ACCOUNTING THEORY & CONTEMORARY ISSUES (AT1)
ACCOUNTING UNDER IDEAL CONDITIONS
Part 1 - Foundation items re the course
Part 2 - Present value accounting under certainty
Part 3 - Present value accounting under
Part 4 - Reserve recognition accounting
Part 5 - Examination question examples
Part 6 - Historical cost accounting
Dr. A. L. Dartnell, FCGA
Year 2009 - 2010
Foundation Items re the Course
Financial reporting is extremely important in our everyday life. You have heard of the many irregularities that have occurred in recent years which primarily involved financial reporting. Financial reporting is controlled by standards set so that the best disclosure will take place. To fully understand the importance and necessity for these standards, you need to appreciate that they are designed so as to trade off the conflicting interests of constituencies affected by them — usually investors and managers.
Note carefully that Standard Setting bodies make these trade-offs through due process. That is, standards are set in consultation with major constituencies. Devices to achieve due process include representation of major constituencies on the standard setting boards, supermajority voting, exposure drafts, and public meetings. In other words, the issues and topics are well-vetted prior to their implementation.
Thus the course deals with standard setting of accounting policies by which you are guided in your work as an accountant.
Second, students often ask why they need an accounting theory course. We need to understand the thinking and action underlying the requirements for the standards we follow. All activities in life have a theoretical background. For example, how a chef prepares a meal in a restaurant. If the theory behind the meal is good, customers return. If not, they dine elsewhere. How you cut the lawn has a theory.
You follow a theoretical plan for the actions you choose. So with accounting we have theories and to understand them is extremely important for the accountant. Why we do things the way we do. We do not want to follows principles which we do not understand.
Third, students ask why the course writer refers so much to shares, the stock market, financing and related matters. If you consider any undertaking it has finance involved. So the writer refers a great deal to shares and the market.
Financial institutions are throughout the world. For example, besides banks in all countries, there are many large stock exchanges, even in Socialist countries like China. Further, smaller businesses and organizations, such as, not-for- profit entities, obtain financing from banks and credit unions, as well as other sources of money, such as, donations from the public. Thus, stocks, bonds, financial institution loans, and other financing, are the life blood of our economic activity.
Without these sources of funds our economy as we know it would not survive. Thus, it is important to you as an accountant to be fully aware of the financial activity we encounter day by day and we must provide good financial information for those who have invested or loaned their money for organizations to exist for our economic benefit. Slide 6
To sum up:
• The Course revolves around setting of standards for release of information for investors and creditors.
• Standards can be set by various regulatory bodies – CICA, Securities Commissions, Stock Exchanges, and other groups.
• Our objective is to provide the best information possible for the readers of the reports. Slide 7
Standards in the Future
As you know, financial reporting for publicly-traded firms in Canada will be in accordance with International Accounting Board (IASB) standards from 2011 on. This course includes coverage of IASB standards, in the textbook, the modules, the assignments, and review material. We do have a number which are...