Introduction
International monetary reporting standards are developed by the global accounting standard panel. These standards are used all over the world by the firms to make the financial statement standards. IASB is an independent body.
The standard made by the organizations in the world should reflect the standards set by the IASB. Conceptual framework enhances the formulation of financial reporting system. For changes or development in international reporting standards to be done conceptual framework should also be changed. The conceptual framework contains all the information that can be contained in international financial reporting standards.
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For changes to be done international accounting standard board has to approve the changes in the conceptual framework. On the other hand, when the international accounting standard board wants to add or change the financial reporting standards it has to write them on the conceptual framework so that the organization can comment on them for standard can be revised.
The development of the accounting have resulted to provision of economic information which is very important in decision making (Pannell, 1997). Proper decision help in determining how the management have resulted in its stewardship decision making. Financial reporting in the new accounting thought focuses on resource allocation decision making. Financial reporting also results in proper separation of sections (Beaver, 1981).
Those who use the financial report have the same objective indeterminate of what the entities of the investment is. If an exposure to positive or negative variation on the economic benefits which have been produced by the economic resource indicates that the economic resource is being controlled by the entity retains. If the retained component has misappropriate exposure on the changes in economics benefits and so the recognition may represent the fact that entity does not have components which have been transferred (Pannell, 1997).
This will not represent the change in the entitys liabilities in the transaction. When transferring an asset another transaction take place in the entry of an asset where the entity requires the asset. In the current development in accountings, the financial report brings about the accountability, efficiency and transparency in all markets around the world (Beaver, 1981).
Transparency brings about easy comparability, and financial information which enables the investors to make proper business decisions. Accountability is achieved in the reduction of information gap between the investors and the customers. Efficiency help the investors to identify opportunities and risks around the globe. The financial information which is obtained from financial statement should be neutral and free from bias. The neutral information is not influential in decision making in achieving a predetermined outcome. The financial report information should also be prudent.
The information have to measure the uncertainty that are inevitable and surround all the events where the economic growth is expected. Conceptual framework is very useful in cost constraint. The financial cost constraints is provided in financial reporting. Cost constraints play a very important role in decision making where it determine the unit of measurement that are to be used in economic development. The financial reporting entity and the statement explain the general purpose of the financial report (Beaver, 1981).
The preparation of the financial statement is developed with respect to the whole entity rather than basing it in a particular group. This explains that there are a conceptual financial report which explains the reporting entity instead of the first user and their reporting entity.The current accounting report suggest that the current cost of assets and liabilities is important than the historical costs when there is a notable change in price of good and services (Sealey et al, 1997).
For instance, when preparing a financial report on current costs, you can predict future margins than when you are using the historical costs. It can also be necessary to determine the physical capital maintenance concept if the current cost method is used in financial statement. The current cost determination is based on the value of using assets and fulfilling the value of the liability, and fair value (Beaver, 1981).
The fair value will be used as a price of a sold asset or a price of transferring the liability for the market participant who would be pricing their economic interest. In fair value, future cash flow is determined, the time value of the money can also be estimated and the possible variation in the time estimated and the timing of the future cash flow for the liability and assets is being measured (Beaver, 1981).
The amount of determining the uncertainty is inherited from the cash flow and it depend on the extent of the uncertainty (Baker et al, 2016).
The just value of an asset isnt increased by the transaction cost on the time when you are acquiring the asset or does it increase by the cost of transaction when selling that asset. When asset and liabilities are measured in terms of fair value, the information provided can be used to predict the future values for they reflects the expectation on uncertainty, timing and the amount of the cash flow in the market. For an asset and a liability to be recognized they must be measured. The measurement are subjected to the uncertainty. The measurement use a reasonable estimates to prepare the financial statement. A good representation is achieved if the estimate are well described. Increased measure of the uncertainty results to low relevant information (Baker et al, 2016).
The measurement can result to low level information if the difference in the possible outcome is wide and the expectation of each possible outcome is difficult to estimate and also if the measurement of the obligation requires difficult subjective allocation of the flow of the cash in the economy which do not have any relationship with the item which is measured. The achievement will also be related to the disclosure where all the information required for financial statement explanations and description.
Changes in economic resources does not mean increase in financial performance. The only changes that can be experienced is the financial reasoning such as issuing more ownership shares. In a developed accounting performance there is an enhancement of the qualitative characteristic such as timeliness, understandability, compatibility and verifiability. This characteristic enhance the importance of information which have been faithfully and relevantly represented as well as determining different ways in which depict phenomenon can be used in considering if the two different approach have been used, are they well represented. In the current accounting development, there exist some prediction in future economic benefits. The degree of uncertainty is assessed and the benefits are made on the basis of the available evidence during the preparation of the financial statement (Baker et al, 2016).
