FINANCIAL ACCOUNTING AND REPORTING

Financial Accounting and Reporting

Financial Accounting and Reporting

Answer One

Since the financial turmoil has passed on, there has been a series of criticism regarding the accounting standards. These accounting standards are causing a great problem to the economies of several countries. The first controversy, which is related to the accounting standards, is the fair value principle. In this the financial principle are recognized according to the proportion of their financial value. These are in term of market value if calculated, in terms of time, or the financial evaluation model. The fair value principle is against the historical cost in which the financial instruments are recorded according to their original price.

The accountants must revalue their assets after some time, in some cases the values goes up and in other case the value goes down. Therefore, when the value goes down the company has to record the loss that goes against the company and lower down the profits of the company. A company having copious intangible assets may find out that these items have no impact on the liquidation of the company (Choi, 2003). The intangibles assets carry statement that cannot be transferred to the second party. These assets are to be retained by the company for its whole life. Thus, the company cannot sell them off or liquidate during the hard times. They will bring no value for the business during liquidation phase.

Answer Two

There are various principle which help and govern the field of accounting. These principles are known as the basic accounting guideline and principles. These are the groundwork, which more complicated, legalistic and detailed accounting rules are based. GAAP Stands for generally accounting principles, the three important sets of rules are as follow (A) The very basic accounting principles and guidelines are as following (B) The detailed ...