Financial reporting of accounting and accountability

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The ability to resolve accounting issues partly determines an organization's success. Wherein, accounting issues are splitted into various forms, which include transparency,
globalization, and accountability. Transparency sector focuses on trust between an organization, its consumers, and the shareholders. Lack of transparency occur when organizations handle their financial operations and accounting information in distrust. This also shakens the company's customers and suppliers' trust in ongoing operations. However, accountability problems hinder an organization from achieving its goals and objectives, thereby, causing a reduction in productivity. Finally, the rapid rise in globalization has made it hard for some organizations to have their operations aligned with the accounting standards.
The Financial Accounting Standards Board (FASB) is a non-profit organization that aims at establishing and enhancing the Generally Accepted Accounting Principles (GAAP) and ensuring that accounting issues are appropriately handled. The FASB is aimed at enhancing corporate accounting practices by improving guidelines that are set for the accounting reports, thus, creating a uniform standard across the financial markets. The composition of the Emerging Issues Task Force (EITF) is designed in such a way that encompasses persons in the position to be aware of the emerging accounting issues before they become widespread. The paper will focus on the Emerging Issues Task Force and its impacts on the Financial Accounting Standard Board.

Missions of the Emerging Issues Task Force

The Emerging Issues Task Force has been instrumental in the enhancement of the performance of the Financial Accounting Standard Board. The EITF has been established in 1984, and its primary mission is to assist the FASB in the enhanced reporting through the discussion, timely identification and resolution of the accounting issues with the framework of the Financial Accounting Standards Board (FASB) accounting standard codifications (Easton, 2016). Through the timely identification of the accounting issues, the FASB makes it easier for organizations to make accurate financial reporting and at the same time embrace reliability and prudence. The application of the EITF makes it easier for the Financial Accounting Standards Board (FASB) to establish, interpret and improve the standards of financial accounting and reporting among entities and these financial reports provide useful financial and non-financial information to both the financial users and investors.

Analysis of EITF Effectiveness

There are various accounting issues, which the EITF addresses. Some of these accounting issues include accountability, transparency, and globalization. The implementation of the Emerging Issues Task Force has helped in addressing accounting issues through various measures. Some of these strategies include the identification of the accounting issues before their applicability. By identifying the accounting issues, it makes it easier for firms to come up with necessary measures before their obtaining costly effects (Easton, 2016). The Emerging Issues Task Force has also made it easier for accounting bodies such as the FASB and the IFRS to integrate the transparency within the accounting frameworks. It implies that with the efforts by the EITF the transparency within the accounting frameworks has been enhanced and accounting transactions which are reported in the financial statements of firms are accurate and reliable. The EITF has also provided a platform through which there has been efficiency in the determination of the customers of the operating service in the service commission arrangements and at the same time eradicate the accounting issues that are experienced in the employee benefit plan and reduce costs associated with assets reported on the financial statement.

Recommendations how to Improve the EITF Effectiveness

In the quest of enhancing the efficiency of the EITF, there are different strategies that can be embraced. One of these strategies is the inclusion of a strong research team that will be mandated with the role of identifying the emerging issues, conducting an extensive research on them and coming up with solutions on how to deal with the issue. The research team can also track on the issues and provide support to the accounting entities on the implementation of the EITF and its efficiency in addressing accounting issues. The efficiency of the EITF can also be improved through basic training among the staff. Training of the employees on the emerging accounting issues equips them with the relevant knowledge on how to deal with the issues as well as help them prepare to handle the issues. Finally, bringing to board people in the position to be aware of the emerging accounting issues before they become divergent can be instrumental in the enhancement of the efficiency of the EITF.

Current Issue Addressed by the EITF

The current issue addressed by the page is accounting issues in the employee benefit plan financial statements (FASB, 2017). The employee benefit plan is one of those areas within organizations that are currently faced with accounting issues. The issues related to the employee benefit plans arises as a result of the failure by the companies to come up with vital measures in planning for the percentage of the company’s productivity that has to be channelled towards the benefit plans. As a result of accounting challenges, employees end up earning remunerations that they hardly deserve. When coming up with an investment portfolio, it is vital to have a clue on the retirement needs of the affected population. Other areas that are being addressed by the EITF include restricted cash; recognition of breakage for the pre-paid stored value products and contingents put and call options in the debt instrument.

