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Write a report of to the chairpersons of the Financial Reporting Counciland the Australian Accounting Standards Board, commenting on the following argument:

Attempts to bring about radical change through the introduction of a conceptual framework have failed. When it appeared as though SAC 4 would require firms to report a greater number of liabilities, lobbying began in earnest and business ensured that any innovation was quashed. As such, the best that can be hoped for from a conceptual framework is that it legitimises current practice, maintains existing social and economic status, and staves off public sector attempts to control accounting standard setting.

Students are required to answer questions in an essay format (introduction, body, conclusion and references) attached a cover with students’ information.must be typed in word and submit it in through Turin-it-in.

You will receive penalty on your report, higher than 30%, you will fail your report immediately.

You are allowed to submit your report many times unit the due date (5pm Friday week 5, 02/06/2017). You don’t need to delete previous report, you just need to resubmit it and the previous one will be replaced by the new one.

If you submit your report after the due date, you will receive 10% penalty on each delay day unit zero mark.

How to submit your report through Turin-it-in?

Conceptual Framework

The current study is written in an essay structure and presented to the Chairpersons of the Financial Reporting Council and the Australian Accounting Standards (Zeff 2014). In addition, several attempts has been made for bringing radical changes for introducing conceptual framework that have failed in previous cases. In the SAC 4, it was mentioned the fact where business firm need to report a greater number of liabilities where lobbying began in earnest as well as business ensured that any innovation brought was quashed. To that, best can be hoped for from the conceptual framework as it legitimizes current practice as well as maintaining previous social and economic status and looking at the public sector that attempts for controlling accounting standard setting in an effective way (Wagenhofer 2015).

SAC 4 means statement of accounting concepts that provide clear details for the treatment of liabilities when business firm were not convinced with the fact (Smith and Tucker 2013). Proper recording of liabilities will restrict the company to hide any types of transactions when they desire. Liabilities are one of the element that are presented in the balance sheet for given financial year as it is the amount of liabilities borne by business. In addition, treatment of liabilities considers as the future sacrifices of monetary benefits when business unit represents the propensity of other business entities for given business transactions for the financial year (Bonner, Clor-Proell and Koonce 2014).

Conceptual Framework

The existing conceptual framework for financial reporting explains the main objective and concepts for general purpose of financial reporting (Bonner, Clor-Proell and Koonce 2014). Conceptual framework is one of the vital tools that assist International Accounting Standards Board for enhancing Standards that are based on theoretical concepts. In addition, the conceptual framework help in assisting the financial users who will be developing consistent accounting policies where no standard applies for a given transactions or events and Standard allows a choice of accounting policy. Therefore, the Conceptual Framework helps in assisting other financial users for understanding as well as interpreting the standards (Singleton-Green 2016).

The Conceptual Framework can be considered as one of the system of ideas and objectives that results in creating of consistent set of rules as well as standards at the same time (Rutherford 2016). As far as accounting is concerned, it deals with certain rule and standards that set the nature, functions as well as limits of financial accounting and financial statements in the most appropriate way. There is several reasons for developing an agreed conceptual framework and it develops framework for setting an accounting standards, a basis for resolving the accounting disputes, basic principles that do not repeat in the given accounting standards (Bonner, Clor-Proell and Koonce 2014). With a sound conceptual framework in place of FASB, it will help in issuing consistent as well as useful standards. Furthermore, without an existing set of standards, it is nearly not possible for resolving any new problems that emerging in given situation. Therefore, conceptual framework assist financial statement users for getting insights of information on the confidence built in the financial reporting and making it easier for comparing it with other financial statement of the company (Quinn 2014).

Limitation of Conceptual Framework

Conceptual framework is one of the frameworks that set the standards for accounting practices as well as principles that have several limitations. The first limitation is setting up of this framework (Pashang, Österlund and Johansson 2014). Countries that are rich and developed can have the capacity to set up conceptual framework. On the other hand, countries that are poor and developing can find setting up conceptual framework an expensive and time consuming process (Bonner, Clor-Proell and Koonce 2014). Conceptual framework is a standard that is leads to rigidity of actions and forwarding new ideas. In addition, conflict may arise between conceptual framework as well as accounting standards that is followed after introducing conceptual framework. Therefore, the conceptual framework may not be acceptable to every part and benefits to some of the interested groups that gets identified by the financial users (Jones and Aiken 2015).

SAC 4

SAC 4 deals with Statement of Accounting Concepts that explains the purpose of the Statement of summarizes the primary concepts for assisting ways for obtaining an overview of the concepts. In that case, the Standard is important to note that a full appreciation of the concepts as well as implications that are obtained when it is obtained to the related commentary. In other words, the background to the development of the Statement as well as basis of conclusions that outlines in the attachment to the Statement (Hopper et al. 2015).

