a

Question 1
Describe on your own words the issue that the exposure draft/proposal and
comments letters dealt with.

The exposure draft chosen for this assignment is comment an Exposure Draft proposing a
revised Conceptual Framework for Financial Reporting. The proposals aim to improve
financial reporting by providing a more complete, clearer and updated set of concepts that
can be used by:
a

the IASB when it develops International Financial Reporting Standards (IFRS); and

Others to help them understand and apply those Standards.

This Exposure Draft:

a

is more accomplished than the current Conceptual Framework as it manage these areas
that are either not elaborated, or not elaborated in clear manners, in the current
Conceptual Framework:

measurements;

ii

financial management as the utilization of other comprehensive revenues

iii

representation and level of disclosure

iv

recognition

the reporting firm

provide guideline on few factors of the current Conceptual Framework as illustrated by

this Exposure Draft:

it elaborates that the data required to attain the goals of the financial reporting
like data that can be utilized to assist the assess of the management stewardship
of the assets of the firm:

ii

clarifies the responsibilities of prudence and substances in specific form in the

financial reporting;

iii

elaborates that the high scale of measurement risk can build less related
financial data;

iv

explains that crucial decisions such as recognition and measurement are

depend on assuming the nature of the data attained about the financial
management and monetary position;

Explains the clear definitions of the resources and liabilities and provide the
wide guideline to encourage those definitions.

vi

Maintain the parts updates of the current Conceptual Framework that are
outdated (IFRS, 2015).

Comments
Letter 1 (Aichigakuin University)
The comments are relevant to the projected definition of equity is Equity is the remaining
interest in the resources of the firm after subtracting the liability
Equity is not always a remaining amount as it has a chance to be computed directly in the form
of the amount of capital contributes, managed, accrued interest on them and the net earnings of
the firm. This amount however at the similar time, mathematically equal to the net resources
(remaining amount of resources of the firm after subtracting the liabilities), through the process
of the double entry system of the bookkeeping.
Letter 2: (BDO)

The explanation of the liability must be revised along with the excellent differentiation in equity
and liability.
Where is the detail?
Letter 3: (Detaches Rechnungslegungs Standards Committee)

The performance evaluation clarifies the differentiation among the profit or loss and the

comprehensive earnings.
The difference among the equity and the liabilities

Letter 4: (AOSSG)
( where are the question 8,6,12,14,6?
How we can defend this in assignmen?
For Measurement (see the comments of Questions 8 and 9 in the ED);
Explanations of Profit or loss and the other comprehensive earnings and the process of
the recycling
Definitions of profit or loss and other comprehensive income and the mechanism of
recycling (see the comments of Questions 12 and 14 in the ED);
Recognition (see the comments of Questions 6 in the ED); and
Explanation of a liability and current responsibilities (see the comments of Questions 3
and 4 in the ED);
Letter 5: (BT)

On the basis of the prudence, while we support that the process of prudence must not
results in deliberately biased computations, we assume that the conceptual framework
must provide the asymmetrical prudence that to be utilized by standard makers while
making a principle and when deemed suitable in few conditions.

Explanation of liability provide the unwanted results that may happen from the new
explanation of the liabilities as projected in the ED, in a specific term current
responsibilities, we assume that it is before time to alter the present definition without
locating the potential challenges due to new definition of the liabilities, beyond the
influence on the levys accounting and the IAS 32. The clarification at standard scale as
IAS 37 could be increased to explain more that the economic compulsion may manage
and establish the current responsibilities in various conditions.

Lacking in complete explanation of the income and the loss (IFRS, 2015)

Almost all groups identify the challenges of the explanation of profit and loss as explained by
AOSSG, DeutschesRechnungslegungs Standards Committee. There was not agreement on the
definition of equity and the liability as identified by DeutschesRechnungslegungs Standards
Committee, BDO, AOSSG and Aichigakuin University. The corporation stated that equity is not
the remaining amount and there is no complete differences explained among the equity and the
liabilities. The equity is not the remaining interest from the opinion of the firm as a whole, as the
remaining interest is a concept that shows the claims of the owners in the firm as a whole. The
owners have no remaining interest in the firm on the basis of going concern. when the firm ban
to follow the going concern, remaining interest may happen. Explanation of liabilities Given the
unwanted results that may happen from the new explanation of the liabilities as projected in the
ED, in specific current responsibilities we assume that it before time to alter the present
definition without locating the potential challenges due to new definition of the liabilities,
beyond the influence on the levys accounting and the IAS 32. There must be a clear explanation
of what are earnings and loss. It is elaborated that this explanation must incorporate the earnings
and loss trend in the accounting period too (IASB, 2010)
The comment letters apply that, the IFRS foundation and the IASB are the private corporations
that work for the benefit of public firms. Although, the composition of their leadership and
reliability and the board members, so the UFRS Foundation and the IASB have no provided any
sign that they interpret their roles as expanding beyond the private benefits of the investors into
the social results of the international accounting rules and of the business and management
processes that accounting rules invite. The economic decision making of usefulness point of