When the business is experiencing large number of receivable debts, there are the possibilities of considering some as the bad debt. There are measures that are used in measuring the basis of an asset and every measurement provides information about the advantages and disadvantages. Each measurement depend on facts and circumstances. The information provided must be well represented and it must be verifiable, understandable, comparable as well as timely. Financial report flow with the sales of good and services, assets, which produce cash flow from the good sold (Sealey et al, 1997).
The measured uncertainty is not the same as outcome uncertainty. For instance, a value of an asset is only known on an active market and there does not exist any uncertainty that can be used to measure the uncertainty (Baker et al, 2016).
On the other hand outcome uncertainty can be used to measure the uncertainty. In the current accounting development, the cumulative expenses equals the different between the carrying amount which is determined by the measurement basis which is chosen from determining profit and loss in the financial statement. This is what is called the measurement of the equity. According to the objectives of the international financial reports. The changes which were made included the following objectives financial statements gives prominence within objectives of financial reporting.
It should reintroduce a clear reference in the idea of judiciousness after creating judgments in situations that has improbability. This will ensure that judiciousness leads to neutrality. The information should represent the economic status, not legal form as before. Should clarify that measurement of uncertainty will enhance relevance in financial information therefore there should be a tradeoff amongst the level of measuring ambiguity and other aspects making financial information relevant
There has development on the part of information contained in the financial statements where financial statements should be organized from the viewpoint of the whole entity instead from the viewpoint of a specific set of investors and lenders.
Also, financial statements should reflect the going concern assumption. There has development that both parent and subsidiary financial statements should show the users how they obtain such financial statements. There was also a development that subsidiary firm should be part of the legal entity because it is under parent firm. In case subsidiary firm is not legal firm, monetary statement will offer information which is appropriate and which is required by the users who rely on it. The statement should faithfully present economic activities of the company.
Financial statement elements which includes assets, liability, expenses, and equity have developed changes in their definitions. Assets are defined as an economic resource that is controlled by the entity. The Economic resource is the right that right that it can produce the economic benefits. Liabilities have been defined as having present obligation where firm has to transfer the economic resources which are accrued in the past transactions. The definition of equity is the remaining interest that firm has in its assets after deducting all liabilities. Income is a decrease of liabilities and increase of assets which leads to increase of the equity. Expenses are increasing in assets or liability that leads to decrease of equity.
On the definition of liability having a current obligation, the firm has present obligation to transmit monetary resource where both firms dont avoid the transfer and the firm has acknowledged monetary benefits. Assets and liabilities have to be recognized and derecognized. For the changes to be changed in the recognition of assets and liability they should provide those who use financial statement information with the following ” should provide relevant information about the assets and liabilities or changes in equity. They should also have a realistic depiction of assets, liabilities, expenses and incomes. Information provided should have monetary benefits beyond the cost that has provided financial statement information.
The liabilities and assets should be retained after derecognition is done and effected. Again the alterations in assets and liabilities are made as due to the occurrence of the transaction in the firm. Today current value bases which show the current value financial statement elements is used instead of historical value. This has enhanced the users of financial statements getting reliable information. The current value bases are important as it represents the current value of the assets and liabilities which is good in decision-making.
There are the changes on the basis that are used to measure the value of assets, liabilities, and expenses that are used to prepare accounting reports. The measurement used today represents the following qualities to the users of the information. It should be relevant to measure the items posted in the accounting reports. It should have qualitative characteristics required in the accounting reports, and should eliminate the cost constraints. In the current accounting development elements in the accounting reports are measured using current cost values but not historical cost value. Historical costs do not reflect the current market situations and cannot be reliable by the users of accounting information to make decisions.
If historical cost values are used, there is the possibility of making a poor decision. Current cost values enhance faithful and reliable information for making effective decisions by the users of accounting information where the current value has an advantage over the historical cost values.In the current accounting, the information in a financial statement is presented in a structured manner where the information with similar items is put together and the one with dissimilar items placed separately.
This has enhanced the easy understanding of the information in the financial statements by the users of information such as lenders, investors, and other stakeholders. The information is also aggregated so that it can be easily seen since it is not obscured. The information is nowadays represented and disclosed using disclosure doctrines instead of the guidelines that lead to mechanic agreement. There are also proposed changes on if the statement of financial statement should consist one statement. They combined financial statement of financial performance does not define profit or loss.
