Uniformity and Disclosure

Topics: Annual report, Financial statements, Balance sheet / Pages: 5 (1017 words) / Published: Nov 5th, 2013
Uniformity and Disclosure

Choice among accounting methods
◦ Relevant circumstances
◦ Nature of finite and rigid uniformity and flexibility ◦ Extent that standards are using finite uniformity, rigid uniformity, or flexibility

Items providing important information to users 

Minimizing agency costs
Signaling information that management wants to send to outside parties
Attempting to “influence” outside parties

Comparability a process
Finally, because comparing alternative investment and lending opportunities is an essential part of most investor and creditor decisions, the quest for comparability is central. The term comparability is used here to mean accounting for similar transactions similarly and for different circumstances differently A conceptual framework should foster consistent treatment of like things provide the means for identifying unlike things and leave open for judgment the estimators inherent in the accounting process (Sprouse 277).

Uniformity is seen as the concept that influences comparability.
Comparability, an enhancing characteristic, is not an inherent quality of accounting numbers in the sense that relevance and faithful representation are.
Comparability deals with the relationship between accounting numbers.

Are economically significant circumstances that can affect broadly similar events
Two types of relevant circumstances
◦ Present magnitudes, conditions known at the time of the event
◦ Future contingencies, factors that can be known only at a later date

Are an extremely important aspect of the uniformity issue

Selection of accounting methods might be affected by motives different than those dictated by the relevant circumstances

◦ maximize reported income... management compensation based on reported income
◦ Minimize reported income...fear of government intervention on

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