代写范文

留学资讯

写作技巧

论文代写专题

服务承诺

资金托管
原创保证
实力保障
24小时客服
使命必达

51Due提供Essay,Paper,Report,Assignment等学科作业的代写与辅导,同时涵盖Personal Statement,转学申请等留学文书代写。

51Due将让你达成学业目标
51Due将让你达成学业目标
51Due将让你达成学业目标
51Due将让你达成学业目标

私人订制你的未来职场 世界名企,高端行业岗位等 在新的起点上实现更高水平的发展

积累工作经验
多元化文化交流
专业实操技能
建立人际资源圈

What is the conservatism principle

2021-06-08 来源: 51Due教员组 类别: Essay范文

今天给大家带来一篇优秀的论文 这篇论文主要描述的是对于有着保守主义原则的管理层会要求企业会计采用务实的方法,以预计企业发展中可能会产生的支出与收入,这样能够让资产损失得到有效控制,从而维护企业利益所得者的利益,这种保守主义倾向过于“谨慎”,会计为了能够达到企业预期的目的,很容易就失去了会计应有的客观性。一起来看看吧 有论文需要帮忙的亲亲可以联系我们的专属客服 wx: Even100100进行咨询喔~

What is the conservatism principle

 

According to conservatism principle, to fully consider the risk in business situations, accountants should be conservative in choosing the one that has the least favorable impact on net income when there are two methods (Smith,  2015).Under the conservatism principle, if there is uncertainty about incurring a loss, it requires tending toward recording the loss. Conversely, if there is uncertainty about recording a gain, itrequirestendingnot to record the gain.Conservatism principle refers to the principle when dealing with uncertain economic and business enterprises, the attitude should be cautious. Any foreseeable losses and costs shall be recorded and confirmed. On the contrary,if the income cannot be recognized or confirmed, it should not be recorded. Because in market economy, enterprises will inevitably encounter risk and to implement the conservatism principle can mitigate risks before them happen. Meanwhile, it helps companies to make the right business decisions. It helps to protect the interests of owners and creditors, and improve enterprise competitiveness in the market (Crawley, 2015). Objective principle is a reflection of economic business accounting work based on the actual occurrence of the financial position and operating results. Conservatism principle requires reflecting the corporate accounting practices to identify possible expenses or income; assets losses may incur but not yet occurred. The tendency of conservatism principle in maintaining owners and corporate interests is obvious. It enables enterprises to adopt "cautious" behaviors to achieve the intended purpose. Therefore, the conservatism principle may lose its objectivity.

A series of actions and rules are in need to prevent its prejudice. Firstly, to reasonably determine the order of priority of the accounting principles is necessary. Objective principle should be the primacy, and conservatism principle must be implemented and used in maintenance on the basis of the principle of objectivity.Secondly,the conflictt should be fully revealed and recorded. Because each company faces uncertainty at different times, under different environment and situation, the scope, time and degree of the adoption of conservatism principleshould also be different (Cheng, Huang& Li, 2015). Therefore, the different scope, time and degree of the adoption of conservatism principle should be fully revealed and recorded. It reveals the impact degree and changes on corporate financial position and operating results when the conservatism principle conflict with other accounting principles. Full disclosure of information can improve the comparability of information. Full disclosure of information can help business stakeholders accurately understand the financial situation of enterprises and to prevent further deterioration of the conflict and misleading accounting information users (Heflin, Hsu & Jin, 2015).Thirdly, the application of the conservatismprinciple requires necessary constraints. This reduces the arbitrariness and subjectivity operation to some extent. This can effectively prevent and avoid conflicts with other accounting principles.Fourthly, strengthen auditing and supervision, and internal restraint mechanism, due to the features of conservatism principle of strong randomness and personal tendency in practice.

How is it applied to intangibles?

The period of amortization of intangibles should be consistent with the shorter regulation against contract or law, or the operation period. If there is no regulation in contract or law, the period of amortization should be ten years. For start-up cost amortization, the industry accounting system stipulate the period should not be less than five years. However, if the start-up cost is not high, it could also be amortized at one time at the beginning of the production and operation of the month (Xie, 2015).

Intangible assets are recorded at actual cost, which in practice is feasible for acquired intangible assets and investmentstransferred into. But it is difficult to accurately measure the intangible assets for certain own currency, such as patents and proprietary technology. These intangibles are generally developed under long process, but the success is with a great uncertainty. Theoretically, the value of these intangiblesshould include all the creation of during development process and all expenses occurred. For cautious, simple and feasible consideration, it should follow the principle of conservatism to record all expenses occurred during the development as technology costs, and deduct from income in the current period.When an application achieves success and patented, a variety of expenses incurred during the development should be recorded as intangibles (LI,2013).

The same as fixed assets, intangibles will also suffer value impairment. Therefore, regular value inspection against intangibles is also necessary. Value impairment should be recorded under the current cost and the recovery value should be recorded as the current earning. Following the principle of conservatism does not mean that artificially inflating or exaggerating any risk of loss probability or amount. Principle of conservatism in accounting principle is only used as a modification principle. It should take the principles of objectivity as a precondition, not raise income, nor lower liabilities and expenses.In the particular practice, principle of conservatism should be taken into consideration due to the uncertainty of intangibles. Not to capitalize it prior to its true form intangible, and directly record it as current expense. Thus, not only embodies the principle of conservatism, but also reflects the feature of amendments of the principle of conservatism to the objectivity principle. Amortization of intangibles should follow the principle of conservatism; due to intangible is a special kind of long-term use. Although there is no specific physical form, as the same with other assets, it has a certain period of expiration date (Sultana, 2015). Its value has the right to deduct even completely disappear along with the development of time and technology. Since the high uncertainty of intangibles, the most difficult part of their recording is the uncertainty of amortization. Therefore, once the intangibles are recorded, it should starts amortization since the day it begins benefiting. 

