Financial Accounting Theory And Practice Essay

If you demonstrable a guess to explain how a soulfulnesss cultural stage setting influences how they tog out financial statements, would you have developed a positive supposition or a prescriptive possible action?The first of all, it is serious to understand the concoct by a surmisal. According to Con flitting ac study statement Theory 4e,Oxford English Dictionary provides divers(a) translations, including A scheme or corpse of ideas or statements held as an explanation or ac itemize of a group of facts or phenomenaA positive possibleness establish on approximately assumptions and, through licit deduction, enables some predictions to be made astir(predicate) the representation things leave be. In particular, their winner in explaining or predicting particular phenomena willing then typically be assessed base on observation. For instance, Watts and Zimmermans positive theory of chronicle relying on the other researchers such(prenominal) as Jensen and Meckling ( 1976) and Gordon(1964).A prescriptive theory based on the norms (or values or beliefs) held by the researchers proposing the theories. For example, Chambers issue has paying(a) attention by researchers, however, they accepted and mensurable in different bureaus.If I developed a theory to explain how a persons cultural background influences how they prep are financial statements, I will develop a positive theory. (Word deal 170)QUESTION 2 Question 1.3What is a conceptual example, and would it be considered to be a positive or a prescriptive theory of business relationship?According to IFRS website shows, the definition of conceptual simulation follows The Conceptual Framework sets out the concepts that underlie the preparation and intromission of financial statements. It is a practical diaphysis that assists the IASB when ontogenesis and revising IFRSs. The objective of the Conceptual Framework project is to improve financial reporting by providing the IASB with a pinpoin t and updated set of concepts to use when it develops or revises stock(a)s.In term of score, the conceptual cloth of business relationship should be considered as a normative theory of account statement. Because of a normative theory based on the norms (or values or beliefs) held by the researchers proposing the theories. (Word count111)QUESTION 3 Question 1.27 (NEW)The International Accounting Standards dining defer has a number of roles, including formulating accountancy standards and developing a conceptual framework. Is the work they do in developing an accounting standard or the conceptual framework normative or positive in disposition?In the given circumstance, the conceptual framework of accounting is an example of a normative theory of accounting. Relying on various assumptions closely the types or attributes of breeding useful for decision-making, The CFA provides guidance on how assets, liabilities, expenses, income and equity should be defined, when they shou ld be recognized, and ultimately how they should be measured.It also shows in Australia Accounting Standards Board (AASB) website, The original framework document and any previous compiled pas seul can be found using the Browse for pronouncements page In the table below, the Notes column identifies when the framework document listed is a compiled version. Extra identifies when additional IASB supporting real(a) (e.g. Basis for Conclusions) is available. (Word count 117)QUESTION 4 Question 1.33 (NEW)In this chapter we provided quotes from Gray, Owen and Adams (2010), in which they contend an apparent herding phenomenon that seems to be occurring in view of the selection and use of particular theories. They state, on that point has been a strange herding tendency, especially close to legitimacy theory, as comfortably as stating that they also have a sneaking feeling that institutional theory may be coming up fast as the next theory around which to herd.What do they mean by th is apparent practice of herding, and what are some possible advantages and disadvantages that are tie in to this practice?In the give circumstance, a common phenomenon in herding is the management of some enterprises, marker doings. As inadequate of information and lack of understanding, it is hard for investors to make middling expectations of future marker uncertainty, are frequently extract information by observe the behavior of those around, in which information is ceaselessly passed, many people will be roughly the same information and strengthen each other, resulting in the herd behaviour. Herding is a kind of nonlinear mechanism of the non-rational behaviour resulting from individual rational behaviour of the collective.The advantages of the transaction of herding for the adoption of specific or temporary situation advantage concept and the way of behaviour is accepted on the long-run nature of the dominant idea and behaviour way. However, people will follow the o rdinary agree, to their own opinions with default negation, and not congenital thinking about the meaning of events. (Word count 149)QUESTION 5 Question 1.35 (NEW)Do we really subscribe to financial accounting theory if all we are implicated in doing is developing accounting standards?In the given question, people really need financial accounting theory ifpeople interested in developing accounting standards.The progresses of theories are indicate how accounting should be done, describe and explain watercourse accounting practices, predict accounting practice, provide principles to baffle into account when taking action or making decisions, and help to identify problems and deficiencies with current accounting practice and improve accounting practiceTherefore, theories can prepare accounting standards state that fair value should be used when calculating goodwill on acquisition, depreciation should be calculated on the basis of useful economic life, etc. A theory of capital bu dgeting helps us with choosing among investments a theory of revenue acknowledgement helps to determine when and how revenue should be recognised it might reveal deficiencies in the way we presently measure profit or understanding deficiencies may promote change. Hence, the conceptual framework is used as a basis for drafting accounting standards. (Word count 150)