Guidelines for Accounting Statements

Discuss About The Adverse Uniform Written Reporting Standards?

Measurement and bureaucratic processes helps generate economic measurements that provide a scale that is used in accounting to assess profit or loss made by a company. Therefore calculations are not generally based on hypothesis or guesswork since an already established measuring scale is used. In addition, these measuring instruments produce reliable numbers that are vital to the production of useful financial statements. For instance, the sales of Recce Group grew by 9.2% to $2,276m and profit after tax reduction was up to 16.1% on the prior year at $192.2m for the year ending 30 June 2016. Therefore, this calculation was done by using the actual figures and statements in order to ensure accuracy (Cairns & Tarca, 2011).

b) All accounting statements are guided by the set rules and regulations and any firm that ignores the outlined standards is subjected to the law. The financial report is prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Therefore, the financial report covers the firm’s and controlled entities as a consolidated entity and all the arithmetic calculations should always be correct so as to provide the real financial position of a firm. Consequently, the consolidated financial statements of the firm should also comply with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Historical cost convention is a great determinant of the financial reports and therefore the set standards of arithmetic should be regarded in order to ascertain financial statements (Chalmers & Godfrey, 2011).

c) In accounting, depreciation involves the allocation of the cost of tangible asset over its useful life. For accounting purposes, businesses depreciate long term assets and as well as for tax purposes. The cost of tangible assets purchased by firms can be deducted as business expenses for the purpose of tax. In addition, depreciation is an accounting convention that allows a firm to write off the value of an asset over time considering it as a non-cash transaction. Depreciation expenses do not represent any cash transaction but it indicates the value of an asset used over a period of time ( Deegan, 2012).

d) In accounting, income is an excess of revenue over expenses for an accounting year. The amount of money received by a firm over a specific period is called revenue. It’s an increase in assets or decrease in liabilities. The gross activity made by a firm quantifies revenue. The gross profit generated by a company at the end of financial year helps calculate revenue hence determining whether the company made profit or loss. However, there might be instances where non real cash items are introduced in the income statement such as devaluation and depreciation which may affect the value of the firm’s real income. In this case it is true that income can be cash or non cash depending on the items represented in the income statement.

Depreciation in Accounting

e) Financial statements report on company’s equity, income, and cash flow. They indicate an entity’s financial activities to parties which include investors, management and tax officials. Financial statements provide vital information that is used by different persons for different reasons. They are presented in a structured manner with conventions accepted by accounting and regulatory personnel. They are therefore very useful in determination of whether a firm will attract the right investors and this sometimes affects how they are represented. Business managers try to paint the right image of the firm and sometimes might manipulate the figures to suit their interest. Similarly, financial statements are affected by human interpretation and error and even at some cases by international manipulation indicating that they are not only determinants of future decisions

f) There are different general accepted accounting principles which of the basic accounting principles and guidelines, the detailed rules and standards issued by FASB and its predecessor the Accounting Principles Board (APB), and the generally accepted industry practices. Although, the information provided by professional accountants should be reliable, consistent, and comparable, the different accounting rules used yield different statements which give different positions.

I believe accounting practice has deteriorated to a ritual of rules of simple compliance. In the past, the accounting history has been characterized by a quick intensification of enormous groups of accounting standards and other technical rules even though abrupt cooperate fall and other related financial reporting breakdowns have endured despite these massive regulatory measures. In an environment like this, the most regulated are the financial report hitherto also the least reliable commodities. The accounting profession is affected by a mediocre and insufficient impulse of quality while on the contrary only adherence to the processing rules instead of correspondence to the occurrences essential in making the accounting information consistent for making decisions in line with finance. Most accounting researchers are majorly nonchalant with enhancing the technical value of financial statements, and consequently, the weight on the accounting education has been reduced to simply a mastery of a rule-book (Sunder, 2010). Arguing from the view of the accounting functions, roles, nature, and obligations of professions in addition to the features and the besets of the rules of accounting. Therefore, it can be accomplished that professional guarantee of accounting as an occupation is to be authenticated by the intellectual authority anticipated of a professional occupation.

