Showing papers on "Accounting period published in 2013"

Review of Accounting Gimmicks Called Depreciation

Abstract: Depreciation is a complex, intricate and confusing term in the fields of engineering, social and management sciences. As a result, it has been over used, over stressed, and over worked by the accountants and professional valuers. International Accounting Standard (IAS) 4, qualifies assets for depreciation when assets are used for more than one accounting period, i.e. assets held by an enterprise for production or service, and has economic useful life. Whereas, under Standard Statement of Accounting Practice (SSAP) 12, depreciation is viewed as wearing out, consumption or other loss of value of fixed asset, whether arising from use, affluxion of time or obsolescence through technology and market changes. Complexity may arise when it is viewed as a fall in price, physical deterioration, allocation of cost, fall in value, valuation technique and asset replacement. Intricate and confusion are inevitable when accountants employ various methods of providing for depreciation on the same or similar assets of different life span. These methods may include straight line, reducing balance, sum of the year’s digit, revaluation, annuity, output, sinking fund etc which will definitely give different values in the financial statement. The consequential effect is either to undermine or overstate the reported profit or distributable profit in the hands of the stakeholders, hence the absurdity of the financial reports. It is recommended that depreciation should be used with caution especially when the anticipated economic useful lives of the asset is short lived by new technology or passage of time thereby making it extremely difficult to recover or replace the net book value of the asset.

A Critique of the Concept of Measurement in Financial Accounting

Abstract: The purpose of this paper is to discuss the concept of measurement in financial accounting, starting with an examination of the approach to measurement taken by the International Accounting Standards Board (IASB), followed by a summary of the general theory of measurement employed in the natural sciences, and finally a review of the arguments raised by various accounting theorists including Edwards and Bell, Chambers and Sterling. While agreeing generally with Sterling’s argument that enterprise income should be measured by the difference between owners’ equity (i.e. assets minus liabilities) at two points in time adjusted for investments and disinvestments, and also his argument that the difference in owners’ equity should be determined by the market (i.e. exit) prices of the net assets of the entity at the beginning and the end of the accounting period, the conclusion that the determination of exit prices is a “measurement” process is unfounded. This leads to the primary argument of this paper, which is that financial accounting “measurement” is not measurement.

Integrating forest resources into national accounts in Karnataka, India

Abstract: The effort to correct the national accounts in order to calculate NNP or related ‘Green GDP’ concepts, known as natural resource accounting, has been a lively research area recently. Natural resource accounting aims to provide indicators for the sustainability of current economic activity. The objective of the paper is an integrated economic and natural resource by compiling forest resources and integrating into the national accounts in the state of Karnataka, India. Results from the forest asset account for volume of standing timber indicate an increase of 5.056 million tones in biomass in accounting period. When the omitted contribution of natural forests were included in the official GDP for 2010, they include an increase in value add from the forest of 0.93 million of NSDP and the value depletion is 1.5 million of the estimated value added. The result of the study has justified the need for development and indicators for sustainable forest management in Karnataka.

Voyage Accounting, User Costs and the Treatment of Financial Transactions in the Theory of the Firm

Abstract: The paper considers some of the problems associated with the indirectly measured components of financial service outputs in the System of National Accounts (SNA), termed FISIM (Financial Intermediation Services Indirectly Measured). The paper considers how to integrate financial transactions into the balance sheet and production accounts of a firm. In order to minimize the role of imputations, the paper considers a firm that raises capital at the beginning of the accounting period, engages in some form of productive activity during the period and then distributes the initial capital and any profits back to the capitalists who financed the firm. This situation corresponds roughly to merchant trading voyages made some centuries ago.