Vous êtes sur la page 1sur 8

ACCT 3004 Accounting Theory and Analysis

Semester 1 2015
Overall Essay Feedback
In an essay between 1000 and 1500 words (+/- 5%), students are to answer the
The development and use of a Conceptual Framework instead of accounting
standards will solve the problem of inconsistency in the application of accounting
in practice. Discuss this Comment

Bentley campus had 4 markers ALL of whom have worked on the unit.
Average grade Bentley = 8/15
Highest grade overall = 14.5/15
Fails = 23%
To achieve a grade higher than 7.5/15 students needed to do more than just restate the
textbook. Restating the textbook and just substituting another textbook as a reference is
the same as restating the textbook.
To achieve a grade greater than 11/15 students needed to have provided some examples
where appropriate and used good quality references (obscure websites and accounting
simplified type websites are poor sources.) 2 or 3 references is not evidence of research.
The essay must be well thought-out and organised well and have good quality grammar
and spelling throughout.
All markers required to review Turnitin reports papers reviewed for high similarities and or
lack of referencing. A higher than 20% similarity may be OK as the word count is 10001500 and only a few direct quotes can increase similarity dramatically. (if referenced
correctly then this is not plagiarism just copying. A high similarity may be indicative of too
much copying and not enough original thought.) End-text references were not included in
Points in the essay students could have addressed
Areas to consider for the main content:
There are 3 key paths all of which may be acceptable depending on how the student
backs up their position with evidence (references). NOTE: The question implies having
a CF and NO accounting standards (hypothetical).

CF is better than accounting standards and will solve inconsistency (agree)

CF cant solve inconsistency we need accounting standards (disagree)
We need both CF and accounting standards (both)
There may be other acceptable paths, but students must answer the question.
If the student is on the wrong path and doesnt clearly articulate they understand the
question they must receive a grade below 7.5.


Some points to be considered (but not limited to)

The essay was NOT about qualitative characteristics of the CF, (Low mark if this is all
students do). Characteristics could however be included as a part of answering the
question but must be in the correct context in relation to inconsistency/consistency.
Must identify areas of inconsistency (professional judgement, can relate to policy,
measurement or business practice but must be in the correct context).
Must indicate the overriding purpose of a CF regardless of the position taken by the
student (eg principles based and broad guide)
Must recognise somewhere that question says instead of
Students can provide essay on pro vs cons, or advantages, disadvantages, of CF but
MUST answer in terms of the question that points to inconsistency and states CF instead
of standards. If students dont discuss in the context of the question unlikely to receive a
grade above 9.
Should recognise that both CF and accounting standards allow choice so there will
always be some inconsistency, it is unlikely that there will never be any inconsistency
given that businesses are not the same and are constantly evolving and changing.
Some students may provide enough evidence to suggest that a CF regime may be more
flexible and cost effective for business, but if they do, they need to mention the role of
audit and how audit costs are likely to increase for listed companies as the stock
exchanges require a certain level of compliance. It also requires significant changes to
the laws.
Students may take a local perspective or an international perspective, internationally to
attain consistency is even more impractical due to political systems, culture, level of
economic development, education levels etc..
Students only have 1000 -1500 words, therefore they have been encouraged to edit their
submissions and focus on quality over quantity so they may discuss their essay from a
particular point of view which is fine if it is relevant to the topic and they have made it
clear up front what they are going to discuss.
To receive higher mark above 11, students must have good references and provide at
least one GOOD relevant example as to why CF may or may not solve the problem of
inconsistency Eg could relate to measurement, disclosure, information for users, the
role of auditors, elements of law if we dont have standards.
Overall grade - to pass and receive a grade over 7.5/15 the student should have
made a relevant, rational choice to answer the question and made
inconsistency/consistency the main focus.
Grades above 7.5/15 should reflect the level of effort and vigour with which the
student has backed up their choice of essay direction and provided examples that
demonstrates their understanding.
If students have made a poor choice then they should receive a grade lower than
Marks deducted if poor spelling, poor grammar and poor references.


