(a) What is a conceptual framework in accounting? How could the conceptual framework help users and preparers understand accounting requirements and financial statements?
(b) Why is accounting said to be political in nature? How could a conceptual framework help in setting of accounting standards?
(c) Which stakeholders within society are likely to benefit from development of a conceptual framework of accounting?
(d) What advantages/benefits have been put forward by standard setters to support development of a conceptual framework in accounting? Do you think such benefits would be achieved in practice?
(e) Hines (1991) (Hines, R.D., ‘The FASB’s Conceptual Framework: Financial Accounting and the Maintenance of the Social World’, Accounting Organizations and Society, vol. 16, no. 4, 1991, pp. 313-31) argues that conceptual frameworks ‘presume, legitimise and reproduce the assumption of an objective world and as such they play a part in constituting the social world … conceptual frameworks provide social legitimacy to the accounting profession’. describe what Hines means.
(f) describe and summarise the present state in development of a conceptual framework in accounting in Australia and internationally.
(a) Income smoothing and ‘big bath accounting’ are two methods accountants/managers use in earnings management. describe how these methods work, discuss the motivations in doing so and the circumstances in which management would consider in engaging in these practices.
(b) Why might managers choose accounting methods to increase current period earnings? Describe with relevant concepts and principles using one ex.
(c) Why might managers select accounting methods which reduce present period earnings? Describe with relevant concepts and principles using one ex.