Selection of accounting methods might be affected by motives different than those dictated by the relevant circumstances Maximize reported income—Management compensation based on reported income Minimize reported income—Fear of government intervention on antitrust grounds Smoothing income—Less fluctuation = Less risk Potentially capable of distorting income measurement Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
UNIFORMITY Finite uniformity: Equates prescribed accounting methods with the relevant circumstances in generally similar situations Rigid uniformity: Prescribes one method for generally similar transactions Generally, if finite uniformity can be attained, it is superior to rigid uniformity from the standpoint of decision-making. Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
APPROACHES TO UNIFORMITY Rigid uniformity Finite uniformity Flexibility Applies to situations in which there are no discernible relevant circumstances But more than one possible accounting method exists Prevalent in U.S. GAAP Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
DISCLOSURE Is related with information in both the financial statements and supplementary communications, including . . . Footnotes Post-statement events Management’s analyses Additional information beyond historical costs Refers to the whole area of financial reporting and not simply to the financial statements Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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- Fall '17