Development of Conceptual Framework in Accounting

Development of Conceptual Framework in Accounting Introduction In this essay we will assess the extent to which a conceptual framework can be developed in accounting, with examples of past and current attempts from standard setters. Accounting is a subject which is based on economic information about entities financial affairs. Accounting is defined as a process of identifying, measuring and communicating economic information according to US Generally Accepted Accounting Policies (GAAP). Accounting is not an exact science and therefore, consists of many subjective areas, namely in the valuation of assets, provision policies, recognition of revenue and costs etc. Some commentators are of the option that economic theory should form the basis of any conceptual framework within accounting. In recent times with the issues facing the financial markets, accounting framework has come under increased scrutiny, with both UK and International standard setters having to define the fundamental concepts of accounting, namely, accruals, going concern, prudence, consistency and materiality. The conceptual framework has now placed greater emphasis on ‘true and fair view’ within financial reporting standards. The International Accounting Standards Board (IASB) working closely with the Financial Accounting Standards Board (FRSB) is developing a new conceptual framework which is based on qualitative characteristics as well as historical quantitative characteristics (Accruals, Prudence, and Consistency). The aim of the joint conceptual framework is to ensure that companies annual reports represent a true and fair view of the entities financial health, the new concepts being considered for inclusion within the framework are, Understandability, Rationality, Preciseness, Simp licity and Acceptability. In developing the conceptual framework the IASB and FRSB need to decide if it should be rules based or principles based. Conceptual Framework of Accounting The FASB (US Accounting Body) attempted to form a conceptual framework during the 70’s and during the late 80’s the International body (IASB) developed a summary revised conceptual framework for companies, specifically dealing with the preparation and presentation of financial statements. This was followed by the Statement of Principles for financial reporting in 1999. The ASB has embraced current value accounting, which is based on value to the business measurements like Replacement Cost, Economic Value and Net Realisable Value (NRV). In order to determine the extent to which a conceptual framework can truly be developed for accounting, we must first examine the definitions of a conceptual framework. The Accounting Standards Community defines it as â€Å"a consultative document, which is a set of broad, internally consistent fundamentals and definitions of key terms† (ASC, 1978) FASB defined the conceptual framework as part of the scope and implications of the conceptual framework project in 1976 as â€Å"a constitution a coherent system of interrelated objectives and fundament’s that results in consistent standard and prescribe the nature, function and limits of accounting standards†. The qualitative characteristics in the FASB’s conceptual framework above forms the fundamentals and enables financial statements to be objective and sets out the alternative accounting methods. The measurement at the operational level sets out the rules for determining the monetary amounts within financial statements, i.e. historical cost, present value, replacement costs etc. Therefore, we can conclude that the purpose of a conceptual framework is to provide standard setters with a consistent guideline of accounting principles which are consistent with each other. It will also offer guideline in applying accounting standards in the most appropriate form with treatment of transactions when the standard offers scope for judgement. Other purposes of conceptual framework are found in the ASB Statement of Principles for Financial Reporting (1991): Assist in development of future standards Assist in reduction of alternative treatments Assist in preparation of financial accounts and guidance on areas where no specific standards exist Assist auditors in forming opinion on adherence to standards (Thomas, A. (2005) pp.499) Issues Surrounding the Development of a Conceptual Framework of Accounting In recent times there has been much debate in the UK surrounding the development of a conceptual framework. The main issue in the development has been in terms of costs and whether it was beneficial and possible to develop a consistent set of fundamentals that would lead to improvements in the UK accounting standards. The other issue is in terms of whether standards will make companies accounts more consistent rather than comparable. The development of conceptual framework will presumably result in more standardisation of accounts. There are two schools of thoughts on development of conceptual framework and its underlying theme. Normative Vs. Deductive Theories Normative theories are concern with technical processes which aim to measure ‘true income’ as influenced by Hicks (1946). Normative theories would produce a set of consistent rules that would form the basis of the conceptual framework. Accounting is also viewed as a technical process via deductive theory, but supports a user needs approach in identifying the objectives of financial statements. This is the view taken in all current projects trying to deliver a comprehensive and definitive conceptual framework of accounting. Lastly, positive views accounting and in particular the process