Download VTU MBA 1st Sem 17MBA13 Accounting for Managers AM Unit 5 -Important Notes

Unit - 5

Emerging Issues in Accounting

Human Resource Accounting

• Process of identifying and measuring data about human and communicating this information to interested parties
• Deals with investments in people and with economic those investments.

Need for HRA

• Change in production pattern, employment pattern and roles of governments, enterprises and individuals

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• To improve human resource management
• To retain qualified human resource
• To focus on employee as an asset
• To create and improve the company image through pre of HRA
• To overcome the difficulties in traditional balance sheet

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• To attract future employees

Methods of valuation of Human Resource

• Historical cost method - valued at unexpired portion of the recruiting, training and development
• Replacement cost method - costs include the cost of re training and development, the opportunity cost during the ir period till the new recruitment attains the efficiency level employee.
• Standard cost method - standard costs of recruiting, hiring and developing the employees are developed and established up to date every year.
• Present value - represent the discounted value of the estimat net contributions of personnel to the earnings of the company

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• Current Purchase Power method - Historical cost of inve human resource is converted into current purchasing power with the help of index numbers
• Opportunity cost method - value of an employee in his alter is determined
• Economic value method - Present value of the firms future _attributable to human resources will be the value of human re

Forensic Accounting

• Concerned with detection and prevention of financial 1 white-collar criminal activities
• Integration of accounting, auditing and investigative skills

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• According to AICPA "Forensic accounting is the appli accounting principles, theories and discipline to hypotheses at issues in a legal dispute and encompass branch of accounting knowledge."

Uses of Forensic Accounting

• Fraud detection where employees commit fraud
• Criminal investigation
• Cases relating to professional negligence
• Arbitration service

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• Settlement of Insurance claims
• Dispute settlement

Sustainability Reporting

• Report about an organizations environmental and social performance
• Enables the organizations to be more transparent about the opportunities

Internal benefits of Sustainability Reporting

• Increased understanding of risks and opportunities

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• Emphasizing the link between financial and non-financial performance
• Influencing long term management strategy and policy to business
• Streamlining processes, reducing costs and improving efficiency
• Benchmarking and assessing sustainability performance with laws, norms, codes, performance standards and voluntary init
• Comparing performance internally and between organizations sectors

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External benefits of sustainability reporting

• Mitigating negative environmental, social and government impacts
• Improving reputation and brand loyalty
• Enabling external stakeholders to understand the organization's true value and tangible and intangible assets
• Demonstrating how the organisation influences, and is influenced by , expectations about sustainable development

Accounting Standards

Written documents issued by the regulatory bodies covering aspects of guidelines, treatment and disclosure of accounting transactions.

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International Accounting Standards Board defines “ to form publish, in the public interest, basic standards to be observed presentation of audited accounts and financial statements and to their worldwide acceptance and observance."

Objectives of Accounting Standards

• To harmonise the diverse accounting policies
• To eliminate variations in the treatment of several accounting
• To provide inference and guidelines on accounting standards
• To bring uniformity in the presentation of accounting aspects

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• To facilitate inter-firm and intra-firm comparison
• To make credibility, reliability and acceptability of accounting
• Useful in the preparation of financial statements
• To improve the transparency in financial statements
• To help in determining corporate accountability and management effectiveness

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International Financial Reporting Standards (IFRS)

• Original name International Accounting Standards (IAS)
• Common global language for business affairs so that accounts are understandable and comparable across international boarders
• Growing international share holding and trade and international dealings with several countries have led to the growth of IFRS
• IFRS are a set of international accounting standards stating particular type of transactions and other events should be in financial statements.
• IFRS are issued by the International Accounting Standard

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• The goal is to make international comparisons as easy as
• Syncronising accounting standards across the globe is an process in the international accounting community

Need for IFRS

• For the world wide acceptance of the accounting standards must be universally accepted
• A single system of financial reporting would benefit more
• With quality standards, consistently applied, investor understanding and confidence rises

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• That translates to strong, stable, liquid markets
• Convergence of accounting standards has played a major the growing acceptance of IFRS

Objectives of IFRS

• To develop in the public interest, a single set of high understandable, enforceable and globally accepted financial standards based upon clearly articulated principles
• To ensure high quality, transparent and comparable information financial statements to help investors, and other users of information to make economic decisions
• To promote the use and rigorous application of those standards

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• To promote and facilitate adoption of IFRS being the standards interpretations issued by the IASB
• To make common platform for better understanding of accounting internationally
• Synchronisation of accounting standards across the globe
• To create, comparable, reliable, and transparent financial statements
• To facilitate greater cross-boarder capital raising and trade

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• To have company wide one accounting language which has support in different countries
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