Can the ASB Really Reduce Creative Accounting?
GRIN Verlag, Aug 23, 2007 - 32 pages
Essay from the year 2001 in the subject Business economics - Accounting and Taxes, grade: A+, University of Warwick (Warwick Business School), 8 entries in the bibliography, language: English, comment:, abstract: The spectacular breakdown of Polly Peck impressively demonstrated the role of creative accounting in the 1980s. Although many companies were not doing well, creative accountants could easily deceive shareholders by manipulating figures. The Companies Act requires financial statements ′to give a true and fair′ (i.e., factual and unbiased) ′view′. This enables user groups to properly assess a company′s financial position. If, however, accountants are free to arbitrarily manipulate figures, this becomes impossible. Therefore efforts had to be made to confine the extent of creative accounting. By defining creative accounting (section 2), a critical evaluation of measures (section 3) and the conclusion (section 4), this essay will show that the measures introduced by the ASB are powerful to contain present creative accounting. However, they will not prevent future creative accounting.
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accounting standard additional notes additional statements amortised appendix application notes Arbitrary write-off ASB’s Assets and liabilities balance sheet finance Bibliografische Bibliothek capitalise Companies Act company’s financial position comply creative accounting scheme creative compliance defines creative accounting definition of exceptional detailed application Deutschen EPS figure everything exceptional items extraordinary items Fair values fair view FFRXQWLQJ fight financial statements FRRP FUHDWLYH DFFRXQWLQJ Gains and losses gearing ratio give a true Goodwill and Intangibles GRIN Verlag http://www.grin.com indefinite Internet issuing FRSs layered format letter compliance loopholes lower gearing manipulate figures McBarnet/Whelan mean that creative measures introduced Misuse of provisions number of possibilities Off-balance sheet finance OHJDOO p&l account pre-FRS Press Notice pretend a lower principle problem profit provides provisions FRS quasi-subsidiaries reduce creative accounting Reporting the substance reserves Shareholder’s equity shareholders sheet finance schemes shown separately specific provisions SSAP substance over form tampering with exceptional transactions true and fair UHGXFH
Page 2 - The funding or refinancing of a company's operations in such a way that, under legal requirements and existing accounting conventions, some or all of the finance may not be shown on its balance sheet.
Page 4 - In straightforward cases, eg where the only movement on shareholders' funds related to retained profit (1oss), a separate statement may not be necessary. (c) Reserve movements FRS 3 states that '. . . Gains and losses may be excluded from the profit and loss account only if they are specifically permitted or required to be taken directly to reserves by this or other accounting standards, or, in the absence of a relevant accounting standard, by law'.
Page 2 - ... true and fair view requirement become, in cases where it is applicable, a source of law in itself in the widest sense of that term. 8 This implies that a standard's acceptance strengthens its contribution to the "true and fair view".
Page 1 - The ASB The Accounting Standards Board (ASB) is the standard-setting body of generally accepted accounting principles in the UK.