Conceptual framework

Conceptual framework

 

Question 1

Term of normative theory

The normative theory explains what should be done to rather of analysis and explaining the importance of the accepted practices to deal with various challenges. This system concentrates on the income earning process and the economic information and practices that can be used to make the economic decisions. The profit earnings and the decision to be made to increase the quality of the decision during the accounting term

HCA concept and the relevance of the discuss the importance of assumptions

Historical cost accounting (HCA) is an approach used in the cost accounting method to calculate the original costs for the items that would be used in the accounting reporting process. It is done to get acquaintance by the company, and to provide a reliable method to improve the decision making process. HCA process highlights the benefits related to the objectivity, as there is a need to make the essential changes in the items value.

Similar things are used to understand the market conditions that impact the decision-making activities. The misguide process is used by the investors in regards to understand the real position to the company. Through this approach an acceptable means by the US is generally accepted accounting principles (GAAP) (Norris, 2002).

Alternative methods to the normative process to HCA

Fair value accounting (FVA) method is used to existing market conditions to determine the value the values and items in the accounting process. Through this method, a real value of the terms and the real position of the company are reflected to understand the stakeholder’s position. The objectivity lacks and examines the challenges faced by the auditors to understand the value for the changes that is being carried out by the company. The strategies are used to improve the practices by analysing the actual values of the items and this is examined, to develop and introduce an effective policy to record the accurate information.

Current purchasing power accounting (CPPA) examines the types of adjustments to be made in the historical cost reflection, and reflects the changes to be made at different price levels. This is done to understand the importance of the general price level indexation process, used for the calculation of the actual price. AN increase the costs of the products, due to the price inflation affects the purchasing power of the goods and different services. In the similar manner, a decrease in the price level causes an increase in the purchasing power of the buyers.

The accounting approach considers the price change and the relevance of the purchasing power to calculate the historical costs included in the financial statements. It also reflects the drawbacks and the benefits with the FVA process, as it considers the transaction value and the purchasing power of the buyers at different levels and time.

Modified historical cost accounting (MCHA) process uses a relevant method to define the cost of the assets and determines the current value included in the cost analysis. It is also associated with the depreciation value analysis process that uses the fact determination process to include the actual costs. This approach is used to value the amortized revaluation reserves created over the life of the assets. The process followed to transfer the funds to the general funding methods is also included in the analysis part.

The changes in the actual market values are based on the pricing method and it calculate the indexes and in considering the manual valuation process. This technique needs the members to create additional journal entries, to reflect the changes in the asset value and highlight it in the general ledger.

The revolution reserve method is used to apprehend the differences between the historical value and the modified historical values. This method uses the surpluses analysis process to include the actual costs in the ledger books. The accountant is expected to update the relevant information and save time introduced to make the changes in the books of accounts.

Evaluated the normative alternative approach

MHCA and CPPA processes can be also used to modify the information included in the HCA method. It provides a clear detail about the characteristics that are included in the FVA valuation process. It also helps in calculating the alterative models to consider the valuation process. FVA process is used to understand the variable alternative method that is included in the HCA process. It also helps in understanding the flexibility followed in the analysis of the market conditions and understands the impact of the related changes (Carter et al., 2004).

In this method, the audited and irrelevant details are not included in the HCA valuation process. Product and value consideration are used to understand the current market condition, and to include an authentic values. An effective method is used to consider the real position of the company, and include the relevance of the decisions on the financial statement made by the management.

The benefits of the timelines included in the analysis part, and the transparency of the valuation process are included in the financial statements. Through this method, the market changes in regards to the social aspects and its impact on the valuation of the products are included in the accounting method. Different aspects are analysed, to understand the need to include the real information and to share the relevant details with the stakeholders. It improves the decision making process, and increases the quality of the financial statement of the company.

