Accounting Theory for Liability and Equity - MyAssignmenthelp

The accounting academics, as well as the developers of accounting standards, have tried to build a conceptual framework for counting, which gives a certain statement about the characteristics plus the objectives of financial accounting along with reporting. Besides this, the framework of accounting can be used as the guideline and guide all the accountants in entire accounting practices. The accounting firework can be useful as it can provide a firm theoretical base in order to provide a cogent explanation about the accounting as well as it helps in making the accounting process logical for the students (Appannaiah, Reddy & Putty, 2010). The main aim of the conceptual framework is to provide the guideline to the accountant throughout the preparation as well as the presentation of the common purpose of financial reports within the public as well as private sectors. The conceptual framework for accounting has the objectives to give a fundamental conception or theory for the accounting. The conceptual framework of accounting helps in detecting as well as defining the qualitative features of the financial information like reliability, relevance, comparability, timeliness, plus understandability. Furthermore, the conceptual framework can help in recognizing and defining the fundamental elements of accounting like assets, liability, equity, income, revenue, expenses as well as profit.  Ã‚   At the low level, it deals with the principles as well as the basic rules for the detection and assessment of the key elements (Britton & Waterston, 2013). It also helps in identifying the information types which would be displayed in the financial reports. However, the attempts to make the radical change by introducing a conceptual framework SAC 4 have failed. The essay is an attempt to explore the reason behind the failure of SAC 4.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   The financial statements of a company should provide the appropriate value of the company. The accountants and auditors should focus on the fair representation of the financial statements. The errors or omissions in the financial statements can lead to the increase or decrease in the value of the company. The income, expense, assets and liabilities should be clearly and fairly stated in the financial statements. Both the FASB and IASB framework considers the objective of the financial reporting is to fairly communicate the financial information to the users. The financial information should be based on the usefulness in the decision-making process. The development of conceptual framework has been a lengthy and complicated process (Holton, 2012). The present focus is on the qualitative characteristics and objective of the financial reporting. The companies should focus on the true and fair view of the company. It has been argued by many people that the previous conceptual framework in cludes the measurement based on the unspecified rules, there is no previous agreement on the objective, logic is circular, and definitions of elements are not workable and also do not provide guidance to the practicing accountants. They have also argued that the previous agreement is not important and also lead to the mechanical decision making. Imprecise and loose definitions and logic can indicate that the accounting is in the pre-science phase. The criticism focuses on the epistemological and ontological assumptions. Thus, accounting can never be unbiased and neutral (Holtzman, 2008). The accountants and auditors play a significant role in depicting the reality and showing the fair value of all the financial items. The material misstatements should be determined that can affect the interests of the shareholders. Apart from this, some people stated that the conceptual framework based on self-interest and professional values. The motivation is to increase the economic through the m onopoly behavior and have gained the social power and acceptance. The accounting professions have to maintain its position and manipulating the attempts at the public regulations. The existence of conceptual framework has increased the conceptual debate level in the standard of setting the process of lobbying. It provides guidance to deal with the problems that are not yet the subject of the accounting standard. The accountants and auditors should provide clear true and fair view of the financial report of the company (Jackling, 2010).   Ã‚   The framework of the study is surrounding the issues which are established by showing the provision of the accounting framework as it is being established by showing the provision of the SAC 4 framework. This is simply explained the benefits and the decrement of the values of the liabilities as it is being provided in the form of the definition of the standards. The FASB statement is showing the financial accounting concepts which are showing the (SAC 4) framework as is being considered for the external reporting as the development of the objectives is considered (Powers & Needles, 2012). The information provided by the standards are showing the establishment of the information which is generally useful for illustrating the usefulness of the information which is beneficial for the purpose of presenting the potential information to the investors and also the creditors. In another way, the rationale established is showing the presented of the selected reporting which enables in showing the appropriate communication process as it is helpful for undertaking the decisions. The framework is also depicted to be surrounding the following objectives that can be achieved by this framework which is enlisted in the following points:- As per the objectives are concerned, these are depicted to be showing the useful financial information’s, but the principles are apart helping in transmitting the information that is necessary for the development of the hierarchy of the qualities. Therefore, the principle characteristics can be easily determined by showing the appropriate, useful information which is showing the complete structure as it is mentioned in the SAC 2. The hierarchical arrangement of the objectives is also showing the ability to the information which is being used for showing the understandability that simply defines the structures of the work (Roode & Leith, 2009). The hierarchy of the work is also presenting the quality measurements which are influencing the financial and the economic decisions as it is shown to be reliable in nature. Thus the material losses can be easily explained by showing the material bias and also the error can be easily categorized. This simply explains the failure of the s tandard SAC 4 for which the inappropriate determination of the values is defined. Since the explanation is also identifying the inappropriate conduct made by the implementation of the framework, then the establishment of the issue is being depicted in the form of showing the removal of the SAC 4 and also the inappropriate transactions are seen in this case. The removal of the issue is becoming the vital reason as it is being explained in this case and also the downfall of the organizational events can be seen by the implementation of this framework (Weil, 2017). These are the issues which are identified in this case and also it is seemed to be leading to the failure of the act as it is being explained in this case. As per the presentation of the work is being made, the errors in the estimations are more as it is being indicated by the implementation of the SAC 4 standard. The inappropriate raising of the issues in the business transactions are identified to be the vital reason for the development of the barriers and also the event destruction is clearly seen in the organizational development. For this reason, the SAC 4 is being removed which is showing the vital cause of the formation of the issues in the organization (Wolf, 2010). There are some archived statements of the accounting concepts such as the SAC 3 as well as SAC 4 were useful until the initial reporting period initiating on or afterward 1 st Jan. 2005, while this specific framework intends for the creation plus presentation of the financial statements according to the AASB the Australian equal to the international IASB framework.  Ã‚  Ã‚   The are several people criticizing the conceptual framework of SAC 4, which help in recognizing and defining the fundamental elements of accounting like assets, liability, equity, income, revenue, expenses as well as profit.   The main issue of this conceptual framework is measurement as the rules for the measurement are not specified in this conceptual framework. Besides this the logic behind the framework is spherical and there is not any previous agreement on the objectives. Apart from this, the definitions of the accounting elements are not workable as well as do not provide any guidance for practicing accounts.  Ã‚   Appannaiah, H., Reddy, P., & Putty, R. (2010).  Financial accounting. Mumbai [India]: Himalaya Pub. House. Britton, A., & Waterston, C. (2013).  Financial accounting. Harlow: Financial Times Prentice Hall. Holton, R. (2012).  Global finance. Abingdon, Oxon: Routledge. Holtzman, M. (2008).  What's new in financial reporting. Florham Park, N.J.: Financial Executives Research Foundation. Jackling, B. (2010).  Accounting. North Ryde, N.S.W.: McGraw-Hill Education. Powers, M., & Needles, B. (2012).  Financial accounting. [Mason]: South-Western, Cengage Learning. Revsine, L., & Mittelstaedt, F. (2017).  Financial reporting and analysis. Dubuque: McGraw-Hill Education. Roode, M., & Leith, K. (2009).  Financial reporting. [Pretoria]: [Salt and Pepper]. Weil, R. (2017).  Financial accounting. [Place of publication not identified]: Cengage Learning. Wolf, M. (2010).  Fixing global finance. Baltimore, Md.: Johns Hopkins University Press.