ACC518-Current Developments In Accounting Thought

Question 1 

The AASB Conceptual Framework (2.12-2.19) refers to ‘faithful representation’ as being necessary for financial information to be useful. This section of the AASB Conceptual Framework also makes reference to ‘neutrality’ (eg. 2.16). Define what is meant by ‘faithful representation’ and ‘neutrality’. Do you believe it is possible for financial reports to be 'representationally faithful' and 'neutral'? Justify your position. In your response, evaluate why you think the IASB (and AASB) include these terms within the Conceptual Framework.

Question 2 

What benefits have been claimed by standard setters to support the development of conceptual framework projects? Contrast these benefits with the criticisms which have been levelled against conceptual frameworks. Do you believe conceptual frameworks to be worthwhile? Justify your position

Question 3

Mautz (1973) made the following comment:

“Accounting is what it is today not so much because of the desire of accountants but because of the influence of businessmen. If those who make management an investment decisions had not found financial reports based on historical cost useful over the years, changes in accounting would long since have been made”

Critically evaluate this statement. In your discussion, you should consider the relative merits of historical cost accounting as well as the various alternative measurement systems that have been proposed.