ACCOUNTING ASSIGNMENT

Theory of Accounting

Theory of Accounting

Introduction

The impact of the global financial crisis keeps lingering, with the world of business remaining pessimistic as it looks into the crystal ball for inspirational insights. Many wish for a flash of brilliance to deliver the impetus necessary to inject growth and realise associated earnings.

This anaemic approach is driven by risk adverse businesses continuing to remain in their comfort zones while preferring to let the “market” deliver the change required to drive customer appetite. In the meantime, growth is minimal or negative, cost management is perceived to be the key to survival. The business then stagnates in a cesspool of mediocrity(Schipper, 1989, 91-102).

Role of accountants

Schwartzman blame accountants as another set of culprits behind all the pains in the US financial industry arising from the 2008 global financial crisis and I feel that accountants in particular, have played a key role in intensifying the crisis, because it is an accountant who has the most reliable and timely information on the status of the organization, and often only an accountant could predict the closest to reality scenario of the situation. 

Based on such knowledge, an accountant by virtue of:

Understand and assess the economic situation in the organization and in the relevant field of activity.

Assess the financial and economic situation in the organization using a variety of techniques and taking into account different indicators.

Prepare various reports on the activities of the organization in a crisis, most clearly characterize its most problematic areas

An analysis of civil law contracts.

To analyze the assessment of tax risks, and to predict the situation

Develop proposals for a strategy of crisis management

Identify the most and least profitable items and orders, and in some cases - to prepare proposals for the manager to enhance their effectiveness.

The head of the organization need to understand that during the unstable economic situation of utmost importance that the ability to make accurate financial statements, on the basis of which it is possible to assess the financial and economic condition of the organization, as well as tax optimization and assessment of tax risks. Given the above, the head of the organization should pay more attention to the work of an accountant of the organization(Kanagaretnam, et al ,2010, pp 2318-2321).

And not only to assess the quality of accountants, but also to determine its potential for solutions "related" economic issues, especially in the absence of other organizations of persons with sufficient knowledge and skills in financial and economic sphere (economists, planners and etc.).

Fair value Measurement

Analysis of nature of Fair Value Measurement

The implement basis of SFAS157 is in an efficient market. Its hierarchy of fair value measurement confirms the priority of market price for the same or similar position. But under the credit crisis, entity will expect to reverse the unrealized losses partially at present or totally in the future. Based on this assumption, some entities preferred to report amortized costs or level 3 mark-to-model fair values, arguing that level 2 mark-to-market fair values will raise larger unrealized losses (Hull, et al, 200, pp ...