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SAC 4 and the Challenge to the Mandatory Status of Concepts Statements

Executive Summary

                This is a report based on research on the arguments in context to the SAC 4 and in relation to the conceptual framework. It explains detail the fact that how the same effect the accounting and other process of the organisation or the over all industry. This report takes us around to describe the whole segment to the chairpersons of Financial reporting Council and the Australian Accounting Standards Board (AASB). In connection two both the motions of positive aspect as well negative aspect and then summing up one aspect which truly supports the functioning of the accounting of the organisation and the accurate format of reporting and presenting the same.

SAC -4

                SAC – 4 in the Australian accounting standard board has been defined or rather titled as the “Definition and Recognition of the Elements of Financial Statements”. Hence, this element of the SAC 4 is assigned the duties or defining, explaining various terms of financial aspects and along with the same ensuring that it is properly categorized and thus, recognized as the regulation or the rule about the same states (Gornik-Tomaszewski, Choi, 2018). This standard defines the outline of the major element of the financial reporting as a matter of fact it classifies them into major heads and sub heads which makes the accounting and reporting as well as analyzing much easier and more streamlined.

Conceptual Framework

                Conceptual Framework can be explained as a process which provides a set or a variety of the series of accounting concepts in a statement format which are in true sense expressed or formulated by either the AASB or the PSASB (the Public Sector Accounting Standards Board). Ultimately used for the purpose and broad content of general-purpose financial reporting. In a simplified manner it provides a structure or an outline as to how the accounting standards needs to be applied or settled, in the books of accounts. It is process where the maintains of the book of accounts is done in such a manner that neither any repetition is done in context to the accounting standard supplied, nor there is a chance that any disputes will arises.

 

Analysis of the Arguments

                Conceptual framework has in many ways after once being incorporated in the reporting format of the organisation financial accounts have definitely eased the way of working. However, in some areas it has failed tremendously. The area which is harmed the most is the failure to estimate the incorporation of all the assets as well as the liabilities running in the organisation especially till date. In conception to the conception of such assets expressed in a framework as defined under the paragraphs 4.24 as well as 5.39 will lead to a position which will open its doors to an auditing process which is ethical and illegal as per the accounting board (Gornik-Tomaszewski, Choi, 2018).

                As a matter of fact, there are huge chances that such aspects will be un auditable at time as well. The main concern is the fact that the standards only adheres the specific and exact concern and issues and does not give weightage to the estimations and its accounting at the conceptual level. Hence, opening a major loop hole on none measurement of estimation under a standard setting format as defined by the AASB for other aspects. This by in large actually causes a major concern which is related to the segment of Razing serious doubts over the accuracy and the truthfulness of the figures recorded in the annual report. On the more such fiqures stated are also not approved by the International accounting standard boards and they have also expressed the same concerns in their letter of recommendations.

                The IFAC in its discussion post and raised a query on the concerns in connection with the fact which has opted for the disclosures and Audit. They also have expressed the same concern as to not produce un auditable numbers in the books of accounts. Another aspect which must be acted and corrected correctly is the fact that the Conceptual framework some where or the other has failed to create an authority matrix which is or has an in all technical aspect failed to create an over arching authority on the accounting standards and its various regulation to treat or judge financial statements respectively(Gornik-Tomaszewski, Choi, 2018). In real base time aspect Conceptual framework at times carries a major problem of time factor and the cost factor as well which is said that they are difficult to be affordable at all times whether in terms of time or money.

                Moreover, it carries a very strict and ridged format of work space which is always not suitable by all industries. Hence, these two major problems even add further, to the concern of mitigating a bridge between the conceptual framework in providing a radical change in the accounting environment. The other major look out is the fact that conflict and the variations in performing work as per the Conceptual framework and the accounting standard are very high and difficult to map with hence, leaving the professional in fix while preparing the statements.   

                SAC -4 Statement came into existence in the Australian working culture to ensure that the measurement and recognition which is the basis of the accounting of any organisation is done taking into consideration the measurement concepts. To be specific in nature revenues are defined in context with the inflows and various enhancement which are nothing but savings in outflows which lead to future benefits in economics format primarily for making sure that the assets are eventually increased and the liabilities are reduced in the entity which is clearly mentioned as per the paragraph 111(Ijiri, 2018).

                The point to be ensured is that they same can only be worked out correctly if the measurement is done as per correct standards and appropriate model of mixed measurement concept. However, such measurement principles in context to SAC 4 deals with measuring in terms of economic benefits, where as the Australian Accounting Standard Board deals not with the economic benefit analysis but does with the concept of the lower threshold re cognition than the probable evaluation costs which can be carried till the time such cost does not receive economic benefits.

