View the step-by-step solution to:

Statement 1: "Accounting standards aim to portray economic reality, rather than shape it. A comparison between the Basel capital requirements and...

Statement 1:

"Accounting standards aim to portray economic reality, rather than shape it. A comparison between the Basel capital requirements and IFRS makes this difference clear. While the Basel capital requirements tell banks how much capital they should have, IFRS Standards are 'merely' designed to show how much capital a bank actually has.

Accounting standards aim to describe economic reality as faithfully and neutrally as possible. They are not, and should not be thought of as a tool to change or hide reality. In other words, the way something is measured should not be changed just because the answer is not very attractive" (Hoogervorst and Prada 2015).



Statement 2:

"There is a presumption that the researcher is a dispassionate observer of accounting/economic 'reality' with no political, sociological or ethical ideals. Not only would these characteristics interfere with the 'search for truth', they can never be rationally justified. However, most scientific communities adopt a dominant value orientation. This becomes so well entrenched that it is difficult to challenge or change. These dominant entrenchments influence expectations as to what projects will lead to definitive, scientifically useful results" (Gaffikin 1988, p.32).


Question:

1) Both of the above statements refer to a fundamental issue of financial accounting. Explain, what the issue is.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question