · to improve the standards of competence and ethics of the profession. Accountants must construct unbiased or neutral financial maps of economic reality. Otherwise, as Solomons warns, ‘If it ever became accepted that accounting might be used to achieve other than purely measurement ends, faith in it would be destroyed’. Page 3 of 37

A Critique Of Inside The Brain Essay

, Research Paper A review of the book: Inside The Brain The first thing that must be said for the book Inside The Brain, is that it made for really easy reading. Even though the book concerns itself with some subjects that, easy, can be confounding due to their proficient or medical nature, the text flows easy. The book was written to be read, non to be a mention or text edition. The content of this well written book was besides first rate. The beginnings quoted in the book were rather impressive, and the research that went into the undertaking was seemingly rather thorough as good. There is information contained in this book that should be had by all. If all prospective parents were to be given a transcript of this book, and if they were to really read it, the hereafter of our state, and our universe for that affair, would be a much brighter one. Some of the points made, including the demand for kids to be stimulated mentally get downing at an early age, are important. Armed with this information, any parent would be probably to pass more clip with their kids in an attempt to guarantee their ultimate success in life. It is a parent # 8217 ; s duty and duty to supply their kids with the strongest mental armament available in order to come in the rational battleground that will be their hereafter. Those who are non decently intellectually prepared for life will fall to the underside of the socioeconomic strata. They will populate a life of discord including deficient instruction, deficient wellness, substandard wealth, and substandard kids. This will perpetuate a rhythm of this type of individual from coevals to coevals. The writer of the book seems to concentrate on the immediateness of the job through the usage of some really startling statistics. His deduction is that if something is non done to do parents better at the ma nner they prepare their kids for the hereafter, we, as a society, will necessitate to be constructing many more prisons in order to manage the overpowering sum of social misfits that we will be bring forthing. The book does travel on to supply some hope for tomorrow every bit good as fright. The latter chapters focus more on the organic structure # 8217 ; s abilities to mend and mend the encephalon and head. Much attending is given to possible interventions and therapies for those enduring from enfeebling hurts and diseases. Along with explicating how the encephalon and associated tissue can mend themselves, many new avenues of intervention are discussed. Again these issues can be, due to their really proficient and scientific nature, really obfuscated with tech nical slang. Kotulak does an first-class occupation of avoiding these booby traps and delivers the intended information with every bit small immaterial proficient slang and academic prose as possible. He does non exclude necessary information, but instead he explains briefly and compactly what is being referenced. This once more makes the book educational piece at the same clip makes it an gratifying book to read. The lone defects that gave a sense of uncertainty to the content of the book can non be attributed to the writer but to some of his beginnings. Many of his beginnings, while being quoted, appeared to be back-pedaling from their finds. After any mentions to a specific racial group or ethnicity, in footings of correlational informations, were made, the quoted person seemed to add a statement intended to further a feeling of political rightness. This seems incorrect from a scientific position. When a scientist completes a survey, the informations can talk for itself. Equally long as the methods used for the survey are clearly outlined, the scientist should experience no duty to explicate the consequences of his survey in footings of political rightness. It is possible that these statements were made in order to forestall any feeling of animus from being directed toward the scientific community by any one ethnic or racial group. Other than this one spot of take awaying information, the book itself was great. Tax dollars would be good spent by supplying a transcript of this book to every citizen of the state. Baring that, it should be made standard issue to all parents taking their neonates place from the infirmary. A few hours spent reading this book, could assist parents raise a kid who could transcend all outlooks. The information contained in this book implies that a kid # 8217 ; s hereafter mentality is non predicated by his parents # 8217 ; familial make-up. A kid could excel the successes of his parents if his parents give him the right start in life. After all, is it non the dream of all parents to do their kid # 8217 ; s life better than their ain, in every bit many ways as possible. The book besides offers hope to the many victims of encephalon hurts and their households. Stoping short of denoting a remedy for these medical catastrophes, the writer offers hope in the signifier of many new discoveries in the countries of pharmacotherapies and encephalon imagination. The ultimate feeling that the writer of this book leaves his readers with is a sense of hopefulness, and if one accepts some of the premises of this book, everyone who reads it is, to some extent, better off merely for holding read it and holding exercised their head.

Biolopy and Sociolization of Crime Essay Example | Topics and Well Written Essays - 250 words

Biolopy and Sociolization of Crime - Essay Example In relation to crime, gender roles play a major role in increasing the participation and prevalence to crime by men more than women. From the perception of the society, males are viewed as masculine and dominant. From the creation of this perception, men tend to increase their show of dominance in the society. Crime is often depicted as a masculine activity a perception easily supported by the need by men to show their social dominance. On the other hand, the perception of the society on the female gender role is not inclusive of complex or hard tasks. Similar to males, women tend to abide by this social classification (Renzetti & Edleson, 2010). The same trend is also visible from the biological creation of both males and females. Biologically, males are built for dominance, strength and authority. For this reason, the participation in crime by men becomes a common occurrence (Renzetti & Edleson, 2010). For women, their gender role as defined by biology is depicted by their less dominant body and social presence. Women tend to view crime as a gender role that is less fit for their biological