Areas for improvement

Incorrect file name -1 (+19% Bentley students didnt label correctly)
Poor referencing in-text & end-text.
Some students still used accounting simplified and UK essays as references. Poor
academic choices when this is 3rd year accounting unit.
2-5 references not evidence of research.
Not following instructions for 1.5 or double spacing (hard to read if single spaced)
Poor use of examples and explicit link to answering the question or backing up of
points made.
Too much restating the textbook when you could have rewritten in the context of
broader criteria to show your understanding.
Poor spelling, grammar, structure, too much copying and cutting and pasting
making it difficult to read as no synergy or flow.
High similarity mostly means too much copying and pasting and not enough original
thought (but not always it may just be that you have one or 2 similar quotes to a
large number of students if the question demands similar information, but if you
rewrite the same information in your own words and use an example to explain,
then similarity should be very low and shows greater effort)
? How to ask Unit coordinator for a review
Fill in the Assessment Review form placed on Blackboard and email to UC by 13
May 2015. lisa.cullen@curtin.edu.au
This is the only way to receive a review and allows the UC to keep records and
follow up on reviews.


Example of a very good essay S1 2015

The development and use of a Conceptual Framework instead of accounting
standards will solve the problem of inconsistency in the application of accounting
in practice. Discuss this Comment
The absoluteness of the proposition that the conceptual framework will resolve the
perceived problem of inconsistency of current accounting standards in the application of
accounting in practice is an imprecise estimation. The principle based approach of the
conceptual framework is still likely to attract inconsistency problems due to its broad nature
but neither do the current standards appear able to resolve the problem. Furthermore its
necessary explore the issue of consistency itself. This is not to say that the conceptual
framework does not a have role to play in accounting, rather that neither approach alone
will conclusively resolve the issue of inconsistency . First it is essential to cover some
points regarding what accounting seeks to accomplish in relation to this matter.
Accounting is a process of identifying, measuring, recording and communicating
economic information (Hogget et al. 2012 , 7) that is relevant and reliable to the end users
in making economic decisions, users such as but not limited to lenders, potential and
existing investors and other creditors (Rankin et al. 2012, 33 . Australian Accounting
standards Board. 2015). Communication in this context takes the form of financial reports
(Rankin et al. 2012, 31 ) which should contain reliable and relevant information on the
underlying economic activity of the entity, reflecting the entities economic position (Rankin
et al. 2012, 32). Economic activity is broad and resultantly accounting treatments for these
activities are also broad and consequently it is difficult to produce information that is
uniform and easily comparable across all circumstances which in turn leads consistency
issues in spite of accounting standards.
The issue of consistency in accounting relates to the inconsistency of the standards
themselves, their inconsistent application and or understanding the underlying economic
reality of the transaction (Arthur et al. 2006, 10). Consequently inconsistencies make
comparability difficult, a quality sought by end users, for economic decision, who wish to
compare financial reports over time and between entities, to aid in determining the reason
for changes or differences (Rankin et al. 2012, 37). Consistency issues are said to have
culminated in major failings of businesses like Enron and WorldCom with standards failing
to prevent them and thus undermining the legitimacy of the entire accounting profession
(Arthur et al. 2006). It is interesting to contrast between inconsistency and relevance and
reliability that if a report provides an accurate, reliable and relevant picture of the
underlying economic activity then does it matter that consequently its less comparable.
Conversely should reporting be more comparable at the cost of relevance and reliability.
Contemporary issues in accounting suggests that relevance and faithfulness should take
precedence in this matter (Rankin et al. 2012, 37).
The current accounting standards use a rule based approach that is characterised by
accounting prescriptions for specific circumstances (Rankin et al. 2012, 67). International
accounting standards are developed by the international accounting standards board, who
through a rigorous process of planning, development, consultation and review create
accounting standards based of accounting principles and theory in an effort to encourage
consistency amongst other objectives (International financial reporting standards. 2015).
Development of these standards stems from preparers demanding explicit guidance on the
treatment of specific situations (Maines 2003, 73-89 , Arthur et al. 2006, 9 ) , which
reflects the notion that accounting rules develop from the inadequacy of principles alone,