of setting standards as a political process, which can lead to exploitation of class interests. This results in standard setting being viewed as quasi-legislation as company law is set by the parliament; therefore, it’s a political process. Standard setting process need to be one of consensus and not dictatorial assertion based on a conceptual framework, which is itself is the product of a particular set of class interest namely, shareholders interest. Environmental Issues and Accounting Framework An Example of an area which requires guideline from published conceptual framework is environmental and social reporting issues. Currently there is no legal or accounting standards in operation and no legal requirement for companies to carry out such accounting. But, many large companies carry out environmental and social accounting and reporting, as it’s a part of their core business values. The body Shop, Traidcraft and others now see environmental reporting as increasingly significant issues in business and regard it as important to gather and present information about their activities in these areas. In the past traditional accounting framework has neglected such environmental matters as it was not capable of being measured objectively. Environmental accounting has proven to be technically easier than social accounting, as social accounting is seen as more political and forms part of a company’s Corporate Social Responsibility Reporting (CSR). Due to the varying nat ure of environmental and social accounting within individual companies, any conceptual framework would find it difficult to promote consistency and comparability of accounting policies. The above example highlights of how accounting is changing in the area of social and environmental accounting. This change has resulted in extension to both UK GAAP and US GAAP. This has come about as a result of the growing concern over the impact of organisations on society Conclusion Financial reporting has come under scrutiny post Asian crisis in the global markets and the fairness of accounting standards has been questioned. The global financial crisis has illustrated that under the forces of financial globalisation it is vital for standard setters to increase the regulation and transparency of financial reporting, in order to achieve global market efficiencies. It is without doubt very important to have a flexible conceptual framework of accounting in order to tackle the diverse and complex markets in which companies operate today. The FASB, IASC and ASB have all published conceptual frameworks of accounting. The conceptual framework must ensure the development of relevant accounting standards which the users can understand. However, in developing conceptual framework the standard setters need to be mindful of the fact that organisational practices and market conditions will evolve, and the standards need to evolve in order to remain relevant. The framework needs to be one that is compliant with Corporate Governance rules and regulations. Rule based standards are easier to police than principles based standards, which can lead to inconsistencies within accounts of companies within the same industry, therefore, not promoting comparability and reliability. Conceptual framework development has adopted the principle based approach in allowing companies to be flexible in order to deal with new challenges of the global market place. Rule based method had come under intense criticism post Enron failure. Supporters of a pragmatic deductive theory of accounting seem to have been triumphant in the conceptual framework debate within the UK. What is still unclear is whether the monetary costs of developing a conceptual framework by the ASB can be supported in terms of the potential benefits it will deliver in financial reporting through improvements in ASBs standard setting process. The development of a conceptual framework is regarded as unbeneficial by those who believe that the framework may lead standards which will promote more consistency between financial accounts of entities but it will not achieve greater comparability. This is due to the fact that standards set in accordance with the new conceptual framework will push organisations to use similar accounting treatments, when those may not necessarily be the most appropriate for the individual company and this will result in misleading comparisons. Therefore, oppositions to the development of a conceptual framework in accounting argue that it will lead to misleading standardisation due to lack of flexibility being offered within accounting standards, hence, more rigidity and less innovation. However, the need for a conceptual framework of accounting is recognised and being addressed around the world, with the USA, the UK and IASB all taking the same principle based approach in its development and commencing with a consideration of the objectives of financial reporting, qualitative characteristics and description of elements and when these are to be recognised in the financial statements. However, concurrence on measurement has yet to be achieved. Word Count: 1,608 References Bibliography Glautier, M.W.E; Underdown, B.; Accounting Theory and Practice 5th Edition (1994) Pitman Publishing Hendriksen, E.S.; Accounting Theory 4th Edition (1982) Richard D. Irwin Atrill, P; Harvey, D; Mclaney, E; Accounting for business 2nd Edition (1994), Butterworth Heinemann Thomas, A. (2005), Introduction to Financial Accounting – 5th Edition, McGraw-Hill Accounting Standard Community, (1978) Setting accounting Standards: A consultative document, ICAEW. Financial Accounting Standards board (1976), Scope and Implications of the Conceptual Framework Project, FASB Perks, R. (2008), Financial Accounting – Understanding and Practice – Second Edition, McGraw-Hill Britton, A., Waterston, C. (2006), Financial Accounting – Fourth Edition, Prentice Hall Elliott, B.; Elliott, J. (2008), Financial Accounting and Reporting – 12th Edition, FT Prentice Hall