view is too narrow and do not consider other sides to serve on the basis of the mission of IFRS
Foundation and the conceptual framework of IASB. The public interest must be elaborated in the
global general public interest. IASB must maintain the interest of people and comment letters
must also align with the theory of public interest. As the alteration is recommended for better
accounting interest is not for the interest of the corporation or not its a effort to impact the IASB
through corporations (Holder, et al.,2013).
IASB must have global public interest in their mind, as clarify the influence of the conceptual
framework of IASB and the global financial accounting and the reporting rules in coming time,
the people interest theory, bequeathed through past generation of economists to the current
generation of the lawyers. This theory present that rules are presented on the basis of the demand
from public for the correction of ineffective market processes. It has various drawbacks that we
shall elaborate, such as rules are presented to provide advantage to society as a whole.
Regulatory body assumed to show interest of society in that it managed to operate instead of the
private interest of rule makers and considering that government is a neutral in such cases(IASB,
2010)

Question 3 Essay
Politicization of the international accounting standard setting process: evidence
from the extractive industries
International accounting standards are meant for converged and comprehensive accounting
standards all over world. This cause better comparability, understanding and validity of
accounting practices used all over the world. There are certain issues that opponents of
international accounting standards sate, in their view using same standards by all companies and
all industries in all nations can not represent the true financial picture and cultural, economic and
political demands are different that makes it difficult to use same set of standards in all
situations. Despite this having coherent accounting standards is the main aim of IFRS and IASB
so that there is uniformity in accounting practices all over world (Van Gruening, 2006).
The major goal of the International Accounting Theory is to encourage the value of the
accounting to the global finance and business. It provides the understanding of the force for
global convergence of the accounting rules and processes. The cause for the diversity and the
means is to categorize the global accounting process. It maintains the rationale of present
progress in the accounting globally. However the various states currently move to IFRS as we
evaluate the previous accounting standards of various countries we witness that the similar
transactions show essentially different results through different accounting treatments. The
variations in the profitability in the accounting have been utilized by various groups is the
justification of the current efforts of the IASB for the convergence of the global accounting
practices and standards (IASB, 2010) . This paper has utilized various illustrations of three major
players of the global accounting rules and standard making procedure for the extractive sector to
further evaluate the politicization of the accounting rules setting. The evaluation of the
submission is by the KPMG, Kerr McGee, and the OIAC, and their connection to the
IASC/IASB and also with each other, has locate the web of associations that is the feature of the
standard making procedure and that ensure the contribution towards the final results, IFRS 6, as
a codification of the current processes (Ashbaugh, 2001)

This results in various doubts on the transparency and the independence level of the IASB as a
standard making organization and however it is recognized at global scale that standard making
is a political procedure, this study identify the source, means and influence of this politicization.
The major concentration of this study has been on the IASB, on the progress of the single
accounting standard, on the responses of the Issue Paper and on just a cross section only of those
responses, it does show the options for the future research. For illustration consider other
challenges relevant to the accounting for the extractive processes could be assumed like the
process utilized for deleting and restoring the expenditure of the goal setting procedure of the
insider who is prior to the process o the standard making. The potential for the IASB can be
located by those corporation that want to follow the standard of specific concern provided that
the IASB is showing that it is an independent entity acting for the interest of people at global
level with the diffusion of the accounting rules that will the influence the global capital markets
(Pitt, 2002).
Accounting policies and rules are essential to make sure that forces are operating in best societal
interests, in absence of regulations in the field of accounting the forces will operates for their
own interests or political pressures may dominate this sector that will ultimately harm the social
interest.Regulations ensure that there is healthy competition and no organization takes undue
profit (Gaffikin, 2005) . The study has evaluated the procedure of setting the rules. The rule
making procedure evaluates different theoretical concerns that elaborates who is probably to get
biggest benefit from the application of accounting rules and locate the role of the accounting in
controlling the political costs. It involves the encouragement of the rules setting procedure and
generates awareness of the political elements and impact on the rules setting procedure. In this
study it is elaborated that IASB claims that it make the accounting rules by considering the
opinion of public interest that are not impacted by the politics and individual pressure of the
corporation. This claim is relevant to the Public Interest theoryof the rules making (Baker,
2005).
It was find out that the rules are more favorable for the big corporations and they do not prove
advantageous for the small corporations in the similar manners that shows that the theory of the
Private Interest. When Issues, IFRS 6 do not get the success to provide the information on the
main issues for the disparity in the extractive sector as reporting that must include the techniques

