Economic Consequence Consideration Essay

1342 words - 6 pages

Economic Consequence Consideration
ATG 563 - Advanced Accounting Theory
February 14,2012

Should economic consequences be considered by the FASB in the accounting standard setting process? Yes, the FASB should consider economic consequences in the accounting standard setting process. Ever since the creation of the FASB in 1973, it was charged with establishing standards of financial accounting and reporting in the most efficient and complete manner possible. The goal of the FASB is to maintain a neutral stance and set standards that will be helpful in predicting cash flows and in assessing managerial performance. The objectives as stated in FASB Statement of Concepts 1 stem primarily ...view middle of the document...

FASB Concept 1 states financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. Because the audience using and relying on financial reporting is growing, economic consequences affecting them should also be considered.

An advantage that standards can provide is more and better information for external users. The benefits come with a short term increase in costs due to a learning curve. The advantage would be that users would have more and better information and thus better equipped to assess the amounts, timing, and uncertainty of prospective net cash inflows to the related enterprise. Investors and creditors want standards to mandate more disclosures than corporations are willing to supply. While a standard requiring more disclosure is an advantage for external users, it’s a disadvantage for organizations and auditors because of the increase in costs to prepare the more comprehensive financial reports. The FASB only considers costs in the narrowest of senses, producer costs, and benefits are thought of primarily in terms of the information needs of the stock market. The FASB’s primary objective is providing useful information for external users subject to the benefits and or costs constraint. Not all economic event considerations will be a zero sum game, in some cases management will have the advantage and in some cases the external user will have the advantage. Information can both be useful for decision making and also involve economic consequences. Unfortunately, the FASB does not have any reliable information on costs and benefits. The Board can only make informed judgments based on what it knows at the time. The affect a proposed standard will have on companies is not known. The only measurable costs are the ones borne the preparers and auditors.

Standards can positively or negatively impact the U.S economy. The economic consequences related to how pension benefits and health care costs after retirement are accounted for on the balance sheet and income statement is yet another example of how standards can have an impact. Economic consequences have to be considered in this example because of the implication to so many.

In August 17,2010 the FASB and IASB issued an exposure draft proposing a new lease accounting paradigm. The proposed changes would simplify lease accounting and improve transparency. FASB’s objective is to ensure consistent lease accounting across sectors and industries and thus, improving the quality and comparability of financial reporting. According to the World Leasing Yearbook 2010, leasing activities in 2008 totaled $640 billion. The economic consequence of the proposal is an increase in assets and liabilities on the balance sheet for all leases previously account for as operating leases. The income statement would no longer reflect straight line rent expense, but amortization of...

Other Papers Like Economic Consequence Consideration

Corruption In India Essay

974 words - 4 pages   Corruption in India Introduction "Power tends to corrupt, and absolute power corrupts absolutely." It is not easy to define corruption. But in a narrow sense, corruption is mostly concerned with "bribery" and it takes several forms. Corruption is a global phenomenon and it is omnipresent. Corruption has progressively increased and is now rampant in our society.National scenario. Corruption in India is a consequence of the nexus between

Human Services Programs: Commonalities and Successes Paper

986 words - 4 pages is to enhance their client’s lives. Through the years, service deliveries have changed based on the trends of that specific time. Service deliveries change based on different factors such as: Political trends, economic trends, social trends, and technological trends (Lewis & Packard, 2012). There are qualities in the human service field that are contributors to the organization’s success. Some of the qualities in the human services organizations

United States Trade Sanctions Imposed on China

2374 words - 10 pages these products (Political Society Online, 2010). Imposing economic sanctions against Chinese products has a consequence of dealing with unfair competition of Chinese products and hence this will help the US companies. By imposing the economic sanctions, the US government will in essence denying China firm from exporting cheaply priced goods to US (Political Society Online, 2010). The US government focuses only on winning in any economic

Modernity

901 words - 4 pages Integrative View of Africa’s Chaos Basil Davidson’s The Black Man’s Burden: Africa and the Curse of the Nation-State denies the assertion that Africa is doomed to endless political and economic turmoil as a consequence of an inherit defect. It proposes instead, that the indigenous political systems, with checks and balances on power, existed long before European came to Africa. Davidson argues that contemporary Africans can draw on their own

Using Material from Item a and Elsewhere, Assess the View That the Growth of Religious Fundamentalism Is a Reaction to Globalisation

1030 words - 5 pages states that the west has tried to impose modernisation too rapidly in these countries and as a result, this has lead to mass resentment f the west by many Islamic populations in the world, thus encouraging Islamic fundamentalism. In conclusion, although gloablisation does play a major role as to why fundamentalist groups are promptly growing, we cannot assume this is the only way. Assessing the view of this, it does need to be taken into consideration that there are other elements which have an impact of fundamentalist groups vastly spreading such as secularisation, economic problems, certainty in a world of choice etc.

