Its a case studys. Thank you. Document Preview: ACC5216 Accounting Theory Semester 2, 2013 Assignment thDue Date: Friday , 20 September 2013 Value: 20% Important Information The course specification...

Contents
Part A    2
Solution 1    2
Solution 2    2
Solution 3    3
Solution 4    4
Solution 5    5
Solution 6    5
Part B    6
Solution 1    6
Solution 2    7
Solution 3    8
References    9
Part A
Solution 1
The conceptual framework is defined as a system of various fundamentals and objectives which are interrelated that recommends the function, nature and various limitations of financial reporting. The objectives are required to find the intentions and goals of financial reporting. The fundamentals are basically the concepts and ideas of financial reporting and accounting. These concepts help in finding the limitations of financial reporting, selection of transaction, events among various transaction and events, and these also find the circumstances and how they should be measured, summarised and reported. Hence, in this way it helps the users in understanding the concepts of financial reporting etc.
Solution 2
Accounting is said to be political in nature as one can easily manipulate the data and can present the information as per his own requirements. This can be done without breaking any rules just by taking the advantages of the loopholes. If one look after the history and especially the last four year one found that most of the companies or institutions which actually failed are because of not following the regulatory frameworks properly. All of them are trying to manipulate financial reporting through wrong means so as to overstate profit or to lure investors because of which they failed. Some of the greatest failures in last four years are Satyam, Lehmann Brother etc. For Ex:- An U.K Company M & S shows Profit on property disposal, Exceptional cost and Exceptional pension credit as parts of the operating income calculation. But none of these activities are from the result of recurring operating procedure. Hence, the inclusion of this item is correct from the accounting point of view but it is totally wrong if one think about the interest of the investors. David,2007) It is because of two reasons:- a) the investors give importance to the operating profit b) By adopting this method, M& S succeeded in overstating the profit of the company. The overstating profit put the company in limelight for shorter period of time but in long term it will lead to harsh failure. If one look after the profit statement of Mark and Spencer for 2011 & 2012, It can easily be found that they manipulated a lot in the profit statement by including all these items in the profit statement and that is the reason they why they are in deep trouble in 2012.
The conceptual frameworks help in the setting of accounting standards in the way that it provides guidance and structure to financial reporting and accounting. These conclusion was used by many other national standard setters, each of them develop a conceptual Framework to make their decisions. Without a conceptual Framework, standard setters will not able to reach their goal and it will be difficult for them to decide which solution of financial reporting is better than other solutions.
Solution 3
The main aim of financial report is to form a basis for the Conceptual Framework along with many other features of the Framework emerging from it and to give financial information related to the entities of reporting. These information are valuable to many stakeholders such as the current and potential lenders, investors and some other creditors which help them in making decision of supplying resources to the entity. Also, user are directed who supply resources to entity of reporting but they don’t have capability to force the entity for giving them information which they need to make decisions related to their investments. The conceptual framework designed by regulatory bodies play important role in transparency and accountability of this information which in turns benefitted all the stakeholders as mentioned above.
Solution 4
The standard setters’ add attributes like Qualitative Characteristics information in financial statements so as to make it useful to users. It will make the information provided by financial statements very understandable by the users. Because of this reason it is assumed that every user has some knowledge of activities and accounting of business and economic and they are also interested to study the information thoroughly. But, there is some complex information which is required in economic decision making of users which must be included in financial statements; these statements might be difficult for many users to understand. Hence, they are achieving it in practices also as this information are useful as they are related to needs of decision making of users. It is also relevant as it effects the economic decisions taken by users by providing them various data to evaluate the events of past, present and future...