Contemporary Issues in Accounting

H3: Standard Setting

Disadvantage
1- Difficult to forecast accurately.
2- Time consuming.
3- Do not prevent bugs.
4- Demotivating if wrong.
5- Force people to change their methods.
6- The implementation of standard removes
the creative element of the program.
7- Reduce productivity by forcing
unnecessary actions.
Advantage
1- Facilities budgetary control.
2- Leads to more accurate budgeting.
3- Assists in performance measurement.
4- Assists in target setting for staff.
5- Reducing costs.
6- Assists in price setting.
7- Increasing productivity.
8- Reducing unnecessary variety.
9- Ensuring interchangeability.
10- Ensuring safety.
11- Quality assurance.
12- Provide a generally accepted language for
financial statements that renders them
more comprehensible to the of accounting
information.
13- May be regarded to establish that the
collective wisdom and experience rather
than the viewpoint of individual
accountant may prevail in the matter.
14- Eliminate or reduce the effect of diverse
accounting policies and What are practices
and make the financial statement more
meaningful and comparable. In other
words, Accounting Standards promote
better understanding an of accounting
statement.

* The benefits of using standards, like:

1. Market Growth for new and emerging technologies.
2. Reduce development time and cost.
3. Reducing business risk and market risks.
4. Standards set the recognized level of quality.
5. Increase productivity and enhance efficiency.
6. Ultimately reduce cost for consumers.
7. Standards facilitate interchangeability of products and services designed for the same purpose.
8. Improving performance.
9. Encouraging innovation, standards help set the rules and establish the frameworks, making it
easier to innovate successfully.
Most world countries have institutional framework that have organizational structure to provide the
process of standard setting through rule (must followed) or principles (to follow) based when preparing
financial statement. Eventually the general trend is to adopt principles based rather than the rule based
Standard Setting Rules-based standards (must follow)
Meaning are sets of detailed rules that must be
followed when preparing financial
statements.
Advantage 1- Perspective (step scope)
2- Clear Procedures.
3- Reduce conflict (positive)
4- Management (more efficient internal
control) (reduce judgment).
5- More comparability (external users).
6- More accuracy (less earning
management).
7- More verifiability.
Disadvantage 1- Complex (more details)
2- Lead to unfavourable reporting.
3- Incomplete and obsolete standard by
the time they issued.
4- Increase auditors Procedures
becouse Manipulated compliance
with rules.
5- Leas faithfulness (disclosure)
6- Not applicable public purpose.
7- No general framework.
 The accounting information is a ‘public good’ there are argues that it needs to be proceed under
regulation or not. Therefore, we have the following theories regarding the need of regulations.
1. Signalling Theory.
2. Public Interest Theory.
3. Capture Theory.
4. ‘Bushfire’ Theory.
Principles-based standards (to follow)
are based on a conceptual framework that
provides a broad basis for accountants to follow.
-The focus is on the economic substance of a
transaction, engaging the professional judgement
and expertise of those preparing financial
statements.
1- Simpler
2- Increase supply guidelines
3- Completed by the time
4- Decrease earning management
5- Decrease auditors Procedures
6- Flexible
7- Conceptual framework (standardize and
regulate accounting definitions,
assumptions, and methods)
8- Allowing professional judgement.
9- Increase improve faithfulness.
10- IFRSs are principles-based standards.
1- Sometimes Not reflect economic
substance.
2- Less(reduced) comparability.
3- More conflict between economic
transaction and external auditors because
what me should be.