                Other level of difference and problem is the fact that the inconsistency in terms of liabilities and the recognition is not required. The valid example is in relation with the leases, where the SAC 4 ensure recognition of liability for the operating leases whatever the condition is, however, in case of the AASB board does not seeks the recognition of an lease’s liability to classi?ed under the group of operating leases, notwithstanding the existence of an obligation, even if it is cancellable or an non-cancellable lease agreement.

                Another, major disagreements is in context to the recognition and realization criteria, to understand the same, considering the assets which in defined only on the basis of the future economic benefits, and are further, led to be controlled on the aspect of the past transactions which have incurred or the future transactions which have incurred. They are purely controlled and a managed by the element of sacrifices undertaken as expressed in (para.14) for the liabilities as well in order to admit that the events and all the money transactions are correctly recorded in the books of accounts. Considering the board analysis and its statement as on date the Boards provides a regulation which in lieu of this also allows or seeks the assurance that the transactions in context to the debit as well as the credit balance which as on date has not been categorized as assets and liabilities. Thus, the variations strongly exists between the AASB 1020 and AASB 1006 and the SAC 4.                               

                Considering the other element which being the SAC 4 introduction in the regulation of the accounting standards it didn’t ease the gap and the situation between the problems and concerns raised by the AASB board as well as the FASB experts. It is a natural process which defines that the elements of financial statements bridges and analyzing terms in context to the benefits which may arise on future economic incomes as well as sacrifice (Ijiri, 2018). Even though the SAC 4 Provided and assurance that its incorporation is in order to ensure a correct and proper sailing of various concepts and terminology are maintained and routed in the books of accounts. Thus, where the nature and the prime purpose is properly solved and defines the probable transactions in much certain numbers. However, notions are concerns or items or rather the cash variations in terms with notions and the earning and the realization does not provide a surety of correct appropriation of nondependent variables which are completely in sane in connection with the future events which are uncertain transactions.

       Thus, provides a major loop hole of acceptance in terms with the world-wide acceptability. It is considered at times that conceptual framework and its accounting is considered to be biased or partial to certain group or an individual or rather a certain sector and not suitable for other industries and its work culture. Hence, failing to meet beneficial to all the organizations or experts to are bound or desire to apply the conceptual framework for standard setting in their financial statements to produce better and a justifiable form of reporting (Ijiri, 2018).

                Further to add, there are major concerns and clauses on account with the Statement of Accounting Concepts and accounting standards which are neither systematic nor collective. Primarily, because the existence of various regulation and regulation bodies and there method of treating accounting statements are much more different and preach a different practice which may lead to an situation of very restrictive and a deferral from of exploration and an evaluating concept.

               

Conclusion

                The Conceptual framework was in corporate and formulated to ensure that the various phenomena or challenges as well as various assumption made are streamlined in an scientific and an systematic manner. Further, it was made to decide that they develop various future IFRS ( INTERNATIONAL Financial Reporting Statement) and bridge them with the running AASB working. However, in order to do so the this concept lead to various problems and concerns as it lead to a parallel existence of the accounting regulation, estimations and working conditions. This eventually related to adding more burden and trouble as it lead to developing policies of accounting and work estimations which were not covered in the existing standards, however by introduction of same in the governance, led to an condition an a situation where the illegitimate transactions where considered as legitimate. Where the expert realized that business and the innovation would have been improved and rules were to be formulated to ensure that better accounting practices are maintained, it actually resulted in an adverse condition where the liabilities was not correctly realized or measured which are under stated and over stated.             The CF has also made an effort in terms with various contractual terms and methods to apply the insurance contracts. Further, actions and relations related to the employees vesting conditions and its expenses on the future analysis along with the levy of revenue of threshold and market share. Along with various lease payments must be made in context with the contingency and consideration must be check and evaluated (Spiceland, THOMAS, Nelson, TAN, Low, and LOW, 2018). Thus, to ensure that the conceptual framework in collaboration with the AASB has made recent changes makes regular changes in the working of the transactions, measurement and recognition of various concepts. Recently, the board has enrolled a new chapter and a guidance principle for measuring the financial performing and also included the guidance of the important issues and supporting concepts. Thus, it can some way be ensured beyond various discrimination there is a huge possibility that the conceptual framework is ensuring that the current practice will and is trying maintain the economic and social status of the accounting field. But, by ensuring that the AASB as well as the Financial reporting council along with other IFRS has stated the whole process in complete harmony so that no illegitimate transactions are legitimatized.

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