Examination of financial instruments
\kindly check the following information regarding the assignment. the accounting issue to be
chosen can be either financial instruments or accounting for agriculture or any other given in the list
below. your choice. Rest of the information is as follows.
The objective of this assignment is to link your understanding of accounting theory and research to
Accounting practice. One way to tackle this task is to identify one of the more controversial
Accounting standards that you will be familiar with from previous financial accounting units or this
unit. Once you have identified the standard, read the Deegan texts to find out about the background
to the development of the standard. You will also find it useful to follow up on some key end of
chapter references from the Deegan texts. Following this approach you will develop an
understanding of the theoretical and research issues in accounting for the activity. You will then be
able to see how these ideas from theory and research have influenced the current accounting
standard.
Research item Guidance
- Significance of the issue Examples: Accounting issue e.g. accounting for goodwill, accounting for R&D,
accounting for extractive industries, lease accounting, executive compensation, financial instruments,
accounting for agriculture. - History of the developments of accounting thought Development of accounting thought related to your
topic. Start with your textbooks and textbook references. What are the key theoretical issues? Have these
changed overtime? What have been the research outcomes?
EXAMINATION OF FINANCIAL INSTRUMENTS
- How accounting thought developments
have impacted standards and practice How have the key theoretical issues influenced accounting
standards and accounting practice? - Conclusion Has the standard effectively addressed the ideas stemming from accounting theory and
accounting research? You may want to link this to the conceptual framework. You may also consider how
the consideration of economic and social consequences has had an impact on the development of a
standard. - Reflection What are the key learning outcomes for me in completing this assignment? What skills have
I acquired from completing this assignment? Has this assignment changed my view of accounting
research and practice?
Financial instruments are the traceable packages of capital that a given firm enjoys after
its good work in accounting matters that are very key in the organization’s success with
allowance to efficiency inflow of capital among the world investors (Ramcharran, 2000).
Financial instrument has been proven to pose high significance in accounting and this is much
evident where the financial instruments poses three attributes inclusive of transparency measures
used by the financial instruments, comparability in its dealings and full disclosure of the required
information that the management is interested in knowing (Raquel, Blay & Hurtt, 2006). When
EXAMINATION OF FINANCIAL INSTRUMENTS
financial documents pass transparency measure they will in a better position of revealing all the
vents and transactions that will be needed to be in making the right judgments and all the
required underlying statements of the organization that is transacting the accounting issue
(Kaplan, Keinath & Walo, 2001). This helps all the statement that is made to possess good
implications towards the financial instruments that have been used (Taylor & Curtis, 2010).
Transparency in the financial instrument is of high benefit as it has proven to give users an
opportunity of viewing the judgments that are made by the management and the entire
implications of the decisions that are followed by the same management (Mensah, Nen-Chen &
Wu, 2004). The full disclosure that is provided by the financial instruments are quite useful in
terms of providing the necessary information that is required in decision making of the given
organization. This information that is provided by the financial statement through the use of full
disclosure help the investors in their organization to get information about how their money will
get returns and they are assured of having not been misled. Financial statement are very
significant as they help in identifying any similar transaction that might have been accounted in a
similar manner and ensure that this mess is rectified with an immediate effect (Marshall,
Dombrowski, & Garner, 2006). This checkup is done to the organization over a given period of
time to ensure that the accounting information that is given is accurate and does not have any
form of contractions in it (Jeter, Chaney & Daley, 2008). This is the reason as to why the
financial instruments given high quality information due to the corrections and high efficiency
that is employed in making them perfect.
History of the developments of financial instruments
The history of the financial instruments applies to the east-west perspective in the Middle
East, where financial techniques were used in making the instruments flourish in a good way.
EXAMINATION OF FINANCIAL INSTRUMENTS
Financial techniques helped to flourish the Middle East region in the 1000AD and all these
techniques were used by the merchants in the Mediterranean region and they came along with
very many innovations (Gordon, 2011). The financial instrument knowledge was then exported
to all Low Countries as it proved to be of great use and high importance on accounting matters
(Giacomino, & Akers, 1998). These countries were inclusive some financial institutions in
England and they were later used in the economic development, financial instruments began to
be successful in Abassid Iraq and Mamluk Egypt, where these instruments proved to be of high
significance to accounting matters that were being employed during that time. It has been since
then that the International standard of the Accountancy Board (ISAB) has really devoted them in
making reporting simplified for the sake of making it easy to use the financial instruments (Eaton
& Giacomino, 2001). Financial instruments have more focus on the provision of financial
statements that are provided on a timely basis to the organization (Leitsch, 2004). All the
complexity in accounting has been reduced according to the history of financial instruments.
Since their establishment the financial instruments have been useful in the provision of guidance
on the classification and measurement of all the required financial assets within a given
organization (Colley, Volkan, Drucker & Segal, 1996). The financial instrument has a theoretical
connection to their functionality that imply that the growth of the given organization will surely
come as a result stability of the accounting measures that have been used and the ability of the
organization to be responsible to monetary and all fiscal policies that lead the firm ahead (Cohen
& Single, 2001). The other theoretical issue is linked with the stability of the financial sector that
is highly regarded to be of great use to the success of then organization. Financial stability is
useful in guaranteeing a faster financial development and this is the reason as to why it’s an issue
that is heavily considered for the success of the organization (Clarke & Hession, 2004).
EXAMINATION OF FINANCIAL INSTRUMENTS
How the theoretical issues have influenced the accounting standards
The financial stability measure that have been put in place by the financial instruments
have brought along the issue of asymmetric information that help the people asking for loan to
know more concerning the financial situation that is at hand (Cormier & Gordon, 2001). This
theoretical issue has helped solve the problem of moral hazards that has been a problem for many
organizations in dealing with accounting matters. Accounting standards have been effected
through the use of financial instruments as they have made their efficiency in giving information
more effective and accurate than some years ago (Borker, 2013). The accounting standards have
been made more integrated and this has reduced any risks that could be experienced in the
accounting operations. Through the use of the theoretical issue accounting standard can now
solve complex problems that have been existence (Marcheggiani, Davis & Sander, 1999). All the
accounting practice is done in a timely manner and with the required accuracy levels as a result
of the developments that have come along with the use of the financial instruments (Canning &
O’Dwyer, 2003).
Conclusion
In conclusion, financial instruments have been of high use of the accounting practices as
it ensures that they are done on accurate and timely basis according to the requirements of the
organization. On the economic side, it has had a positive impact towards the financial
instruments that have been good in the perfection of the accounting standards through giving a
chance of identifying the most important and potent parts of the financial instrument. The use of
financial instrument has not quite explained the accounting research that is used and that is
regarded to be of high use. However, it has explained the best way that needs to be followed in
EXAMINATION OF FINANCIAL INSTRUMENTS
ensuring that the accounting practices are done, corrected and through the use of the right
procedures (Vinciguerra & O’Reilly-Allen, 2004). Use of financial instruments is a god and a key
issue in accounting applications of any organization. Financial instrument has been proven to
pose high significance in accounting and this is much evident where the financial instruments
poses three attributes inclusive of transparency measures, comparability in its dealings and full
disclosure of the required information that the management is interested in knowing (Bishop &
Lys, 2001). When financial documents pass transparency measure they will in a better position
of revealing all the vents and transactions that will be needed to be in making the right judgments
and all the required underlying statements of the organization that is transacting the accounting
issue.
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EXAMINATION OF FINANCIAL INSTRUMENTS
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