Business Law

1706 words - 7 pages consequence that the plaintiff cannot attend the beauty pageant because of her injuries is too remote. But for the breach of duty of care of the defendant, the plaintiff would not have fallen and injured herself severely. Thus, the plaintiff's physical injuries (hip fractures) are caused directly by the breach of duty of care of the defendant. The plaintiff needs to quantify this physical loss in economic terms, such as hospital charges and other

Wellfleet Bank

1535 words - 7 pages their risk management to Basel II Accord and guidelines. The bank has a unique risk profile and warranted risk-taking discipline. The bank aggressively pursues growth in the large-scale transformational deals. The bank wants to grow aggressively but with balance. As the bank grows, they need to make sure that their risk infrastructure keeps apace with the business opportunities. A consequence for their growth strategy, the bank is facing several

Coral Sea Proposal

2341 words - 10 pages -economic impacts, particularly on the commercial fishing fleet, given minimal consideration. The Commonwealth Fisheries Association (CFA) is the peak industry body representing the interests of fishers in Commonwealth-managed fisheries, who generate a significant part of Australia's $2.2 billion in economic activity in the seafood industry. Its chairman Martin Excel says the $100 million compensation package is "a drop in the ocean" of the amount

Views on the World Financial Crisis Will It Continue to Deepen

3300 words - 14 pages . Ultimately, it is highly expected that China’s growth will slow down and possibly even come to a complete standstill. The main consequence of such a scenario is that China’s financial downfall will further weaken an unstable global economic status. Conclusions With so many different opinions, points of view, and variables to take into consideration, it is quite difficult to state, without any reasonable doubt, that the crisis will continue

Causes And Consequences Of Unemployment In Spain

1489 words - 6 pages long-term unemployment carries a huge detriment to the country and its future. It affects the status and image of the nation and its economic state. Nowadays, the reputation of Spain is suffering, and associated with one of the most problematic countries in the European Union, which needs help from other members and financial institutions to overcome its own problems. Taking into consideration all negative consequences of high unemployment rate

Bait&Switch

1042 words - 5 pages that “The commercial speech is economic in nature and usually has the intent of convincing the audience to partake in a particular action, often purchasing a specific product. Generally, the Supreme Court defines commercial speech as speech that "proposes a commercial transaction."  A contract is an agreement between two or more parties evidenced by an offer, the acceptance of that offer and a legal consideration. In a contract, each party obtains

Related Essays

Tax Research Memo Essay

934 words - 4 pages outlined in the lease to be $50,000 worth of merchandise and the trip. The entirety of this rental income qualified for the de minimis exception under §280A which excludes the consideration from gross income. In the case that the improvements made by the lessee (i.e. Surprise Home Renovations) had a subsequent increase in value of the property, any tax consequence should be deferred until the lessor disposes of the property. According §109

China's Presence In Eu Essay

574 words - 3 pages EU 2020 Strategy and Policies towards China’s Presence To stimulate economic recovery, EU 2020 was schemed with three priorities namely smart, sustainable and inclusive growth. The targets include 75% employment rate of 20—64 year-olds, 3% of GDP invested in R&D, energy structural adaptation, a wider coverage of education, and poverty reduction. Therefore, European Commission urged to pursue differentiated, growth-friendly fiscal

Compare Personal Values And Principles With The Principles Of Support For Working In Health And Social Care

872 words - 4 pages targeted audience. The theory would allow predicting behavioral changes and causing change in order to have room for the audience. Theory: The theory I aim to focus on the theory of the health belief model (HBM). This model was developed my Becker in 1974 based off the ideas generated by the work of Rosenstock. This model illustrates the behavior changes associated with each patient. This is achieved by taking into consideration the

Pricing Essay

696 words - 3 pages Although dropping prices in the short runs would increase sales revenue in the short term, it causes numerous other factors that must be put into consideration. When concentrating on the long-term effects of a price drop there are many consequences that come into play. With a price drop during an economic downturn, its seems wise as it will boost short term sales, but when the economy begins to recover it will be difficult for the client to