中山大学：《基础会计学》英文版 Lesson11-en

m中山大學管捏學院 经m00 BUSINESS SUN YAT-SEN UNIVERSIT Lesson 11 Understandin Accounting Principles Mtask team of TJADAWIEAVMAL AO JAVNAA Business School, Sun Yat-sen University

Lesson 11 Understanding Accounting Principles Task Team of FUNDAMENTAL ACCOUNTING Business School, Sun Yat-sen University

Outlines Q Accounting standards: a tool for trusting Q Introduction of Accounting Standards Q Accounting standards in China QA Brief of Accounting Theory Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity

2 Outlines ⧫Accounting standards: a tool for trusting ⧫Introduction of Accounting Standards ⧫Accounting Standards in China ⧫A Brief of Accounting Theory

Opening Story ◆ Enron scandal again D Filed 8-K to restate its financial statements in November 8. 2001 n Filed bankruptcy protection under Chapter 11 in December 3, 2001; n Mr berardino. then ceo of andersen. issued an announcement: Enron, a wakeup call; Accounting standards is the first to be blamed: Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 3

3 Opening Story ⧫Enron scandal again!  Filed 8-K to restate its financial statements in November 8, 2001;  Filed bankruptcy protection under Chapter 11 in December 3, 2001;  Mr. Berardino, then CEO of Andersen, issued an announcement: Enron, a wakeup call; →Accounting standards is the first to be blamed;

Opening Story Q The standards involved in Enron case n Special purpose entity(sPe); D FASB on SPe: -73%independent interest Assume substantially the risk ignoring the risk assessment requirement. ent. d Enron and Andersen; stick to 3%o requireme Q Accounting standards or standards enforcement? Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity

4 Opening Story ⧫The standards involved in Enron case;  Special purpose entity (SPE);  FASB on SPE; →3% independent interest; →Assume substantially the risk;  Enron and Andersen: stick to 3% requirement, ignoring the risk assessment requirement; ⧫Accounting Standards or standards enforcement?

Accounting and Trust Q How could accounting help to develop trust? n Translate all business activities into numeric so it could be summarized measured and evaluated n Managers may report and discharge their accountability; Principal-agent problem Q Since all common investors are principals: n Free-rider issues are pervasive n How to assure managers to provide financial report truthfully and reliably? Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 5

5 Accounting and Trust ⧫ How could accounting help to develop trust?  Translate all business activities into numeric so it could be summarized, measured and evaluated;  Managers may report and discharge their accountability; →Principal-agent problem; ⧫ Since all common investors are principals;  Free-rider issues are pervasive;  How to assure managers to provide financial report truthfully and reliably?

Accounting and Trust Q Are financial reports reliable and objective n The inherent limitation of financial accounting Monetary measurement: penny wise and pound foolish Where to put Bill Gates on Microsoft's Financial Statements? Historical cost, accrual basis, periodic report: Financial reporting are lagged, no matter good news or bad news; n Be aware: all managers, including accountants, are REMMS Accounting comes down to the-vehicle-for-bank-ro bbers (EAll the blames to accounting for its "unique role" in Yinguangxia, Enron, WorldCom, etc. Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity

6 Accounting and Trust ⧫ Are financial reports reliable and objective?  The inherent limitation of financial accounting; →Monetary measurement: penny wise and pound foolish; ➢ Where to put Bill Gates on Microsoft’s Financial Statements? →Historical cost, accrual basis, periodic report: ➢ Financial reporting are lagged, no matter good news or bad news;  Be aware: all managers, including accountants, are REMMs; →Accounting comes down to the-vehicle-for-bank-robbers; →All the blames to accounting for its “unique role” in Yinguangxia, Enron, WorldCom, etc

Accounting and Trust Q To assure the reliability of accounting information, many mechanism are devised and employed; n Periodic and timely disclosure; I Full disclosure; D Accounting standards: - Why generally accepted? D Auditing: Additional tool to assure the reliability of accounting information, Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 7

7 Accounting and Trust ⧫To assure the reliability of accounting information, many mechanism are devised and employed;  Periodic and timely disclosure;  Full disclosure;  Accounting standards: →Why generally accepted?  Auditing: →Additional tool to assure the reliability of accounting information

Accounting Standards a Trust Perspective O REMMS push the lines as hard as possible; Q Executives will abuse accounting numbers given that these numbers are essential in their performance evaluation n Incentive to manage and manipulate earnings. Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity

8 Accounting Standards: a Trust Perspective ⧫REMMs push the lines as hard as possible; ⧫Executives will abuse accounting numbers given that these numbers are essential in their performance evaluation;  Incentive to manage and manipulate earnings

Open discussion Q Revenue recognition criteria n Earned process done, considerations guaranteed ◆ How to account for n Sell and repurchase transactions? d Sell and lease-back transactions The criteria satisfied -But they are financing in substance Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity

9 Open discussion ⧫Revenue recognition criteria:  Earned process done, considerations guaranteed; ⧫How to account for  Sell and repurchase transactions?  Sell and lease-back transactions? →The criteria satisfied; →But they are financing in substance;

Accounting Standards a Trust Perspective Q In order to solve the disputes on accounting choices, agreement on the set of accounting choices is necessary, o We define this as accounting standards 0 It is also named as GaaP in US Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 10

10 Accounting Standards: a Trust Perspective ⧫In order to solve the disputes on accounting choices, agreement on the set of accounting choices is necessary;  We define this as accounting standards;  It is also named as GAAP in US;