Why does the author believe that expensing of intangibles is questionable?

The author thinks the expensing of intangibles is questionable because it is not consistent with the principle of prudence. The principle of prudence is one of the most important and widely used accounting concepts. It prevents the over elevation of assets and income, lower evaluation of liabilities and expenses. It could also play the role of early warning risks and resolving risks. But in practice, there is inevitable potentiality to use the principle of prudence to manipulate profits. Therefore, it is necessary to take measures to prevent the negative effects.There are multiple methods reflecting the principle of prudence, majorly including provision for bad debts of accounts receivable, inventories are stated at the lower of cost or market valuation method, LIFO inventory issue assumptions, impairment losses of inventory preparation, fixed accelerated depreciation of assets, impairment of long-lived assets, research and development expenses incurred treatment methods (Khurana & Wang, 2015).The essence of the principle of prudence is asymmetric recognized requirements againstgains and losses. It means that it is stricter on gains than losses. Losses could be recorded immediately and gains will be recorded after it realized. This asymmetric feature majorly influences reporting, net assets, accruals and surplus items.If the principle of prudence is more negative or positive to an enterprise largely depends on the degree of its application. Either overused or lower evaluated will cost the advantage of the principle of prudence and lead inaccurate state of financial situation or businessperformance and furthermore, misguide decision-make based on accounting information. Possible solution is to find balance advantages of application of the principle of caution, so that the principle of prudencewill be maximized, and the shortcomings of its own will be confined within a minimum range.Firstly,in the application of the principle of prudence in terms of assets, the principle of prudence is widely used. Development costs of self-developing intangibles should be directly recorded into the current cost and other intangibles should be consistent with the shortest among the regulation of contract or law, or operation period, or ten years. Because of there is big invisible loss of fixed asset; accelerated depreciation method should be adopted. Enterprises should periodically or at least at the year-end perform comprehensive inspection of assets per year. The loss could reasonably be expected to occur in the provision for impairment. When prices rise, the choice of valuation method of inventories should be LIFO, and FIFO should be selectedwhen prices fall.Secondly, principle of prudence is widely applied in investment and liquidation dividend, including abandoning non-cash assets to acquire long-term equity, the preparation of capital reserved project, etc. (Luther, 1998). If the fair value of the equity investment made clearer, it can also be obtained to determine the fair value of equity investments. For the amortization of equity investment, limited period investment should follow the amortization of investment period. If there is no investment period stated, then amortization should be no more than ten years.

Why cannot accounting procedures generated by the conservatism principle be conservative forever?

It will conflict with other accounting principles, including reliability principle, comparability principle, matching principle, and timeliness principle.Firstly, it conflicts with reliability principle. Reliability principle requires truly and objectively reflecting accounting transactions and events actually occurred. It cannot be confirmed based on fictitious accounting or financial business, measurement or reporting have not yet occurred (Van Hulle, 1996). It conflicts with the conservatism principle requirements for recognizing and measuring the anticipated losses and expenses that may occur,or expected economic and business losses that may occur but have not yet occurred.Secondly, it conflicts with the comparability principle. In order to facilitate investors, creditors and other users of accounting information truly and better understand the changes in financial position, results of operations and cash flow trends, compare companies in different stages of the accounting information, objective and impartial evaluation of enterprise in the past, predict the future of the enterprise, which is conducive to users of accounting information to make rational decisions (Gonedes, 1969). Therefore, comparability principle requires accounting methods and accounting indicators have consistent and comparable caliber. Once the accounting method is confirmed, it cannot be adjusted easily. This also conflicts with requirement of conservatism principle that enterprises could adjust their accounting method according to their specific situation. Thirdly, it conflicts with the matching principle. Enterprise in profitable business activities with benefits must ultimately pay the cost for profit. So in a certain period, the income from operating activities associated costs need to recognition and measurement,the requirement of the matching principle. But under the cautiousness feature of conservatism principle, the possible expense, which does not belong to this period, may be recorded and possible income, which does belong to this period, may be not recorded. They all conflict with the matching principle. Fourthly, it conflicts with the timeliness principle. In the era of rapid development of information, time is money. From the collection of accounting information, accounting information processing to transferring accounting information, all of these procedures need timeliness. The value of accounting information is to help stakeholders to make the right information at the right time. With the lack of timeliness of accounting information, no matter how correct or objective information is provided, it does not have any value (Waymire,1988). Timeliness principle requires companies to take timely recognition and measurement against economic activities, no advance or delay. However, according to the conservatism principle, it is possible to lead to income or expense being recorded in advance or delay. Therefore, it conflicts with the timeliness principle. In conclusion, since the order of priority among the accounting principles is not clear, when conservatism principle and other principles conflict, conservatism principle is difficult to obtain well implementation.?


51due留学教育原创版权郑重声明:原创优秀代写范文源自编辑创作,未经官方许可,网站谢绝转载。对于侵权行为,未经同意的情况下,51Due有权追究法律责任。主要业务有essay代写assignment代写paper代写作业代写、论文代写服务。

51due为留学生提供最好的论文代写服务,亲们可以进入主页了解和获取更多代写范文提供论文代写服务,详情可以咨询我们的客服QQ:800020041。

上一篇:Marketing Thinking 下一篇:The Role Of The Management Acc