Assessment item 2 back to top Review of Current Accounting Issues Value: 25% Due
ID: 2333555 • Letter: A
Question
Assessment item 2
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Review of Current Accounting Issues
Value: 25%
Due Date: 19-Sep-2018
Return Date: 15-Oct-2018
Length: 3,000 words (guide)
Submission method options: Alternative submission method
Task
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In your accounting career you will be required to analyse current accounting issues and communicate your theoretical understanding to your professional colleagues and your clients. For this assignment assume that you are the senior accountant working for a major firm.
Question 1 - 1,500 words
The CEO has forwarded to you an interesting article and requires you to provide her with a deeper theoretical understanding of the issues discussed so that she can fully engage in the lively discourse at an upcoming conference.
You are required to find a newspaper article or web page report of an item of accounting news, i.e. it refers to a current event, consideration, comment or decision that has been published after the 1st of June 2018. Your article could also come from one of the professional journals. The article should not come from an academic journal. Academic journals generally do not contain news articles or articles of less than one page and are usually only published 2 or 4 times a year. Your article should also relate to a different issue to what you will be investigating in Question 2 (in other words, don't use an article about the exposure draft you will be using in question 2). If you are having a problem ensuring that your article is from an appropriate source contact your subject coordinator.
You then need to explain the article that you have found in your own words and clearly relate the concepts, ideas and facts within the article to one or more of the theories or topics that you have studied this session. Support your analysis of the assumptions and implications of the topic or theory as appropriate with reference to sources in APA 6 style. For example, this article from the Sydney Morning Herald in April 2016 could be linked to the topics of accounting regulation and measurement (and perhaps others). You must provide a copy of the article or web page, with details of the source, date and page number with your answer.
Question 2 - 1,500 words
The Senior Partner of the firm you work for has appointed you to a new role. It is now your responsibility to review upcoming accounting standards and provide a report to the partners on the proposed standard and the opinions of other industry players on the changes.
Firstly, you are required to find a current exposure draft or proposal for a new accounting standard which has been opened for public comments. (These can be found on the websites of most standard-setting organisations, such as the IASB, AASB and FASB. Hint: These websites can be quite difficult to navigate, so as a first step try typing “IASB exposure draft and comment letters”/”FASB exposure draft and comment letters” into Google or other search engine of your choice). Read a sample of the comments from a range of respondents. Select four respondents, ideally from different types of organisations for example, from accounting bodies, industry, companies or corporate bodies. If you are having a problem finding suitable comments letters then contact your subject coordinator.
In your own words, supporting your evaluation with appropriate citations, appropriately referenced in APA 6 style, you are required to include the following information in the report.
An outline of the major issues covered in the exposure draft (what is the exposure draft introducing or changing?).
An outline of the views presented in the comments letters which highlights the areas of agreement and disagreement with the exposure draft.
An assessment as to whether the comments letters can be interpreted as being 'for' or 'against' regulation, which provides relevant examples.
An application of each of the theories of regulation (public interest, private interest and capture) to the comments letters and a critical evaluation of the effectiveness of each theory is at explaining the comments letters.
Please note: you need to attach the comment letters you selected for your report (there is no need to attach the exposure draft)
Explanation / Answer
1-1 Management accounting measures, analyzes and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting and is not restricted by generally accepted accounting principles (GAAP).
Financial accounting focuses on reporting to external parties such as investors, government agencies, and banks. It measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).
Other differences include (1) management accounting emphasizes the future (not the past), and (2) management accounting influences the behavior of managers and other employees (rather than primarily reporting economic events).
1-2 Financial accounting is constrained by generally accepted accounting principles. Management accounting is not restricted to these principles. The result is that:
· management accounting allows managers to charge interest on owners’ capital to help judge a division’s performance, even though such a charge is not allowed under GAAP,
· management accounting can include assets or liabilities (such as “brand names” developed internally) not recognized under GAAP, and
1-5 Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.
Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company’s value chain. Attempts are made to restructure all cost areas to be more cost-effective.
1-14 The Institute of Management Accountants (IMA) sets standards of ethical conduct for management accountants in the following areas:
1-29 (30–40 min.) Professional ethics and end-of-year actions.
1. The possible motivations for the snack foods division wanting to take end-of-year actions include:
(a) Management incentives. Gourmet Foods may have a division bonus scheme based on one-year reported division earnings. Efforts to front-end revenue into the current year or transfer costs into the next year can increase this bonus.
(b) Promotion opportunities and job security. Top management of Gourmet Foods likely will view those division managers that deliver high reported earnings growth rates as being the best prospects for promotion. Division managers who deliver “unwelcome surprises” may be viewed as less capable.
(c) Retain division autonomy. If top management of Gourmet Foods adopts a “management by exception” approach, divisions that report sharp reductions in their earnings growth rates may attract a sizable increase in top management supervision.
2. The “Standards of Ethical Conduct . . . ” require management accountants to
Several of the “end-of-year actions” clearly are in conflict with these requirements and should be viewed as unacceptable by Taylor.
(b) The fiscal year-end should be closed on midnight of December 31. “Extending” the close falsely reports next year’s sales as this year’s sales.
(c) Altering shipping dates is falsification of the accounting reports.
(f) Advertisements run in December should be charged to the current year. The advertising agency is facilitating falsification of the accounting records.
The other “end-of-year actions” occur in many organizations and fall into the “gray” to “acceptable” area. However, much depends on the circumstances surrounding each one, such as the following:
(a) If the independent contractor does not do maintenance work in December, there is no transaction regarding maintenance to record. The responsibility for ensuring that packaging equipment is well maintained is that of the plant manager. The division controller probably can do little more than observe the absence of a December maintenance charge.
(d) In many organizations, sales are heavily concentrated in the final weeks of the fiscal year-end. If the double bonus is approved by the division marketing manager, the division controller can do little more than observe the extra bonus paid in December.
(e) If TV spots are reduced in December, the advertising cost in December will be reduced. There is no record falsification here.
Each of the (a), (d), (e), and (g) “end-of-year actions” may well disadvantage Gourmet Foods in the long run. For example, lack of routine maintenance may lead to subsequent equipment failure. The divisional controller is well advised to raise such issues in meetings with the division president. However, if Gourmet Foods has a rigid set of line/staff distinctions, the division president is the one who bears primary responsibility for justifying division actions to senior corporate officers.
3. If Taylor believes that Ryan wants her to engage in unethical behavior, she should first directly raise her concerns with Ryan. If Ryan is unwilling to change his request, Taylor should discuss her concerns with the Corporate Controller of Gourmet Foods. She could also initiate a confidential discussion with an IMA Ethics Counselor, other impartial adviser, or her own attorney. Taylor also may well ask for a transfer from the snack foods division if she perceives Ryan is unwilling to listen to pressure brought by the Corporate Controller, CFO, or even President of Gourmet Foods. In the extreme, she may want to resign if the corporate culture of Gourmet Foods is to reward division managers who take “end-of-year actions” that Taylor views as unethical and possibly illegal. It was precisely actions along the lines of (b), (c), and (f) that caused Betty Vinson, an accountant at WorldCom to be indicted for falsifying WorldCom’s books and misleading investors.