代写 ACC307Accounting Theory

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  • 代写 ACC307Accounting Theory
    Unit:  ACC307 – Accounting Theory
    Weighting:  The assignment is worth 40% of the total unit weight. 
    Instructions: 
    1.  Students are required to complete three case studies. 
    2.  Your answer must be both uploaded to Moodle in word  file and 
    handed over a printed copy with signed coversheet. 
    3.  You need to support your answers with appropriate Harvard  / APA 
    style references where necessary. 
    4.  Only  include  information  in  your  appendixes  that  has  been 
    directly referred to in the body of your document. 
    5.  Include a title/cover page containing the subject title and  code and 
    the name, student id numbers. 
    6.  Please save the document as ACC307AT1_first name_Surename 
    _Student Number 
    Eg:ACC307AT1_John_Smith_20140000 
    1   Case Study 1 (1000 words) 
    Revisiting the conceptual framework 
    The FASB and IASB began a joint agenda project to revisit their conceptual frameworks for financial accounting 
    and reporting in 2002. Each board bases its accounting standards decisions in large part on the foundation of 
    objectives, characteristics, definitions, and criteria set forth in their existing conceptual frameworks. The goals of 
    the new project are to build on the two boards' existing frameworks by refining, updating, completing, and 
    converging them into a common framework that both Boards can use in developing new and revised accounting 
    standards. A common goal of the FASB and IASB, shared by their constituents, is for their standards to be 
    'principles-based'. To be principles• based, standards cannot be a collection of conventions but rather must be 
    rooted in fundamental concepts. For standards on various issues to result in coherent financial accounting and 
    reporting, the fundamental concepts need to constitute a framework that is sound, comprehensive,  and 
    internally consistent. 
    Without the guidance provided by an agreed-upon framework, standard setting ends up being based on the 
    individual concepts developed by each member of the standard• setting body. Standard setting that is based on 
    the personal conceptual frameworks of individual standard setters can produce agreement on specific standard- 
    setting issues onf y when enough of those personal frameworks happen to intersect on that issue. However,  
    even those agreements may prove transitory because, as the membership of the standard-setting body changes 
    over time, the mix of personal conceptual frameworks changes as well. As a result, that standard-setting body 
    may reach significantly different conclusions about similar (or even identical) issues than it did previously, with 
    standards not being consistent with one another and past decisions not being indicative of future ones. That 
    concern is not merely hypothetical: substantial difficulties in reaching agreement in its first standards projects  
    was a major reason that the original FASB members decided to devote substantial effort to develop a conceptual 
    framework. 
    The IASB Framework is intended to assist not only standard setters but also preparers of financial statements (in 
    applying international financial reporting standards and in dealing with topics on which standards have not yet 
    been developed), auditors (in forming opinions about financial statements), and users (in interpreting information 
    contained in financial statements). Those purposes also are better served by concepts that are sound, 
    comprehensive, and internally consistent. (In contrast, the FASB Concepts Statements state that they do not 
    justify changing generally accepted accounting and reporting practices or interpreting existing standards based 
    on personal interpretations of the concepts, one of a number of differences between the two frameworks.) 
    Another common goal of the FASB and IASB is to converge their standards. The Boards have been pursuing a 
    number of projects that are aimed at achieving short-term convergence on specific issues, as well as several 
    major projects that are being conducted jointly or in tandem. Moreover, the Boards have aligned their agendas 