principles which provide insufficient guidance on the most appropriate accounting practice.
For example accounting standards AASB 102 concisely defines inventory and its
measurement, leaving no room for inconsistent interpretations. Strictly speaking standards
in fact encourage consistency by their definition, creating uniformity by discouraging many
varied treatments of the same thing (Obradovic, Vladimir, and Stefanovic 2012, 2).
Naturally its fair to derive that standards create consistency advantages through the
specific guidance they supply, setting a minimum standard that must be adhered too, a
view shared Nobes (2005, 25-34). Still despite this standards for a number of reasons do
fail on this matter of consistency.
Accountings standards have paradoxically created inconsistency due to their contingent
nature, their complexity (Nelson 2003, 175-202 , Arthur et al. 2006, 11, Herdman, 2002a )
and lack of completeness (Rankin et al. 2012, 68 ). Standards are contingent in that they
try to foresee every possible situation, a difficult objective that can result in complex
standards that are confusing and susceptible to manipulation, consequently resulting in
inconsistency issues (Arthur et al. 2006, 11). Incompleteness of standards undermines
there prescriptive nature leading to inconsistency given the lack of certainty (Alfredson
2001, 12). The sheer complexity, multitude of options and exceptions as noted by Nobes (
2004, 25-34) allows for many varied interpretations. For example IASs Measurement
standard uses a mixed measurement model for measuring values, offering historical cost,
current cost, realisable value or present value (IFRS, 2015). This means the same assets
or liability could have four different values. These issues also allows entities to structure
transactions, to manage earnings and to circumvent unfavourable reporting which can
consequently deliver reduced reliability, relevance and ultimately diminish the decision
usefulness of the information, again creating inconsistencies (Arthur et al. 2006, 13 ,
Rankin et al. 2012, 68, Nelson 2004, 91-105). So while standards claim increased
consistency the standards themselves are inconsistent while also powerless to control how
preparers strategically follow them to meet their entities and or managers objectives.
Accounting standards clearly have a range of problems contributing to inconsistency,
problems it is argued the conceptual framework can help resolve.
The conceptual frameworks principle based approach sets general concepts which are
used as a boundary to guide the judgement of the decision maker (Rankin et al. 2012, 67,
IFRS , 2015) and it is this that proponents argue will better deal with consistency issues
(Rutherford 2003, 372-96). Principles offer a general basis to guide decision making
instead of relying on rules narrower interpretations, placing emphasis on accountants
making sound and appropriate judgements based on these principles (Rankin et al. 2012,
25 - 67 ). These principles will simplify accounting practices, for example leases as
discussed by Nobes (2004), through offering broad guidelines instead of the existing
multitude of complex and incomplete rules, allowing accountants to use their judgement to
assess the substance of the transaction, translating into more faithful and consistent
accounting practices and reporting (Rankin et al. 2012, 69). Evidence also suggests that a
principles base discourages earnings management issues (Nelson et al. 2002, 175-202 ).
An area where the conceptual framework does provide much needed consistency is the
standard setters themselves. The establishment of a conceptual framework for the
standards setters to work from creates a boundary to base the standard creation process
from, creating a greater degree of certainty and thus consistency (Attmore 2009, 1, Rankin
et al. 2012, 39-40). This is unlike current circumstances where every principal needs
restating each time a new standards is developed. Principles would also seem to provide a
strong foundation for confronting new accounting issues as they emerge, apply principles
against new problems to determine a solutions that are consistent with accounting

principles instead of waiting for a new standard to be developed (Attmore 2009, 2 ,

Obradovic, Vladimir, and Stefanovic 2012, 3). While it is the latitude of the principal based
approach, allowing greater autonomy from standards to treat economic activity according
to sound judgement which is the strength of the framework, it is also its weakness.
Allowing greater freedom, which the principles based approach does, inherently means
there can be more approaches taken to the same matter and potentially greater
inconsistency of accounting treatments (Rankin et al. 2012, 69, Arthur et al. 2006, 11 ).
This is the double edge sword of the principle based approach, it relies on the sound
judgement of the preparers and this does not mean that their decisions will all converge to
similar practices (Arthur et al. 2006, 11). Whether this be from inadequate guidance or the
natural variation in expressing underlying economic activity it seems inconsistency will
emerge. Again using measurement of value, principles would allow preparers to choose
amongst a range of bases they believe best suits their circumstances, thus again resulting
in inconsistent results. Nor does principles eliminate earnings management entirely, in fact
managers would have greater autonomy to structure transactions to impact reporting
(Rankin et al. 2012, 69, Arthur et al. 2006, 13). Clearly principles alone will not fully resolve
the issue of consistency.
While reporting is ultimately for the end user to make economic decisions, comparability
based on uniformity seems the lesser perspective than comparability derived from
consistency of reporting the substance of the economic transaction. Its important not to
forget that the typical end users are mostly sophisticated people or parties experienced in
the language, idiosyncrasies and nature of business and business entities (Rankin et al.
2012, 37). It can likely be inferred such users can recognise and account for to a sufficient
degree, with the aid of adequate disclosure, these inconsistency in the absence of strict
uniformity and thus should be more concerned with relevant and reliable of the
information. To further complicate matters consistency is also strongly impacted by cultural
differences, enforcement and legislation which neither approach can adequately account
for. (MacArthur 2006, 10, International Accounting, 2001)
Really neither one approach is better than the other in terms of consistency and this is why
both should coexist. In conjunction they should provide a stronger overall structure with
principles setting the boundaries, while standards provide specific yet not absolute
guidance, giving a better balance between principles and rules. In any case consistency
should be focused on ensuring that reporting information is relevant and reliable of the
economic reality of the entity an objective that cannot be adequately achieved with current
standards alone.