HAC process also concentrates on analysing the historical facts that can be misguided by the users in the financial statements. An inclusion of the wrong information can impact the estimation of the asset value in the books of account. With a reliable method, the companies can follow the accounting standards that is needed to include the actual costs of the assets, used to determine the actual values that is not included in the HCA approach.

Question 2

Concept of IASB conceptual framework

In the international accounting standards the framework created by IFRS are used. The risks of IFRS are globally implemented in the accounting standards. It is done through the IFRS standards and process methods. These standards define the framework that has an objective to improve the quality of the financial reporting process, which also provides a standardised method to define the financial performances of the company. In this consideration, the transparency of the system and its efficient to use the details in the financial markets are examined. The stated standards are used to record the actual information in the books of accounts and to influence the buyer’s decision to make decisions on the work performances.

In the general financial reporting process, the public interest and the long term financial stability of the company in the global market are examined. Through this framework the management uses the transparent method that improves the account information recording and presentation process. It also increases the quality of the financial information presented in the books of the accounts for the company and the stakeholders (Glaser & Strauss, 2006).

Financial reporting purpose

The general purpose used in the financial reporting process is to understand the needs of the existing and the potential investors for the company. Accurate information is shared with the creditors and lenders to increase the value of the services provided to the clients. In the financial reporting process, all the relevant facts are included in the books of the accounting process. This influences the decision making process, and to record and present the actual information in the financial statements. The balance sheet and the profit and loss and cash flow statement are accurately prepared and presented by the members.

These statements of accounts, presents accurate information about the company performances. Management of the company make relevant investment decision, from the information that is being included in the books of account. The details included in the books of accounts are also used by the staffs to understand the existing performances of the company. Based on the details presented in the books of accounts, the company and the staff plan to introduce the changes in the efficiencies.

The compliance issues are examined to understand the legal aspects and to follow the accounting standards by the firm. Auditors and the investors completely depend upon the accounting information presented by the company to the stakeholders. Auditors of the company present fair and transparent information to the external investors, and record accurate details to the investors (Kurniawan & Indriantoro, 2000).

Accounting measurement and its implications

a.     Users measuring requirements

In the financial reporting process, the users choose the different measuring needs that is included below –

  • How the measuring accounting information is would be used by the company?
  • Will the users get the information required in the books of company?
  • What details are considered to be accurate and reliable?
  • How the disclosure of the accosting details and information does takes care of the users requirements?

The owners of the company use the measurement information for assessing the value and an effectiveness of the performances, through the adoption of the standards. An investment analyst includes the fair value calculation and analysis of the relevant details and makes the needed adjustments to record the historical costs on the accounting statement. This information is recorded on the fair value basis. The company also uses different means of information analysis process that influences the stock market prices and reflects the evidences required to increase the accurateness of the actuating details to the users. An accurate details about the books of accounts, influences the buyers decision to either buy or sell the stocks in the open market.

These factors are used to examine the accurateness of the current price that uses the process of the cash flow method. In the users costing method, the financial reporting process is used to collect and examine the relevance of the information to understand how it impacts the management decisions. In the reporting information process, the deviation from the actual statement is closely examined and the changes in the regulations are implemented. An accurate process is followed auditors and a detailed process is followed to reflect the actual performances for the financial year (Alberti-Alhtaybat & Al-Htaybat, 2010).

Measurement basis

The measurement basis is used to improve the decision-making process and to reflect the exact information in the books of account. FVA process is associated with the decision-usefulness and uses the HCA method to improve the standardised process used to reflect the actual performances in the books of account. It is relevant for the company to reflect the actual information in the books of account and present it to the users. In the stewardship process, the accurate relationship between the users and the information analyses are done in an organised manner. Decision-making process, are improved due to the improved accounting process adopted by the company.

In the stewardship measuring factor, the relevant information is included in the books of accounts. It also assists the managers to include the accurate details in recording the details in the books of the account. Stewardship is used to consider an agreeableness of the parties involved in recording and presenting the information to the external members. The flow of the information is designed to present reliable details in a clear manner.