utilized to control the pre productions costs of the business. Such type of costs also named as
inspection costs that consists on significant expenses of the extractive corporations, that costs
usually raise hundreds of millions of dollars on yearly basis. ExxonMobil is the biggest
petroleum corporation of the world that has to bear US$27 billion on such type of inspection or
exploration cost (ExxonMobil Corporation stated in 2009). Exploration cost is also significant
even for the small sized corporations as the Anadarko Petroleum Company has to bear US$1.3
billion on the exploration (Anadarko Petroleum Corporation stated in 2009). Provided the
billions of dollars that corporations bear on the pre production activities, the means these costs
are distributed in the accounting procedure is crucial and, over time, various industry processes
have progressed that develop significantly distinctive accounting outcomes (International
Accounting Standards Committee elaborated in 2000, Katz stated in 1985, Nichols in 2012 and
Van Riper in 1994). The two major processes that are utilized to control the pre production costs
are called as the progressing efforts technique and the complete cost techniques. While both
techniques are dependent on the historical cost of the accounting, the major distinction is the way
by that the progress and failed inspection ventures are treated in the accounts. The progressive
efforts technique stipulate that the costs relevant to the inspection and examination of activities
may be capitalized just if they are relevant to the progressive discovery of the petrol or minerals,
with all the costs relevant to the failed ventures to be occur as a expenditure. The complete cost
technique, although, allows all inspection and examination costs, whether relevant to progressive
or failed venture, to be capitalized and write off against the earnings from the progressive
projects (America stated in 1979, Flory & Grossman in 1978 and ISAC in 2000).
But the real process is quite distinctive, the political force were identified to be the one of the
crucial element in making the rules that concentrates on the notion of the Economic Interest
theory.As mentioned, in her recent study Nichols, assume whether this result of the extractive
industry project was a outcome of the political clout of the industry components. Nichols in 2012
also evaluate the historical issues surrounding these techniques in the America in the oil and gas
industries and likens this to the efforts of the global accounting standard making to enforce the
accounting standards for the industry (Van Riper described in 1994). In the US case, it was
mentioned that the political forces from the oil and gas sector influence the Financial Accounting
Standards Board and results in failure of the board to control the full cost accounting and both
technique as full accounting and the progressive effort technique are utilized by extractive sector

companies to this day. When the IASC work on its extractive sector project in the 1998, it open
again this challenge at the global scale and once again, the progressive effort technique and the
full cost technique were highlighted and the standard makers again failed to converge the
accounting rules and standards (IASC stated in 2000).
With the potential of the politicization, the accounting rules setting procedure are established in
efficient manners. It is crucial to deeply inspect the global accounting rules setting procedure for
the extractive sector, paying specific concentration to the major players included and the
procedures by that the standards were established. These sections provide the due processes
followed by the IASC/IASB while setting the global accounting rules, elaborates the major
constituents included in the procedure and the map of intricacies of single particular network
these constituents to make available the encouragement for the arguments for the politicization.
References
Pitt, Harvey (2002), Public Statement by SEC Chairman: Regulation of the Accounting
Profession [Online] Available at: http://www.sec.gov/news/speech/spch535.htm[Accessed 4
May, 2016]
IFRS, (2015) Conceptual Framework Exposure Draft and Comment letters [Online] Available at:
http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Pages/ConceptualFramework-Exposure-Draft-and-Comment-letters.aspx [Accessed 4 May, 2016]
International Accounting Standards Committee (2000). Extractive Industries Issues Paper
(London: International Accounting Standards Committee).
Nichols, L.M. (2012). Has international oil and gas accounting been politicized?, Petroleum
Accounting and Financial Management Journal, 31(1), 22-34.
ExxonMobil Corporation (2010), 'Annual Report', , accessed 12 October.
Flory, S. M. & Grossman, S.D. (1978). New oil and gas accounting requirements, The CPA
Journal, 48(5), 39-43.
Anadarko Petroleum Corporation (2009), 'Form 10-K', , accessed 7 January

Katz, L.C. (1985). Oil and gas: A compromise method of accounting, Journal of Accountancy,
159(6), 116-24.
Van Riper, R. (1994). Setting Standards for Financial Reporting: FASB and the Struggle for
Control of a Critical Process (Connecticut, USA: Quorum Books).
Amernic, J. H. (1979). Accounting practices in the Canadian petroleum industry, CA Magazine,
112 (3), 34-38.
Gaffikin, M. (2005) Regulation as Accounting Theory
[Online] Available at: http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1049&context=accfinwp
[Accessed 4 May, 2016]
Baker, C R (2005), What is the meaning of the public interest Examining the ideology of the
American accounting profession, Accounting, Auditing and Accountability Journal, v 18, pp
690-703.
Ashbaugh, H. (2001). Non-U.S. Firms Accounting Standard Choices. Journal of Accounting and
Public Policy 20: 129-153
van Gruening, H. (2006). International financial reporting standards: A practical guide (pp. 4)
(4th ed). Herndon, VA: World Bank Publications.
International Accounting Standards Board (IASB) (2010). The Conceptual Framework for
Financial

Reporting

[Online]. Available

at:

http://www.ifrs.org/Current+Projects/IASB+

Projects/Conceptual+Framework/Objectives+and+qualitative+characteristics/
Objectives+and+qualitative+characteristics.htm [Accessed 4 May, 2016]
Holder, A. D. et al (2013) A content analysis of the comment letters to the FASB and IASB:
Accounting for contingencies. Advances in Accounting, incorporating Advances in International
Accounting 29 (2013) 134153

Appendices
Letter 1

Letter 2

Letter 3

Letter 4

Letter 5