The main purpose of SAC 4 is to establish the definitions of the elements of financial statements such as assets, liabilities, revenues, expenses and equity) as well as specifying criteria for recognizing in the financial statements (Deegan 2013).

Here, Liabilities can be termed as the future sacrifices of monetary benefits where the business unit currently obliged for making it to other business entities as a result of previous transactions or any other events at the same time. A liability should be reported in the statement of financial position as it is possible for getting insights of information of the future sacrifices of monetary benefits that is needed and the amount of liabilities that should be accounted on reliable terms (Caskey and Corona 2016).

The existence of la is generally considered as clear indication of the existence of a liability that are shown in the financial statement and other attributes of a legal liability that restricts in defining the term liability. In that case, liability is explained in SAC 4 and identifies the features that are treated to be essential to the existence of liability. Defining liabilities means considering the essential features of liabilities that does not specify the conditions that fails to meet before a liability qualifies for recognition (Bonner, Clor-Proell and Koonce 2014).

SAC 4 explains even the revenue that takes into account inflows and enhancement or savings in outflows that concerns with the financial benefits that increases in assets or decreases in liabilities of the business unit (Bonin 2013). In addition, the Standard considers expenses as consumptions or loss that concern future economic benefits that decreases in assets or increases in liabilities that links with distributing to the owners that leads in reduce in equity in the reporting period. Furthermore, the structure explains the treatment of expenses or losses that are considered on net basis in the most appropriate way. SAC 4 explains statement of accounting concepts where outflows gets exposed on gross basis and revealed on net basis (Bonner, Clor-Proell and Koonce 2014).

SAC 4

On the contrary, AASB had issued SAC 4 that links with the conceptual framework for a given financial year. SAC 4 is a standard that assist financial user and preparers on how to apply and use the framework (Biondi and Zambon 2013). Conceptual Framework is a structure that indicates innovative work in the area that explains reporting entity and applied to public or private sector. In addition, the act of a unit in setting aside treasury for a prospect event does not give increase to a legal responsibility. For instance, most of the unit that take out renovate, maintenance and regeneration connecting to main items of property, plant and equipment frequently "offer" in their fiscal information for such employment to be undertaken in the prospect, with associated detection of an expenditure. Furthermore, these necessities do not convince the description of liabilities, since the unit does not have a current compulsion to a peripheral party (Bebbington, Unerman and O'Dwyer 2014).

On the other hand, a compulsion would usually only happen when the outlook repairs work is carrying out in the most appropriate way (Bonner, Clor-Proell and Koonce 2014). Nevertheless, submission of the impression in this declaration would engage the identification of depreciation expenses as the potential financial benefits personified in obtainable components of property, plant and equipment are devoted in the process of the unit. Moreover, most of the entities create "necessities" for uninsured prospect losses (at times terms as "self-insurance provisions") for the reason of retaining funds in the unit to meet losses which may happen in the prospect. As far as given situation is concerned, the unit does not have a compulsion to a peripheral party. Therefore, a responsibility would only happen when a prospect occurrence transpire which would require forgo of monetary reimbursement by the entity (Al-Htaybat and von Alberti-Alhtaybat 2013).

One of the main indispensable features of a liability is that it has unpleasant fiscal penalty for the unit in that the unit is indebted to forgo financial benefits to one or more entities (Bonner, Clor-Proell and Koonce 2014). Consequently, the survival of a legal responsibility depends on the current obligation being such that the legal, social, supporting or financial cost of failing to honor the obligation leaves the entity little, if any, discretion to avoid the future sacrifice of economic benefits to another entity. It is where an unit places an order for the acquirer of goods, for example, this act would not, of itself, usually give rise to a liability, because the unit would normally have the carefulness to evade the outlook forgo of economic benefits by being able to withdraw the order without the other party being able to implement presentation by the entity (Bebbington, Unerman and O'Dwyer 2014).

It is all about conviction of completion may be connected with liabilities, others may engage important indecision (Al-Htaybat and von Alberti-Alhtaybat 2013). In addition, where resolution of a responsibility is necessary on demand, there include an opportunity that the demand may never be made by the party permitted to the financial reimbursement. Otherwise, the event which signals the inevitability for the sacrifice of financial reimbursement may never happen. For instance, the granting of an assurance for a loan creates an accountability to sacrifice financial benefits to a further unit was resolution of the compulsion to be obligatory. Though, until the borrower evasion it is not recognized whether the sponsor will be obligatory to respect the assurance. Furthermore, in this situation, the legal responsibility created by incoming into the assurance will only succeed for respect if and when it becomes credible that the borrower will default and resolution will be mandatory (Biondi and Zambon 2013).

