Accounting Research Concept and Practice

Question: Discuss about the Accounting Research for Concept and Practice. Answer: Introduction When it comes to accounting concept and practice, it needs to be note that even the process of income measurement and asset valuation can lead to an issue. The process of valuation becomes more complex in nature when various financial instruments and other income measurement concepts become interlinked. There are various concepts of accounting which when taken into consideration and implemented led to a sound decision. Moreover, it makes the reporting process strong and contains all the desirable information. In short, it can be commented that the presence of accounts is just ensure justification of the decisions that is undertaken. However, it leads to ignorance of the mistakes. Accounting concept Accounting concepts can be termed as the assumptions, and regulations that follow and help in the preparations of the accounts. The term accounting concepts comes to the forefront. The financial statements that are used by the investors, labors, creditors and other governing bodies for assessing the performance and providing an opinion relate that relate to the financial health of the company. Therefore, it is vital that the material information provided in the financial statements, disclosures must be adequate. This leads to transparency and better presentation (Albrecht et. al, 2011). When it relates to the accounting performance beneath the accrual basis, the revenue shown on the income statement and the time it is earn. The same practice is follow by Ramsay Healthcare and is ascertain from the financial report. In the accrual system of accounting, the revenue is match with the expenses that is link to each other. The main impact of accrual system is that it enables the income sta tement to assess the companys profitability during a particular time span (IASB, 2010). Therefore, from the annual report, the profitability of Ramsay clearly ascertained. There are many concepts into practice, but the highlight provided to the noteworthy ones in the annual report. From the annual report of Ramsay healthcare, it is clearly stated that the business enterprise and the owners are two different parties and independent in nature. Therefore, the business, as well as personal transactions differ (Ramsay Health Care, 2015). From the accounting records, it is observe that the dealings are done from the business unit view and not the person. This has helped Ramsay healthcare to ascertain the profit of the business and this concept has led to the elimination of any personal transactions. On the other hand, the money measurement concept state that all transaction of the business should be denominated in money (Brigs, 2013). In the case of health care, it is denominated in dollar. From the annual report, it can be seen that thee revenue for 2015 stands at $7355.5 million and the earnings before interest and tax stood at $803.9 million (Ramsay Healt h Care, 2015). This concept has the peculiarity that the transactions recorded in monetary units not physical units. This concept helps to provide a guidance on what to record and what to not. This has helped to record the transactions of the business in an effective manner. The accounting period is another accounting concept that extracted from the accounts of Ramsay healthcare. The transactions recorded in the books with an assumption that the transactions are ascertain after a particular period. This is the accounting period concept (Horngren, 2013). According to this concept, the preparation of accounts is done and different activities such as profit computation, financial position ascertainment, and evaluation of tax, etc. are done. Further, it remarks that the life of the business divided into parts and in this scenario, one year is consider. As per the annual report, it is seen that all transactions are recorded in the books of accounts for a particular period (Parrino et. al , 2012). Therefore, goods purchased and sold, salaries and rent are accounted for the specific period only. Lastly, the revenue from the transaction of the business is included when realization is done. It means the right to receive money. Realization either happened when goods and services has been sold for cash or credit or even refers to the inflow of assets that happens in the form of receivables. Problem of measurement in the context of AASB/IASB The objective of financial reporting is attained though a proper measurement of the incomes, expenses, assets and liabilities and its disclosure in such a way that the users can make meaningful decision about whether the resources of the company have been utilized effectively or not. It has become of vital importance to disclose all the relevant information so that proper decision taken. Hence, it is imperative that the measurement technique based upon concept that will provide a flawless result. As per the AASB and IASB standards, the group measures financial instruments such as derivatives at fair value. Fair value is the price that is received to sell an asset or paid to transfer a liability. This happens in an orderly transaction between market participants at the measurement date (IASB, 2010). The principal or the most advantageous market that is accessible by the company considered in this case. Such assets classified under Level 1, Level 2 or Level 3 based on the fair value hierarchy. As there is no availability of market data therefore, it turns out to be problematic. There are practical difficulties in this measurement due to lack of suitable market data (Ramsay Health Care, 2015). In the case of business combination with Generale de Sante, the fair value of the assets and liabilities recognized based upon the best available information on the reporting date. It needs to be considering that the information is best available and not on an evidence basis, which is fully correct (Ramsay Health Care, 2015). Though due diligence