Accounting Standards in Evolution Cdn

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9780130880154: Accounting Standards in Evolution Cdn

Appropriate for financial accounting theory courses at both the senior undergraduate and professional master's levels.

The primary purpose of this book is to describe present-day accounting standards and to evaluate them in conceptual terms. With great emphasis on the past development of accounting ideas, Milburn and Skinner write with three main objectives in mind. The first is to examine the standards that govern financial reporting. The second is to explore the general theory underlying accounting standards, and the particular thinking that has influenced the form taken by individual standards. The third is to critically evaluate the standards and underlying theory of accounting.

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From the Back Cover:

In this much-anticipated second edition of Ross Skinner's classic text and reference book, Accounting Standards in Evolution, Skinner and new co-author Alex Milburn continue the three-fold approach that proved so effective in the first edition. First, they examine the standards that govern financial reporting. Second, they explore the theory that underlies these accounting standards. Finally, they evaluate both this theory and the standards that it has produced.

To reinforce this approach, Skinner and Milburn have employed a variety of highly effective features:

Summaries — Detailed overviews are provided at the end of each chapter.

Annotations — Each chapter is fully annotated, with a selected bibliography at the end of the text.

Index — A clear and detailed index is provided for easy access to essential topics.

Illustrations — Well-integrated illustrations and tables reflect key theories and accounting standards.

Excerpt. © Reprinted by permission. All rights reserved.:

PREFACE

The first edition of this book, authored by Ross Skinner, was issued in 1987. The preface to that edition stated three principal objectives:

The first objective is to recount in an organized fashion the standards that govern financial reporting today. The second is to explain why they take the form that they do—that is, to explore the general theory underlying today's standards and the particular thinking that has influenced the form taken by individual standards. The third is to evaluate the standards and underlying theory critically—to appraise strengths and weaknesses with a view to stimulating discussion and possible improvement.

I have attempted to remain faithful to these objectives in updating the book, and in replacing, modifying, and extending parts of it to reflect the sense of, and reasons for, changes that have taken place since 1987.

The preface to the 1987 edition emphasized also that accounting standards have evolved over time and will continue to evolve—hence the title of this book. This must be so if accounting standards are to keep pace with changes in the business environment and in society's expectations for financial information.

Much has happened since 1987. The pace of change has been accelerating as a result of the effects of the globalization of capital markets, revolutionary advances in information technology and in investment and risk management theories and practices, among other factors. These developments have severely challenged significant aspects of the traditional historical cost-based accounting model. Many new accounting standards have been issued in recent years that have effectively extended or replaced parts of the model to try to meet these challenges.

The piecemeal, issue-by-issue approach to accounting standard setting has resulted in an uneven development, and a patchwork of standards—what some have described as a "mixed attribute model". This has created a confusing picture for accounting students and practitioners alike. It is difficult to detect a unifying theory from existing standards and practices. The temptation may be to focus on a literal interpretation of specific standards, without trying to develop a broader framework of understanding. Such a narrow objective can only serve to diminish the usefulness of accounting as an economic information system, and to diminish the role of accountants as experts in enhancing the information value of financial reports. One may easily lose one's way in the forest of detailed accounting rules if one does not have the context that comes from understanding how accounting has come to be what it is, its conceptual underpinnings, its limitations, and something of the forces of change and opportunities for improvement.

The current times have been described as an "information age". Much of the current emphasis would seem to be on developments in information technology rather than on information content, however. Accounting and accounting standard setting is primarily concerned with the content (the relevance and reliability) of financial information. The benefits of advanced technology for the rapid processing and communication of large quantities of accounting data can be fully realized only if that data have relevant information value. It is hoped that this book will contribute to promoting a better understanding of financial accounting as a crucial information discipline.

It is a strong belief of the authors that an understanding of the past development of ideas will help us in the present and the future. All of us have our ingrained mind-sets, and it is instructive to look back and see how much of previous conventional wisdom has proven to be ill suited to changing conditions. This is why Part I of this book contains a brief excursion through the history of accounting. Accountants would do well to study the history of their discipline and how it has responded to changes in its environment. Chapters 2 and 3 are very little changed from the original edition, while Chapter 4 on developments in the twentieth century has been extended to briefly examine the effects of developments in academic thinking and research on the information value of accounting, as well as recent steps taken towards internationalization of accounting standards and standard setting.