The emphasis in accounting education has been inclined to the mastery of rule-book techniques. This is not desirable as the accounting rules, and the standards advance daily though no significant progress is exhibited in the quality of the financial statements. It eliminates the correspondence to the existing commercial situations essential in advancing the reliability of accounting information in directing financial decision-making process. The emphasis on application of rules increased the technical insufficiencies of the same rules which have depleted the authority of professional and accounting autonomy at the same time introduced feebleness to of the professional obligations (Armstrong, 1987)..

Income in Accounting

There is Recoil from the principles of professional practice therefore together with an enduring satisfaction concerning the current technical accounting practices. According to (Sunder, 2010 ) “the criticality of a professional literature depends not only on the efforts of academic researchers but also on the intellectual leadership exerted by the professionals.” The professionals of accounting have depreciated in the quality of intellectual leadership they offer on the issues of the occupation.  Pressure from outside like the developing complexity in the commercial functions also overall more controversial community may have incremented the challenges of achieving professional epitomes within the accounting profession. But the same kind of occupations gives them influential institutions with the ability to expound and create their situations. Professions are characterized upon the basis of independency and there requires to be self-regulatory (Ogus, 1995). Because of this, the cause of breakdowns in the accounting practices cannot be traced back to external factors. Various illogicalities have been manifested has been evident. The authority of the practitioners has been depleted while the power and extent of accounting occupation, in general, seem to have improved with no serious challenge which raises a question of why the increased macro-authority cannot correspond to the personal practitioner level. The next is the accounting profession has put a premium on practitioner impartiality even though frequent allotting of censure for accounting disappointments to company managers implies that accounting practitioners are unable to depend on themselves. Lastly, renunciation of the requirements of the professional obligations has taken place without the presence of important and crucial evaluation of the technical properties of the accounting profession. The liability crisis of the auditor and frequent indication of insufficient serviceability of the financial statements published have not issued a stimulus for the transition.  In place of that, the accounting occupation has stuck obstinately to an unevaluated prior assumption of an inbuilt competence (Armstrong, 1987). The repercussions are that the accounting goes on in maintaining a perpetual crisis state. Even though any other partitions are subject to disapproval and inspection, the accountancy situation is peculiar as it is enduring and strong in its manner (Sunder, 2010).

Arguing from the renouncement of the external factors as cause, there are insights of how the accounting technique besets nonconformities from the professional practice ideas. Techniques are of late termed as accounting rules. Behind these, inconsistencies is a disjointedness between the actual commercial phenomena and the rules of accounting (West, 2003). The rules in addition to the references of the financial reports are usually founded on imaginary ideas. Consequently, the duplication of the reliability that stands within the experimental information if relinquished and the capability to validate accounting data autonomously is forgone. These issues infringe not only the capability of the financial reports to act as consistent financial tools but also the authority of the profession of the accounting practitioners (West, 2003). A profession individual should always be in a position to account for the technical steps that she or he applies. This statement infers to being able to exhibit an evidence of the knowledge acquired on the current issues or problems.

Impact of Financial Statements

Accounting standards, on the other hand, lacks the practicality of the theoretical proof. Supervisory sanction instead of cognition motivates the actions of the practitioners. These problems put together impels in a nearly exclusive dependence on the formally established rules to show certain accounting steps. The practitioners remain with no important authority about the matter not specialty to accounting norms (Sunder, 2010).

Heritage assets own no exact definition as per the accounting standards while these assets commonly have an environmental or historical and cultural importance, for instance, the historical monuments and buildings, artefacts and conservation areas. These are not restricted to assets of a specific age or variety. Consequently, certain specifications may be needed to clarify the assets which fall under the reference of heritage assets and that which is noted as plant, equipment, and property.

• Their educational, cultural and environmental value may not be fully considered in a financial value founded chastely on the price of the market.
• Statutory and or legal responsibilities may limit the capability to discard the asset
• They are not replaceable plus their quality may increment over time although their physical condition degenerates.
• It may be hard to approximate their significant lives which at times could be hundreds of years.