Word count : 1480 (without in text references)

Reference List
Alfredson, Keith. 2001. "Accounting for Identifiable Intangibles--an Unfinished StandardSetting Task." Australian Accounting Review 11 (2): 12-21.
Arthur, Alex . June Crawford . Suzanne Hillier . Ross Lindsay . Melissa Spence . 2006 .
Principles-Based or Rules-Based Accounting Standards? A Question of Judgement
. The Institute of Chartered Accountants of Scotland.

Attmore, Robert H,C.G.F.M., C.P.A. 2009. "What is the Significance of GASB's Conceptual
Framework?" The Journal of Government Financial Management 58 (4): 8-10.
Australian Accounting standards Board. 2015. Student Queries .
Herdman , R.K. (2002a). Testimony: Are Current Financial Accounting Standards
Protecting Investors? by Robert K. Herdman Chief Accountant, U.S. Securities and
Exchange Commission, Before the Subcommittee on Commerce, Trade and Consumer
Protection, Committee on Energy and Commerce, U.S. House of Representatives,
February 14, 2002. http://www.sec.gov/news/testimony/021402tsrkh.htm
Hoggett, John., John Medlin, Lew Edwards, Matthew Tilling, Evelyn Hogg . 2012 .
Accounting 8th edition . John Wiley & Sons. Australia .
International financial reporting standards. 2015. Accessed April 10. http://www.ifrs.org .
MacArthur, John B. 2006. "Cultural Influences on German Versus U.S. Management
Accounting Practices." Management Accounting Quarterly 7 (2): 10.
Nelson, Mark W. 2003. "Behavioral Evidence on the Effects of Principles- and RulesBased Standards." Accounting Horizons 17 (1): 91-104.
Nelson, Mark W., John A. Elliott, and Robin L. Tarpley. 2002. Evidence from Auditors
about Managers' and Auditors' Earnings-Management Decisions. Rochester: Social
Science Research Network. doi:http://dx.doi.org/10.2139/ssrn.294688.
Nobes, Christopher W. 2005. "Rules-Based Standards and the Lack of Principles in
Accounting." Accounting Horizons 19 (1): 25-34.
Laureen A Maines, Chair; Eli Bartov; Patricia Fairfield; D. Eric Hirst; Teresa E. lannaconi;
Russell Mallett; Catherine M. Schrand; Douglas J. Skinner; Linda Vincent (principal author)
. Evaluating Concepts-Based vs. Rules-Based Approaches to Standard Setting .
American Accounting Association Accounting Horizons Vol. 17 No. 1 March 2003 pp. 7389
Obradovic, Vladimir, Radoslav Stefanovic, and Emilija Vuksanovic. 2012. "A
Metalurgia International 17 (12): 117-123.
Rankin, Michaela. Patricia Anne Stanton. Kimberly Ferlauto. Susan C. McGowan. Matthew
Tilling. 2012. Contemporary Issues in Accounting . John Wiley and Sons Australia,


Rutherford, Brian A. 2003. "The Social Construction of Financial Statement Elements

Under Private Finance Initiative Schemes."Accounting, Auditing & Accountability Journal
16 (3): 372-396. http://search.proquest.com/docview/211233220?accountid=10382.
Schipper, Katherine. 2003. "Principles-Based Accounting Standards." Accounting Horizons
17 (1): 61-72. http://search.proquest.com/docview/208920944?accountid=10382.
Staff, Editorial. 2001. "International Accounting Standards Need Global Enforcement."
Investor Relations Business: 1.