Part II examines the state of current accounting standards. Financial accounting has been rooted in the transactions-based historical cost model. Even at the height of its influence this model did not come close to providing satisfactory answers to many very important accounting questions. Its inadequacies became increasingly clear from the late 1960s. The analyses of specific issues in Part II trace the bases for this, and the efforts of accounting standard setters to address the problems—in part by placing emphasis on a more rigorously reasoned conceptual framework that gives predominance to decision usefulness and economic concepts of assets and liabilities. There is also evidence of the increasing influence of modern capital markets and finance theories as, for example, standard setters struggle with the implications of present value concepts, and with the effects of complex business transactions to debundle, rebundle and diversify risks and combine and restructure business enterprises.

The traditional historical cost model concentrated on product-handling industries and was poorly adapted to the financial reporting needs of such important sectors as financial institutions, investment companies, service industries, and extractive industries. In recent years efforts have been made to incorporate all types of enterprises within a common conceptual framework, reasoning that similar transactions should be accounted for similarly regardless of the industry setting. This edition of the book has deleted the chapters on extractive industries and financial institutions that appeared in the 1987 edition, and has attempted to include important material that was in those chapters within discussions of pertinent accounting subject areas.

The final chapter of Part II (Chapter 24) chronicles efforts made to replace or revise historical cost-based accounting so as to better portray the effects of changing prices in financial reports. Those efforts failed, for several reasons. A major reason was that no one model could be demonstrated to be superior, and all have serious conceptual and practical problems. Interest in these models largely disappeared when inflation levels dropped in the mid 1980s—but standard setters may do well to consider the lessons of this experience so as to be prepared should a repetition of inflation or fundamental price instability reappear in the future. Chapter 24 represents a condensation of material that made up four chapters of the 1987 book. At the same time it introduces some new ideas in suggesting that developments in capital markets and finance-based thinking may have significant implications for redefining concepts of capital maintenance.

The focus of this book is on Canada and Canadian GAAP. But, since the early 1900s Canadian accounting has been much influenced by U.S. practice and standards. Thus the book examines U.S. developments in some depth as these have affected the thinking and development of Canadian practice and standards. As can be seen from the discussion of particular issues in Part II, Canadian standard setters have been independent and selective in taking different positions from the U.S. on a number of matters, despite the fact that the CICA conceptual framework is essentially the same as that of the U.S. The examination of particular accounting issues in Part II offers critical analyses of factors (political, conceptual and practical) that have given rise to some significant differences in accounting between the two countries. The globalization of capital markets, increasing integration of business on a North American basis, and the predominance of U.S. capital markets, are having profound effects on Canadian GAAP, and give question as to the usefulness of separate Canadian standards in the longer term. The examination of particular issues in Part II has been expanded to assess the influence of the international dimension by including some comparative analyses of significant IASC standards. In Part III, the broader implications of U.S. influences and increasing demands for internationalization of accounting standards are examined.

The gaps and weaknesses of existing financial accounting stimulate accountants to ponder whether a better conceptual framework could be articulated. The first chapter of Part III (Chapter 25) examines the need for a conceptual framework. It then builds upon the literature in this field to suggest a structure of thought, and some possibilities for the improvement of the explicit framework. It notes that certain changes in thinking underlying developments discussed in Part II have resulted in some de facto changes in the conceptual underpinnings of financial accounting that have yet to be incorporated in the formal conceptual framework.

The final chapter of Part III (Chapter 26) deals with the process of accounting standard setting. The standard setting process must demonstrate its competence and its independence from preparer and other vested interests if it is to have credibility. As well, the record suggests that standard setting requires some measure of legal support to be workable. To receive such support it must be seen to be acting in the public interest and to be performing effectively. The CICA's performance as the authoritative financial accounting standard setter in Canada has been credible to date. Some serious challenges have arisen in the past few years, however. This chapter examines these challenges and proposals that have been made to address them.

Part IV contains chapters on accounting for not-for-profit organizations and governments. These chapters have been expanded, reflecting major developments since 1987.

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Skinner; MILDURN
Published by Prentice-Hall (Canada) (2000)
ISBN 10: 0130880159 ISBN 13: 9780130880154
New Paperback Quantity Available: 1
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Irish Booksellers
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