Question 3

Benefits of accounting process

In the conceptual framework, the financial information process is done as per the rules mentioned in the framework. The objective to include the relevant details in the financial statements and to properly use the details to influence the external stakeholders is identified. AN analysis is done to find a proper solution to the challenges reflected in the financial statement. Conceptual framework provides the relevant details that are included in the finical accounting statement. Some of the benefits are

  1. Conceptual framework helps in presenting accurate information to the external and internal stakeholders.
  2. It resolves the major issues faced by the company in presenting the reliable information in the books of accounts.
  3. An effective guidance is provided and this requires the management to include accurate information in a detailed manner.
  4. Conceptual framework ensures that the accountants follow the stated accounting policies and present accurate and reliable information. It assists in resolving major issues faced while presenting reliable accounting information to the external members.
  5. Auditors can analyse the relevance of this system and include it in the financial analysis prices. The standards are defined, and it is accurately followed by the members (Carter et al., 2004).
  6. The development in the conceptual framework improves the accounting process, and ensures that the members follow the accountant standards mentioned in the books of account. Through the accounting theory of overarching, it is possible to report a problem and solve it.

Who does Hines evolve will get a benefit from the conceptual framework

Conceptual framework is developed to reflect accurate information in the financial statement. Accurate details are presented to the customers, employees, and stakeholders. Hines stated that the positive and the negative aspect related to the conceptual framework can be identified and relevant standards re followed to share the relevant information with the members. The accounting standards are included in the conceptual framework, and the related challenges with sharing the details in an accurate manner.

Benefits associated with the accounting standards are examined, by the auditors and it is compared with the guidance set out by the company. The accounting standards are used to provide the relevant information and examine it before reporting the details to the stakeholders. Hines, outlined the benefits associated with the conceptual framework, and outlines the challenges presented in the account presentation process. The developmental process and the framework included in the accounting statement and it assists in performing the external performances for the company. An accurate information presentation process is used to create positive impact about the company to the investors (Kurniawan & Indriantoro, 2000).

The accounting process and the standards are used to identify the challenges faced by the companies in recording and presenting the information. A need to implement and improve the conceptual framework is used to find the errors involved with the accounting statement recording and presentation process. Any errors evaluated at the time of examining the information are recorded and presented in an accurate manner.

With a conceptual framework, the positive aspects about the accounting standards for the company are established and it is communicated with the members. Through an effective method, the actual performances of the company in the market are examined. Hines stated that examined the relevance of the conceptual framework and assisted the auditors and the financial managers to solve the issues included in the journal entry. In the accounting standard process, the authorities work on presenting the actual information to improve equality of the statement or the information presented in the books of accounts. The related challenges are examined through the overarching method of accounting theory. A defined process is used to report the issue and to ensure that accurate standards are used to increase the quality of the details included in the statement of books (Norris, 2002).

 

References

Alberti-Alhtaybat, L.V. & Al-Htaybat, K. (2010). Qualitative accounting research: an account of glaser’s grounded theory. Qualitative Research in Accounting & Management,7(2), 208-226.

Carter, C.R., Kaufmann, L., Beall, S., Carter, P.L., Hendrick, T.E, Petersen, K.J., (2004). Reverse auctions-grounded theory from the buyer and supplier perspective. Transportation Research Part E 40, 229–254

Glaser, B. G & Strauss, A.L. (2006). The discovery of grounded theory, strategies for qualitative research. New Brunswick (USA): Aldine Transaction (reprint)

Kurniawan, D.M. & Indriantoro, N. (2000). The role of disclosure in strengthening corporate governance and accountability. The Second Asian Roundtable on Corporate Governance, Hong Kong, China, 31 May–2 June.

Norris, G. (2002). Chalk and cheese: grounded theory case studies of the introduction and usage of activity-based information in two british banks. British Accounting Review 34, 223-255, Doi:10.1006/Bare.2002.0199, available Online At http://www. idealibrary.com.on 1,

 

 

 

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