Accounting question answer Essay Example
Q1.The themes discussed in the article “The Demand and Supply of Accounting Theories” has the capability to predict the accounting standards which promotes the OBF and the earnings management (Watts and Zimmerman, 1979). The standard theories of accounting have been changing each and every day due to influence of political decisions as well as individual interest. The challengers and players in the change for the standards in accounting has created direct link to predict what might be introduced into the market through evaluation of the political and individual wishes.
The themes discussed provides the best way forward that accountant can read in the moods of politics and individual organization positions which facilitates the prediction of the new term that would be introduced into the OBF and earning managements in suiting the situation. The managers and controllers of the variables within the accounting standards and variations do not introduce too many characters in the already existing formulas but only adjust minor parts as well as removing variables which are not favoring the current situations. Since the adjustments are done to facilitate the interest of the individuals, the themes makes it easier to determine the next variable to be introduced, as accountants only need to read the interest of the individuals. With the understanding of the aims of the business and the public interests, accounting principles are easily predicted as they are geared towards ensuring that public interests are put into consideration when establishing the accounting standards (Laux and Leuz, 2009). The themes indicate that saving the situation that is available at hand is necessary in formulating the accounting standards. When accountant understands the situation that needs to be saved then they can easily predict the next accounting standards which are not necessary for the inclusion in the major accounting work like real balance sheet.
Q2.Mr. Herz identified some variables which affect the standardization of the accounting rules within America and he argues that one of the variables which bring difficulty in standardizing the rules is the complexity in the variables (FASB.org, 2016). The complex nature of the assets within different organization affects the understanding of the asset to include or not to include in the OBF and earnings management. One item might seems to be a large capital expenditure in one type of business yet in the other business it is a minor capital expenditure making it hard to evaluate its existence in the OBF and earnings management. The mixed reaction in understanding these assets as well as the different economic positions of the business makes it complex and difficult for standardization of the accounting principles and formulas.
Some of the forces that shape the OBF include; first, the operating leases which has no direct rule regarding its operation causing complexity in its ways of inclusion in making entries. The understanding of the leasing principles by the working company and the political interests is what shapes the way of inclusion of the lease into the OBF. Secondly, the kind of partnership that the organizations form in the business affects OBF and earnings management as the partners must agree on the understanding of different variables before making its entry (Holthausen and Watts, 2001). The agreement that exists between partners and understanding of the nature of resources within the organizations greatly shapes the accounting rules for OBF and earnings managements since they are for individual gain.
Fasb.org. (2016). [online] Available at: http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818768056&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs [Accessed 4 Sep. 2016].
Holthausen, R.W. and Watts, R.L., 2001. The relevance of the value-relevance literature for financial accounting standard setting. Journal of accounting and economics, 31(1), pp.3-75.
Laux, C. and Leuz, C., 2009. The crisis of fair-value accounting: Making sense of the recent debate. Accounting, organizations and society, 34(6), pp.826-834.
Watts, L. W. and Zimmerman, L . J., 1979. The demand and supply of accounting Theories: The Market for excuses. The Accounting Review (2), pp.273-305
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