Therefore there is the need for changes to make on presentation of the financial statement so that users can depict if there is loss or profit in the organization. Current accounting uses two statements to show financial performance of an organization. The information is efficiently and effectively presented in financial statements so as to make the information relevant. This contributes to faithful representations of the elements of monetary statements. Capital maintenance in the monetary statements has changed in the current accounting. This is adjusted to reflect the inflation in the market environment.
Also, there is consistency in the maintenance of the capital. All these information should be maintained so that users can use it to make their decisions. The current changes and developments in accounting have enhanced the preparation of financial reports which are relevant and have all qualitative characteristics will provide reliable and faithful information to the users.
References
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.
Beaver, W. H. (1981). Financial reporting: an accounting revolution. Prentice Hall.
Campbell, R. L., & Owens-Jackson, L. A. (2008). FAIR VALUE ACCOUNTING.
Pannell, D. J. (1997). Sensitivity analysis of normative economic models: theoretical framework and practical strategies. Agricultural economics, 16(2), 139-152.
Sealey, C. W., & Lindley, J. T. (1977). Inputs, outputs, and a theory of production and cost at depository financial institutions. The journal of finance, 32(4), 1251-1266.
Lowering Taxes Issues
We live in a country where many people are suffering and few people are thriving, it’s not fair to the lower- and middle-class citizens that are suffering from financial problems caused by taxes. Lowering taxes has many benefits for our country, whether it be with our economy or our people. Taxes have affected many people who are financially in debt.
When one person talks of lowering taxes, he or she may be referring to taxes as a specific taxation in individual. Most U.S. Residents pay an amount of taxes, all imposed by the government agency, e.g., the municipality, the state or the government. Each agency oversees measuring its own taxes, which are written into this law. But by altering the law taxes will be lowered. Lowering taxes will get several benefits. If consumers can pay less for products because of the reduction of these sales tax, they would be promoted to pay more money. If income taxes are depressed, people may stay promoted to work harder, thereby increasing ratio. And, if corporate tax taxes are lowered, jobs may be promoted to create more products and provide more companies.
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I propose that the less taxes we get to give, the greater the amount of money that people. The two largest cases of taxation collected are income taxation and corporate taxation. Tax cuts may get in multiple forms, and the combined decrease at that corporate tax rate and income taxes could be the greatest choice, as it could make civilians and businesses more freedom to use their resources as they see fit. “On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act. It cuts individual income tax rates, doubles the standard deduction, and eliminates personal exemptions. The top individual tax rate drops to 37 percent (Amadeo)”.
“Although some say that one of the downsides of lowering taxes is that this administration will not be able to pay off the debt we have occurred over time, “The Trump administration had said that the tax cuts would pay for themselves by generating increased revenue from faster economic growth, but the White House has acknowledged in recent weeks that the deficit is growing faster than it had expected. The Office of Management and Budget said this month that it had revised its forecasts from earlier this year to account for nearly $1 trillion of additional debt over the next decade — on average, almost $100 billion more a year in deficits(tankersley)”.https://www.nytimes.com/2018/07/25/business/trump-corporate-tax-cut-deficit.html.
Thereby tightening its power to support companies, one school of thinking contends that lowering taxes can in some cases boost revenue (Martin)”. According to economists who believe supply-side economists, the reduction of specific taxes, e.g., income and capital increases taxes, is the best means to encourage growth in economy. As a matter of fact, these theorists think that, in some instances, lowering taxes will really increase government revenues, as the economy grows enough to balance the lower taxation rate.
If taxes aren’t lowered, then our government will begin to have too much power, for example “too high of tax charge may impede development and give the government a bit much control over how money is used (Ortiz). Lowering taxes will, in the good place, get several benefits. Most taxes are levied as the fee of one specific transaction, usually calculated in the form of proportion. For instance, the income tax that America residents are required to fund is estimated in terms of the proportion of their overall income. “If you had $50,000 of taxable income, you’d pay 10% on that first $9,525 and 12% on the chunk of income between $9,526 and $38,700. And then you’d pay 22% on the rest, because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,900 — about 14% of your taxable income, even though you’re in the 22% bracket (Orem) https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/”
Without tax cuts, “The poorest Americans will be hit the hardest, but the middle class will feel the burn as well. Because the income required to be considered “middle class” varies from state to state — and from individual to individual, depending on your definition of the term — we’ve highlighted the share of returns among the second, third and fourth 20 percent of earners that will get a tax cut and tax hike in each state (Martin)”.
In a free country, money belongs to the people who earn it. The most fundamental reason to cut taxes is an understanding that wealth doesn’t just happen, it must be produced. And those who produce it have a right to keep it. We may agree to give up a portion of the wealth we create in order to pay for such public goods as national defense and a system of justice. But we don’t give the government an unlimited claim on our money to use as it sees fit.