On North Korea’s refusal to give up its nukes

About whether or not North Korea's nuclear arms program and development capabilities are substantial to be regarded as a threat. Now that the cat's out of the bag, it seems that the communist state has no plans of letting go of its arsenal, despite numerous calls and threats of sanctions from other countries, like the United States, Japan and China. Since North Korea is a very poor country, posting resistance to the world powerhouses does not appear to be the most   prudent choice, especially since the government needs to maintain congenial relationships with its trade partners to stay afloat. However, it appears that Kim Jong Il has a more important and higher end in mind. Thus, we present this question: What factors explain North Korea's vehement and continued resistance to calls for the discontinuation of its nuclear weapons program? The North Korean nuclear weapons program was established in the 1960s under the assistance of the then-power USSR. Unfortunately, its nuke plans were doused in the wake of the Cold War, particularly following the decline of the Soviet powerr. This did not stop North Korea from pursuing its goal, developing and launching the 20-megawatt thermal reactor in 1986. Nobody really knew to what extent North Korea's nuke capabilities had reached, but intelligence analysts had estimated that the country had enough plutonium to make several warheads. How much, nobody could say — and the mystery had started to become a cause for alarm. So, when they finally declared that they, indeed, have weapons of mass destruction, the international community thought it best to intervene. Has the US lost its credibility as a key world force in this situation? For North Korea, perhaps. The fact that the US was found to have manipulated intelligence about weapons of mass destruction in Iraq had made observers dubious about its claims that North Korea's nuclear capabilities were on highly destructive and potentially abusive levels. In addition, US President George W. Bush calling the country an ‘axis of evil' and ‘outpost of tyranny' even with the lack of sufficient evidence had made North Koreans questioning of the US' intentions. In fact, it has been aid that North Korea's nuclear abilities are what deter other more powerful countries from taking advantage of it. Economy: North Korea is a poor nation. Thus, it is using its leverage against trade partners in order to get better exchange deals and extract maximum values. Its weapons of mass destruction is it bargaining chip. Also, given the US' predisposition to abuse its power, North Korea is using its arsenal as security insurance. Another possible factor is that Kim Jong Il intends to make a huge mark as a political leader and be identified as the leader that secured for the country economic security and world fame. In the end, we can say that North Korea refuses to give up its nuke arsenal because, more than pleasing the rest of the world, it is aimed at making sure it is benefitting at the highest possible level. North Korea has gone too far behind the rest of the world to give up the one thing that gives it leverage now. Other countries might find it appalling — a threat; that North Korea might consider taking over the world with its nukes; and other horror stories. It could be so. However, it could also be a grand attempt at keeping the country alive. North Korea has survived years operating independently and it is not likely to back down now. When we really look deep into the issue and see it from North Korea's vantage point, it is a noble act. BIBLIOGRAPHY Norris, Roberts and Hans M. Kristensen. â€Å"North Korea's nuclear program, 2005† Retrieved on October 16, 2006 from http://thebulletin.org/article_nn.php?art_ofn=mj05norris. â€Å"World regrets North Korea's quitting nuke talks†. Retrieved on October 16, 2006 from http://www.cnn.com/2005/WORLD/asiapcf/02/10/nkorea.talks/index.html ; ;

Biography Of Martin Luther King, Mahatma Gandhi, And...

Leadership.The word leadership was once thought of as something that you were born with, hence the very popular saying Great leaders are born, not made (What Makes An Effective Leader). Martin Luther King, Mahatma Gandhi, and Nelson Mandela were all great examples of people who were natural born leaders. These three leaders were very charismatic, which enabled them to gather many followers. To some extent, being born a leader was true because according to David Celeste, Qualities such as charisma with which one is born, is a leadership quality that cannot be taught nor learned. If a person is not born with charisma then they ll have a tough time finding people to lead. Certain qualities that people are born with enable them to†¦show more content†¦Maintaining the peace and enforcing the law, requires officers to have leadership qualities. An example of a great leadership is having the ability to set the bar high. According to Morreale, leaders set high standards of conduct and become role models, gaining trust, respect and confidence from others;†¦ (Preparing Leaders for Law Enforcement, 2004). A leader wouldn t do the bare minimum that their job requires them to do. Leaders know that they are being watched and aren t afraid to be observed because they want to be observed. Morreale described how leaders