Heritage assets are scarcely accounted for in line with their ability to produce cash inflows. Many times a real cost to the entity of holding the possessions will exist. The key rationale for keeping such like assets is the non-financial issues that are normally intangible for instance an entity possessed a church that had been utilized steadily for almost one hundred and fifty years. The church may have a cultural importance but because of its age, probable limitations on the capability of the church to sell it and the church’s underlying ability to produce income, it may own no or little real value to the market (Deegan, 2012).

Heritage assets at times are needed and considered as an asset to develop the general financial statements, and therefore their disclosure is crucial.  The policy reason behind this is that the heritage assets do constitute a crucial section of the assets under the control of the organization. It also holds several benefits of accurately gathering heritage assets in financial statements. Just like other items of property, heritage assets are under as by the same standard as a plant; equipment thus owns the same disclosure necessities and measurements. The asset values will be recorded allusion to the active market. The small local market may exist for several heritage assets, but an international marketing can always exist for value derivation. The asset value will be recorded as per the active market.

In some circumstances where the heritage asset is impossible to be reliably measured, it is considered to be a liability. In this case, the asset is not put down on the balance sheet. However, according to the standards, a disclosure of the following is needed:

• A description of the heritage assets on hold that has not been realized in the financial statement encompassing the importance and nature of the particular asset (Deegan, 2012).
• In a case where the present information is existing, an approximate of the quality of the assets not recognized like the newest insurance value.
• The anticipation in this respect to this is that the exposure of would be sensibly detailed level of asset category, the quantities included and the reason for the unobtainable value of the asset (Sugahara & Cillioni, 2008).

Information recording concerning assets cannot be consistently gotten when reading in aggregation with the information on the recognized assets gives beneficial and pertinent information concerning the general holding of the heritage assets of the entities.   The heritage assets form a substantial portion of the cultural identity and modern society. They show the important portion of our past historical records and defending these assets improve our communities.

No, this ought not to be the case. The Eureka flag although considered as a heritage asset to the Ballarat city council it should be included in the financial statements. The Eureka flag has been protected through proclamation under an amount of almost $ 10,000 to remove the inappropriate utilization. Therefore, however much the exact value cannot be accounted for in financial statements, the protection value should at least play the lead in the financial statements, and the unaccounted characteristics are outlined under the invaluable assets. This approach will exhibit a clear communication to stakeholders who can result in increased stakeholder provision because of enhanced clarity of the importance of the Eureka Flag the organization controlling (Jacklin & Keneley, 2009)

References

Armstrong, M. B. (1987). Moral development and accounting education. Journal of Accounting Education, 5(1), 27-43.

Cairns, D., Massoudi, D., Taplin, R., & Tarca, A. (2011). IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia. The British Accounting Review, 43(1), 1-21.

Chalmers, K., Clinch, G., & Godfrey, J. M. (2011). Changes in value relevance of accounting information upon IFRS adoption: Evidence from Australia. Australian Journal of Management, 36(2), 151-173.

Deegan, C. (2012). Australian financial accounting. McGraw-Hill Education Australia.

Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.

Jackling, B., & Keneley, M. (2009). Influences on the supply of accounting graduates in Australia: a focus on international students. Accounting & Finance, 49(1), 141-159.

Ogus, A. (1995). Rethinking self-regulation. Oxford Journal of Legal Studies, 15(1), 97-108.

Parker, R. H. (Ed.). (2013). Accounting in Australia (RLE Accounting): Historical Essays (Vol. 58). Routledge.

Sunder, S. (2010). Adverse effects of uniform written reporting standards on accounting practice, education, and research. Journal of accounting and public policy, 29(2), 99-114.

West, B. P. (2003). Professionalism and accounting rules. Routledge.

Sugahara, S., Boland, G., & Cilloni, A. (2008). Factors influencing students’ choice of an accounting major in Australia. Accounting Education: an international journal, 17(S1), S37-S54.