Social policy Essay Example | Topics and Well Written Essays - 1500 words

Social policy - Essay Example The individuals against whom those powers might be used are just those who infringe the general rules; they should not be identified in any other way. Since the point is to restrain the coercive activities of government, these general rules should not be framed so as to discriminate either against or in favour of any group of persons known in advance—against Jews or Blacks, for example. Laws against speeding lay down general rules of this kind: they apply equally to all motorists, and they do not single out particular individuals (say, BMW drivers) for special attention. Retrospective legislation is likely to violate the rule of law on this interpretation since its victims and beneficiaries usually can be identified in advance. 1 General rules of this kind that are announced in advance are a defence against the arbitrary actions of governments. They are necessary in Hayek’s view both for the proper working of the market and for the existence of liberty precisely because they allow individuals to plan their affairs secure in the knowledge that government powers will not be used deliberately to frustrate their efforts. Once governments go beyond the enforcement of certain general rules, their activities inevitably involve the coercion of particular individuals. Since general rules of the kind Hayek favours are not aimed to produce particular effects on particular people, their precise consequences cannot be known in advance. They provide a framework for the decisions and actions of individuals, but they do not determine what those decisions and actions will be. From this point of view there is no reason in principle why governments should not concern themselves with the regulation of economic affairs. B ut their interventions should take the form of a framework of laws within which markets can operate, rather than the direction of economic activity by a central authority. 2 Here and elsewhere, Hayek

Not all companies are viewed as equal Research Paper

Not all companies are viewed as equal - Research Paper Example From an economic perspective, free trade not only makes a company successful, but it also creates a competitive market that improves a country’s economy. In comparison to the candy industry, the tobacco industry is unfairly targeted. Candy has constituents such as excess sugar, which are detrimental to human health, similar to tobacco. Candy and its associated products are a leading cause of obesity, and other undesirable lifestyle diseases like diabetes (Goddard, 2012). It is indeed discouraging that the government does not force them to put a warning after their candy advertisements. Although companies do not in any way force consumers to use their products, they have an ethical obligation to protect consumers. I support the candy industry because it is the duty of consumers to monitor their consumption and purchases. Government legislation only exists when the dangers of a product are too profound. Capitalism plays a significant role in corporate decision-making. It is a great engine of development that natures technological advancements, promotes enterprise, and creates wealth. Even so, sometimes capitalism takes a negative turn when creation of wealth overrides moral obligations. Consumption is the solitary aim and purpose of production and this is what the candy industry targets (Quinn, Mujtaba, and Cavico, 2011). Companies go to all lengths to produce desirable and well-packaged candy products that attract children and adults alike. In most business operations, the interests of producers override that of customers. The main aim of production is to make profits, but it should not have superiority over social prosperity or the importance of production for consumption. In the contemporary society, it is possible for a company to cater to both its interest and that of consumers conjointly. Ethical business decision-making demands poise between corporate and social

Assignment Essay Example | Topics and Well Written Essays - 500 words - 37

Assignment - Essay Example The first one is receiving computer print outs and records. The next step is the collection of ship and money. This is achieved through two ways; one is by bidding auctioned ship. This is followed by buying and selling ship during the auctions. The other potion is placing orders for construction of new ships. After that, the company now uses the existing record to calculate the size of the fleet. The available ships are then allocated to the different fishing areas and placed on the game board. Finally, the decision sheet is submitted to the operator. In ensuring that a fishing company gets the best form each transaction, it has to make crucial decisions. This is the reason to whether it needs to keep its fleet at its current size or expand it. In cases of expanding the fleet, decision has to be made at to whether the new ship should be acquired through bidding in an auction or ordering new ships to be constructed. In this experiment, the focus as on selling the fish cash at $ 20 per fish. The main expenses incurred were form buying ship form auctions and ordering the construction of new ones. The company also operated ship fleet in different fishing area which required additional maintenance costs. The ship sent to the deep sea made considerable greater returns in terms of the size of the fish catch compared to the coastal bank. The company ensured that it made great profits by maintaining low initial bank balances. From the decision sheet provided, it can be observed that the number of ships that remained in the harbor were hig her than the number of ship sent into deep sea or the coastal harbor. This shows that the company was not able to utilize its resources fully in order to get the maximum assets. At one point, there was only one ship sent to the deep sea while the rest 18 were at the harbor. This ensured that it got a great fish catch by maximally utilizing the existing resources. The great catch was also as a result

Factors Influencing Process Design Essay Example | Topics and Well Written Essays - 2500 words

Factors Influencing Process Design - Essay Example The choice of materials is one factor that affects the process design of products. In the process of choosing the right material for products, there are a number of factors that are considered in relation to material choice (Cresswell, 2002). Quantity of products to be manufactured, market costs and product use are the factors associated with material choice. The material to be used should consider what environment and the product will be used. For example, when manufacturing cups for taking tea, the material used should be able to withstand hot or cold temperatures and washing. The quantity of products to be manufacturedrelates to the amount required to be sold to the target market. For example, a large amount of cups can be manufactured if many orders are required by the client. Moreover, marketing cost refers to the final product costs. The end costs of products should not exceed the cost that product will be sold in the market so long as it can perform the function it was manufac tured for and reflects the quality (Kalakul et al, 2014).Product purpose fitness and durabilityare other factors that influence product design. This means that the product should do the function it was designed for. For example, a cup is manufactured for the purposes of taking liquids such as tea. Other factors such as weight and size should be considered when designing products.The weight and size should be reasonable in order to perform its intended purpose. Therefore, when considering product fitness, designers should establish all the important elements of the product