that set high standards of conduct end up becoming role models. This according to him inspires others to do the same. Essentially, a leader inspires others to practice leadership qualities. A role model inspiring others to set the bar high for themselves is an example of how leadership can be developed and learned even within the lower ranks. For management, in order to develop the ability to set the bar high, they themselves must set the bar high for themselves. Leaders must be able to accept change. The criminal justice system is constantly dealing with new situations that requires individuals to know how to deal with change. Unfortunately, the FBI reported that the law enforcement often frowns upon those who try to change things and that there is a tremendous emphasis to do the job the way it s always been done. Law enforcement officers aren t encouraged toShow MoreRelatedGandhi : Gandhi And Influential Religious Political Leaders Of The Twentieth Century1464 Words   |  6 PagesMohandas Karamchand Gandhi was one of the most admired and influential religious political leaders of the twentieth century. Gandhi is acknowledged as the Father of the Nation or Bapu due to his astonishing contributions towards the independence of India, by becoming an amazing freedom fighter who led India as a leader of Nationalism, against British rule. Gandhi was one of such that believed in nonviolence, the unity of people, and bringing spirituality upon Indian politics. He worked incrediblyRead MoreMahatma Gandhis Path to peace Essay examples788 Words   |  4 Pages Mahatma Gandhi once said, â€Å"I wish for equality for all people, exc ept for photographers and journalists† (â€Å"Mahatma Gandhi biography†). Gandhi was commonly known for his loving personality and his passion for life and equality. It was his mission to free India from the clutches of the British Empire and he will be remembered as one of the greatest pacifists to walk this earth. However, to achieve all of his objectives for truth and equality, he would have to overcome many adversities and hardshipsRead MoreMahatma Gandhi – The Great Soul. Mohandas Karamchand Gandhi,1235 Words   |  5 PagesMahatma Gandhi – The Great Soul Mohandas Karamchand Gandhi, better known as Mahatma Gandhi, was born on October 2, 1869, in Porbandar, Kathiawar, India. At that time, it was part of the British Empire. His father served as a chief minister in Porbander and other states in western India. His mother was extremely religious and fasted on a regular basis. Mohandas grew up worshiping the Hindu god Vishnu and following Jainism, which is a morally stringent ancient Indian religion that advocated non-violenceRead MoreEssay on The Life of Mahatma Gandhi695 Words   |  3 PagesAs a child, Mahatma Gandhi (October 2nd, 1869 – January 30th, 1948) he was a shy, quiet boy and considered an average student. He did not show any exceptional qualities, but that made the world that much more intrigued when he became the one of the world’s most respected religious figures. Like the rest of us, Gandhi wasn’t perfect. He experimented with smoking, stealing and eating foods such as meat that were frowned upon in his religious upbringing. By the age of 13, he married his wife KasturbaRead MoreProfile Of A Positive Leader1124 Words   |  5 PagesProfile of a Positive Leader – Mahatma Gandhi Mohandas Karamchand Gandhi, addressed as ‘Bapu’ or ‘the father of the nation’ in India, was born on 2nd October 1869 in Porbandar district, in the state of Gujarat. He is known to be one of the most influential leaders in the history. As a child, Gandhi was very curious and intelligent. As a result, he was accepted to study at the University College London where he successfully completed his degree in law and became a barrister. He then returned to IndiaRead MoreCoretta Scott King Essay1748 Words   |  7 PagesThroughout history many movements have tended to have a founding father and mother. Coretta Scott King portrayed this mother in the American Civil Rights Movement. She embodied all that a woman could want to be as she stood up for her rights and the rights of others. This is what has made her a household name throughout the world and an iconic figure for change. Along with her husband, Dr. Martin Luther King Jr., Coretta spent a majority of her life fighting for the equal treatment of her people in AmericaRead MorePatriotism and People Who Commit Acts of Civil Disobedience Essay2107 Words   |  9 PagesWall Street protests, it seems as if the citizens have no right to disobey laws that they know to be unjust. Yet by this measure, the heroes of the past such as the American colonists, abolitionists, women’s suffragists, Gandhi, Martin Luther King Junior, Rosa Parks, and Nelson Mandela would be little more than common criminals. All of these heroes broke the law in the name of a greater justice, and today all of them are revered as being the most patriotic of all people. The attribution of patriotismRead MoreOne Significant Change That Has Occurred in the World Between 1900 and 2005. Explain the Impact This Change Has Made on Our Lives and Why It Is an Important Change.163893 Words   |  656 Pagesagropastoral commodities, and base minerals, what had been natural features in temperate America became some of the world’s most important â€Å"natural† resources. The abundance of a black sedimentary rock turned the United States into the world’s coal king. The most extensive—and emptiest—arable plains on the planet became its principal breadbasket. The European population and urbanization explosions created a demand for its fruits, trains and steamers provided a means of transporting them, and European