is carried out, the amounts remain formally open and are determined on a provisional basis only. Since the amount is available on a provisional basis, it appears to be of issue. It is claim that upon receipt of the final figures the required retrospective adjustments to the provisional amounts made (IASB, 2010). The amount of goodwill recognized represents the value of synergies that is expected to achieve because of the business combination. Hence, the previous adjustments are not considered, and the effect has not been given, therefore, there is a big gap in the results and needs rectification (Landsman et. al, 2014). The calculation of goodwill is link to few assumptions like budgeted margins, tax rate estimates, discount rate, and growth rate estimates. Thus, these figures are based on assumptions and estimates. However, it needs to ascertain that the figures based on assumptions is misleading, as it does not project the actual result (Leo, 2011). The interest rate swaps and hedging help in the risk management. Measurement of the cost largely depends on the amount of information available. There is subjectivity associated with the same. The other measurement issue is with the estimation of cash flows that might not be a realistic estimate of the future. Issues also arise when the subsequent measurement leads to different results when compared to the initial measurement. The period plays an important role in this case (Melville, 2013). When the measurement technique utilized, it might have provided a different result while in a different scenario or the current condition a different evaluation might have appeared. Thus, it the fair value based measurement and cost-based measurement are all based on a few assumptions and this can be concluded to be the drawback of the measurement requirements as per AASB / IASB. Relevance and Representational faithfulness Relevance is a vital feature that is qualitative in nature. To be relevant, it is important that the information should have the skill of providing a difference in the decision-making capability by enabling them to assess the influence of past and present events on the cash inflow of the future even if the data is not utilized. Moreover, faithful representation of the occurrences that pertains to the real scenario is evens a qualitative feature. Representations are faithful in nature; there is an agreement between that of the description provided by the accounting and evaluates the financial report and the happening to which they belong to (Libby et. al, 2011). This can happen only when the features and descriptions are verifiable in nature and measurement done in a neutral manner. Hence, faithful representation, even needs completeness not subordinating matter to form, verifiability, neutrality, etc. however, both relevance, as well as faithfulness are vital characteristics. Both re levance, as well as faithful representation needs to be present and are equally important. These are contained in the report of Ramsay Health Care. An apt example from the annual report is that of the internally developed intangible assets. From the current conceptual theory it can be stated that AASB came to the decision making body due to single attribute of the management the fair value of the asset that arisen from the research and development skills would come under relevancy but not verifiable and hence it cannot be represented in a faithful manner (Williams, 2012). One of the sub-qualities in faithful representation, completeness, and not assessable on any particular item is seen in the annual report. Recommendation When it comes to the process of standard setting, it needs to be noted that the unavailability of standards should start with the evaluation of the real world economic happening. Therefore, it is important to note that the standards to be followed in a proper manner that will lead to immense benefit in terms of reporting. When the reporting will be strong, it will ultimately lead to strong results. Hence, the items should happen in a systematic manner and once it is done, it leads to better results as a well-defined routine is followed. Conclusion The above discussion clearly signifies that the negotiation of the numbers can be done to present a better picture. Hence, it is important for the management to ensure that the accounting concepts should be strong so that there is less room for error. There are various accounting concepts and theories which when taken into consideration leads to positive results (Kaplan, 2011). In short, it can be said that the presence of concept make the report effective and the shareholders can articulate their views. Accounting concepts need a follow up in precision that leads to a favorable result. Further, there are certain measurement problems that indicated clearly in the above report (Graham Smart, 2012). The project clearly states that there are certain measurement practices that are not in tune with the issues of measurement and hence remains unsettled. It is to be noted that there are various standards that project more or less arbitrary mixed compromises of measurement and have a pendin g resolution. The annual report of Ramsay Healthcare indicates the same. References Albrecht, W., Stice, E. and Stice, J. (2011). Financial accounting. Mason, OH: Thomson/South-Western. Brigs, A. (2013).Financial reporting analysis. Mason, Ohio: South-Western. Graham, J. Smart, S. (2012). Introduction to corporate finance. Australia: South-Western Cengage Learning. Horngren, C. (2013). Financial accounting. Frenchs Forest, N.S.W: Pearson Australia Group. IASB. (2010). The Conceptual Framework for Financial Reporting, retrieved September 4 2016 from https://eifrs.ifrs.org International Accounting Standards Board. (2010). 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Retrieved April 24, 2016, from https://www.ramsayhealth.com/Investors/Annual%20and%20Financial%20Reports Williams, J. (2012).Financial accounting. New York: McGraw-Hill/Irwin.