It requires mutual approach for understanding the likelihood of actions where arrangement needs to be made for future analysis purpose (Bonner, Clor-Proell and Koonce 2014). It depends upon the IASB structure that is usually traditional and properly under the given philosophy that should be genuine and achieving future goals and objectives there is some disputes that had been taken into account where there is difference present between the compulsion and the several financial items that are incorporated in SAC 4. In that case, SAC 4 explains the present obligation for understanding the financial items that are selected in the given alternatives. It is hypothetical that there is attributing between near obligation as well as opportunity assure that are both in SAC 4 as well as the IASC structure for justifying on supposed foundation. Besides, it is prominent that the modification for essential that makes it impartial by significant the belongings. Furthermore, it is theoretical that the portrayal of accountability in the IASC arrangement that appoint fault in common with the sorting of liabilities as included in SAC 4 (Statement of Accounting Concepts) (Bebbington, Unerman and O'Dwyer 2014).

Conclusion

In this particular study, it is concluded that the report is presented to the Chairpersons of Financial Reporting Council as well as Australian Accounting Standards Board. Addition to that, there are many efforts that are made for introducing new conceptual framework as it had failed previously. With the introduction of SAC 4, it has been seen that business firm are not happy with close recognition of liabilities and lobbying became a common practice. It means legitimizing the previous practices while evaluating the financial status of the company and staves for the public and control over the accounting financial standards.

Reference List

Al-Htaybat, K. and von Alberti-Alhtaybat, L., 2013. Management Accounting Theory Revisited: Seeking to Increase Research Relevance. International Journal of Business and Management, 8(18), p.12.

Bebbington, J., Unerman, J. and O'Dwyer, B., 2014. Sustainability accounting and accountability. Routledge.

Biondi, Y. and Zambon, S. eds., 2013. Accounting and business economics: Insights from national traditions. Routledge.

Bonin, H., 2013. Generational accounting: theory and application. Springer Science & Business Media.

Bonner, S.E., Clor-Proell, S.M. and Koonce, L., 2014. Mental accounting and disaggregation based on the sign and relative magnitude of income statement items. The Accounting Review, 89(6), pp.2087-2114.

Caskey, J. and Corona, C., 2016. Commentary on: Thoughts on the Divide between Theoretical and Empirical Research in Accounting. Journal of Financial Reporting, 1(2), pp.59-64.

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

Hopper, T., Ashraf, J., Uddin, S. and Wickramasinghe, D., 2015. Social theorisation of accounting. The Routledge Companion to Financial Accounting Theory, p.452.

Jones, S. and Aiken, M., 2015. Evolution of early practice descriptive theory in accounting. The Routledge Companion to Financial Accounting Theory, p.91.

Pashang, H., Österlund, U. and Johansson, K., 2014. Cost accounting, ethical accountability, and accounting principles. Journal of Modern Accounting and Auditing, 10(1), p.20.

Quinn Jr, E., 2014. The Evolution of Accounting Theory in Response to Market Changes. International Journal of Academic Research in Business and Social Sciences, 4(10), p.509.

Rutherford, B.A., 2016. Articulating accounting principles: Classical accounting theory as the pursuit of “explanation by embodiment”. Journal of Applied Accounting Research, 17(2), pp.118-135.

Singleton-Green, B., 2016. Discussion of “articulating accounting principles: Classical accounting theory as the pursuit of ‘explanation by embodiment’”. Journal of Applied Accounting Research, 17(2), pp.136-138.

Smith, M. and Tucker, B., 2013. Advanced Strategic Management Accounting: Theory and Practice. Cengage Learning Australia.

Wagenhofer, A., 2015. Usefulness and implications for financial accounting. The Routledge Companion to Financial Accounting Theory, p.341.

Zeff, S.A., 2014. Some Historical Reflections on “Have Academics and the Standard Setters Traded Places”. Accounting, Economics and Law Account. Econ. Law, 4(1), pp.41-48.

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My Assignment Help. 'A Report On The Failure Of Attempts To Bring Radical Change Through Conceptual Essay.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/acc307-individual-assignment/journal-of-applied-accounting-research.html> accessed 29 May 2024.

My Assignment Help. A Report On The Failure Of Attempts To Bring Radical Change Through Conceptual Essay. [Internet]. My Assignment Help. 2021 [cited 29 May 2024]. Available from: https://myassignmenthelp.com/free-samples/acc307-individual-assignment/journal-of-applied-accounting-research.html.

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