    more closely to achieve convergence in future standards. The Boards will encounter difficulties converging their 
    standards if they base their decisions on different frameworks. 
    The FASB's current Concepts Statements and the IASB's Framework, developed mainly during the 1970s  and 
    1980s, articulate concepts that  go  a  long  way  toward being an adequate foundation for principles-based 
    standards. Some constituents accept those concepts, but  others  do  not.  Although  the  current  concepts 
    have  been  helpful, the IASB and FASS will not be able to realise fully their goal of issuing a common set of 
    principles-based standards if those standards are based on the current FASS Concepts Statements and IASB 
    Framework. That is because those documents are in need of refinement,   updating,  completion,  and 
    convergence. 
    The planned approach in the joint project will identify troublesome issues that seem to reappear time and time 
    again in a variety of standard-setting projects and often in a variety of guises. That is, the focus will be on issues 
    that cut across a number of different projects. Because it is not possible to address those cross-cutting issues 
    comprehensively in the context of any one standards-level project, the conceptual framework project provides a 
    better way to consider their broader implications, thereby assisting the boards in developing standards-level 
    guidance. 
    2   As noted in the chapter, the boards have issued and received comments on an exposure draft relating to Phase 
    A Objectives and Qualitative Characteristics. A discussion paper relating to Phase D Reporting Entity had been 
    issued and work is continuing on Phase B Elements and Recognition and Phase C Measurement. 
    Source:  Excerpts  from  Halsey  G. Bullen  and  Kimberley  Crook,  'Revisiting  the  concepts:  A new conceptual 
    framework  project',  M<1y 200'),  FASB and  11\SB, www.fasb.org  or www.idsh.org. 
    Questions 
    1.  Explain why principles-based standards require a conceptual framework. 
    2.  Why is it important that the IASB and FASB share a common conceptual framework? 
    3.  It is suggested that several parties can benefit from a conceptual framework. Do you consider that a 
    conceptual framework is more important for some parties than others? Explain your reasoning. 
    4.  What is meant by a 'cross-cutting' issue? Suggest some possible examples of cross•cutting issues. 
    Case Study 2 (1000 words) 
    The trend toward fair value accounting 
    by J Russell Madray, CPA  
    Critics contend that GAAP is seriously flawed. Some in the accounting profession go so far as to pronounce 
    financial statements almost completely irrelevant to the financial analyst community. The fact that the market 
    value of publicly traded firms on the New York Stock Exchange is an average of five times their asset values 
    serves to highlight this deficiency. Many reformers, including FASB chairman Robert Herz, believe that fair value 
    accounting must be part of the answer to making financial statements more relevant and useful.* Advocates of 
    fair value accounting say it would give users of financial statements a far clearer picture of the economic state of 
    a company. 
    But switching from historical cost to fair value requires enormous effort. Valuing assets in the absence of active 
    markets can be very subjective, making financial statements less reliable. In fact, disputes can arise over the 
    very definition of certain assets and liabilities. 
    The crux of the fair value debate is this: Each side agrees that relevance and reliability are important, but fair 
    value advocates emphasize relevance, while historical cost advocates place greater weight on reliability. 
    Relevance versus Reliability 
    The pertinent conceptual guidance for making trade-offs between relevance and reliability is provided by FASB 
    Concepts Statement No. 2, Qualitative Characteristics of Accounting Information. It provides guidance for 
    making standard-setting decisions aimed at producing information useful to investors and creditors. Concepts 
    Statement No. 2 states: 
     
