It is designed to explain and predict which firms will and

Question

Assignment Question 1:

Read the following quotation from Miller and Reading (1986, p. 64). If constituency support is necessary before particular accounting approaches become embodied in accounting standards, does this have implications for the ‘neutrality' and ‘representational faithfulness' (qualitative characteristics that exist in various conceptual framework projects around the world) of reports generated in accordance with accounting standards?

"The mere discovery of a problem is not sufficient to assure that the Financial Accounting Standards Board will undertake its solution ... There must be a suitably high likelihood that the Board can resolve the issues in a manner that will be acceptable to the constituency-without some prior sense of the likelihood that the Board members will be able to reach a consensus, it is generally not advisable to undertake a formal project".

Assignment Question 2:
As Watts and Zimmerman (1986, p. 7) state, Positive Accounting Theory ‘is concerned with explaining [accounting] practice. It is designed to explain and predict which firms will and which firms will not use a particular accounting method but it says nothing as to which method a firm should use'. Do you think that this represents an ‘abrogation' of the academics' duty to serve the community that supports them?

Word Limit: 2000

Answer 1

For completing the assignment, you have to read the given quotation from Miller and Reading (1986, p. 64). When constituency support is essential before specific accounting approaches become embodied in accounting standards, does this encompass implications for the ‘neutrality' and ‘representational faithfulness' (that is, qualitative features which exist in different conceptual framework projects around the world) of reports produced in accordance by means of accounting standards? "The only discovery of a problem is not adequate to guarantee that the Financial Accounting Standards Board will undertake its answer ... There should be a correctly high likelihood which the Board can resolve the issues in a way that will be acceptable to the constituency-without some preceding sense of the likelihood which the Board members will be capable to reach a consensus, it is usually not advisable to take on a formal project".