    The qualities that distinguish "better" (more useful) information from "inferior" (less useful) information are 
    primarily the qualities of relevance and reliability ... The objective of accounting policy decisions is to produce 
    accounting information that is relevant to the purposes  to be served and is reliable. 
     
    Critics of fair value generally believe that reliability should be the dominant characteristic of financial statement 
    measures. But the FASB has required greater use of fair value measurements in  financial  statements because 
    it perceives that information as more relevant to investors and creditors than historical cost information.  In  that 
    regard, the FASB has not accepted the view that reliability should outweigh relevance for financial statement 
    3   measures. 
    Some critics also interpret reliability as having a meaning that differs in at least certain respects from how that 
    term is defined in the FASB's Conceptual Framework. Some critics equate reliability with precision, and others 
    view it principally in terms of verifiability. However, Concepts Statement No. 2 defines reliability as "the quality of 
    information that assures that information is reasonably free from error or bias and faithfully represents what it 
    purports to represent." With respect to measures, it states that "[t]he reliability of a measure rests on the 
    faithfulness with which it represents what it purports to represent, coupled with an assurance for the user, which 
    comes through verification, that it has that representational quality." Thus, the principal components of reliability 
    are representational faithfulness and verifiability. 
     
    Although there are reliability concerns associated with fair value  measures, particularly when such measures 
    may not be able to be observed  in active markets and greater reliance must be placed on estimates of those 
    measures, present-day financial statements are replete with estimates that are viewed as being sufficiently 
    reliable. Indeed, present day measures of many assets and liabilities (and changes in them) are based on 
    estimates, for example, the collectability of receivables, salability of inventories, useful lives of equipment, 
    amounts and timing of future cash flows from investments, or likelihood of loss in tort or environmental litigation. 
    Even though the precision of calculated measures such as those in depreciation accounting is not open to 
    question since they can be calculated down to the penny, the reliability of those measures is open to question. 
    Precision, therefore, is not a component of reliability under Concepts Statement No. 2. In fact, Concepts 
    Statement No. 2 expressly states that reliability does not imply certainty or precision, and adds that any 
    pretension to those qualities if they do not exist is a negation of reliability. 
    * Robert H. Herz's remarks to the Financial Executives International Current Financial Reporting Issues 
    Conference, New York Hilton Hotel, November 4, 2002. 
    Source:  Excerpts from ‘The trend toward fair value accounting', Journal of Financial Service Professionals,  May 
    2001,  pp. 16-113. 
    Questions 
    1.  What you  think  is the fundamental  problem  with  financial  statements based  upon the historic cost 
    measurement principle used under US GAAP ? 
    2.  What do you think of the principle' ... accounts must reflect economic reality' as a core principle of 
    measurement in accounting? 
    3.  How would you measure economic reality? 
    4.  What is reliability in accounting? 
    Case Study 3 (1000 words) 
    Disclosure of environmental liability 
    by Lindene  Patton  C.l.H., Senior vice-president and counsel, Zurich 
    4   Around the world, companies are being required to meet higher levels of disclosure of environmental liability ... In 
    the United States, for example, the US Financial Accounting Standard Board (FASB) issued provisions in 2002 
    for accounting for environmental liabilities on assets being retired from service. The provision for accounting for 
    asset retirement obligations required companies to reserve environmental liabilities related to the eventual 
    retirement of an asset if its fair market value could be reasonably estimated. 
    The intent of the ruling was disclosure, but the conditional nature of  estimating a fair market value caused 
    corporations to take the position that they could  defer their liability indefinitely by 'mothballing' a contaminated 
    property. Companies effectively postponed the recognition  of their environmental  liabilities in the absence of 
    pending or anticipated  litigation. 
     
    Earlier this year, FASB clarified its intention by providing an interpretation that said companies have a legal 
    obligation to reserve for environmental and other liabilities associated with the eventual retirement of 
    manufacturing facilities or parts of facilities, even when the timing or method of settlement is uncertain. Among 
    examples given by FASB: 
     
    •  An asbestos-contaminated factory cannot simply be 'mothballed' without adequate reserves to cover 
    the eventual cost of removing the asbestos 
    •  Reserves must be established today for the eventual disposal of still-in-use, creosote• soaked utility 
    poles 
    As a result of what may seem like a minor technical re-interpretation, companies may have to recognise 
    immediately millions of dollars in liabilities in their income statements to comply with this change. 
    In Europe, regulators have also initiated efforts to promote disclosure. In 2001, the European Commission 
    promulgated tougher, non-binding guidance for disclosing environmental costs and liabilities, and various 
    countries in Europe have issued additional requirements related to environmental disclosure. In 2002, the 
    Canadian Institute of Chartered Accountants published voluntary guidance that stressed the importance of 
    disclosing all material risks, including environmental liabilities, in companies' annual reports. 
     
    Some financial institutions have also pledged to adhere to tenets of international initiatives such as the Equator 
    Principles, which factor environmental and social considerations into assessing the risk of a project. Also, a  
    group of pension funds, foundations, European  investors  and  US  state treasurers  have  endorsed  UN  efforts 
    to promote a minimum level of disclosure on environmental, social and governance issues. 
    Recognition of environmental liabilities may also soon emerge as an issue for companies in Asia. While 
    environmental issues may have taken a back seat to rapid economic development over the past 20 years, that 
    situation may change as legislation and regulation catch up with development. 
    The responsibility for disclosing future environmental liability is clearly a growing issue for companies around the 
    world. However,  accurately estimating cleanup costs is not an easy task due to unknown contaminants, legacy 
    liabilities related to formerly operated property, regulatory changes or unexpected claims related to natural 
    resource damage. 
    代写 ACC307Accounting Theory
    Questions 
    1.  The article states that the US standard  setter  FASB  requires  companies to record a provision in 
    relation to environmental costs of retiring an asset ('to reserve environmental liabilities') if its fair value 
    could be reasonably estimated. How do you think companies would go about estimating such a 
    provision? 
    5   2.  What aspects of the requirements were used by US companies to defer recognition of a liability? 
     
    3.  In what ways does the recognition  of the liability in relation to future restoration activity affect (a) net 
    profit in the current year and future years; and (b) cash flow in the current and future years? 
     
    4.  The article refers to changes  in  disclosure  requirements  relating to environmental liabilities in many 
    countries around the world. How important is it that companies recognise the liability? To what extent is 
    disclosure about the liability sufficient? 
    代写 ACC307Accounting Theory