Impacts of the EITF on a Company’s Accounting and Financial Reporting

In the past five years, financial reporting of companies has been enhanced in such a way that they are inclusive of various accounting issues faced by the company. Among these issues are accounting concerns in the employee benefit plan financial statements. With the integration of the EITF within various organizations, significant changes have been witnessed in terms of financial reporting. One of the noticeable impacts of the EITF has been the reduction of accounting fraud cases. In the early 2000s, various companies have witnessed the escalation of accounting frauds, and it has led to the closure of some of them such as Enron Corporation. The EITF advocates for the transparency in the presentation of the employee benefit plan and at the same time ensure that before reporting on the employee remunerations and benefits, they consult the various company employees (Easton, 2016). The enhanced transparency during financial reporting has been vital in the reduction of cases of accounting frauds within corporations. The EITF has also been instrumental in the reduction of accounting errors in the financial statements. The financial statements of companies have a section in which they focus on the employee remuneration and benefit plans, and it is in line with the FASB and the EITF.

Recommendations on EITF Enhancement in Accounting and Financial Reporting

There are various strategies that can be adopted by the Emerging Issues Task Force (EITF) in improving accounting and financial reporting of companies. One of these measures is a focus on the in-depth review of financial and accounting information during financial reporting. Subsequently, it helps ensure that there is a total inclusivity in the financial information within the financial statements and at the same time ensures that financial statements are reliable to the users. The companies also have to ensure that they include the shareholders and experts in the financial field that have full knowledge on the emerging accounting issues (Bradshaw et al., 2014). The inclusion of these persons will help ensure that there is prudence and reliability in the financial reporting. The EITF can also be instrumental in the enhancement of the financial reporting of the companies by allowing for flexibility in the reporting. Flexibility in the financial reporting implies that a company is capable of adding information that may be non-financial but useful to the financial statements and at the same time make adjustments on the financial information. By ensuring that there is flexibility in financial reporting of organization, the Emerging Issues Task Force can help enhance the accountability of companies and the reliability of their financial reports.

Arguments in Favour of the EITF Recommendations

The EITF has brought many of the positive effects in the way companies carry out their financial reporting and operations. The recommendations are designed in such a way that they can be useful in addressing the accounting issues that are attached to the employee benefit plan financial statements. The GAAP, for instance, requires that an organization in its quest for the implementation of a plan investment disclosure reveals all the individual investments that represent 5% of available employee benefits and the net appreciations and depreciations of the investments are disclosed (FASB, 2017).
The organizations also have to ensure that they measure, present and disclose fully benefit-responsive investment contracts at the contract value. Consequently, it helps the maintenance of the relevant financial and non-financial information while reducing the costs and complexities of reporting for the full benefit-responsive investment contracts. The EIFT also recommends for the implementation of responsive investment contracts that are of full benefit to the employees within an organization. The aim of the investment contracts is to ensure that employees, using a percentage of their employment benefits, channel them to investment platforms that are organized by the firm. Using the EITF, companies have also found it easier to plan investment disclosures and allocate remunerations to different employees based on their positions.

Different Accounting Treatment for the GAAP and IFRS on the Issue

Both the GAAP and the IFRS require that the organizations disclose on the employee benefits and benefits plans in their financial statements. It is usually termed to as the employee remunerations, and it covers the salaries that are earned by different sections of employees within a company as well as the benefits that they enjoy. According to IAS 19 of the IFRS on employee benefits, the cost of providing employee benefits has to be recognized in the period in which the benefit is earned by the employee instead of when it is payable (IAS Plus, 2017). The GAAP highlights on the short-term employment benefits and post-employment benefits. Based on the GAAP, when an employee offers service to an organization in a current or prior period, he or she has to be compensated.

Recommendations that Would have a Positive Impact on the Difference between Treatments

Both the GAAP and the IFRS have to come up with measures that fully benefit the employees. The GAAP as an accounting standard, for instance, can fully define the benefits that each group of employees can earn and the type of service generates the benefit. As for the IFRS, it is vital to include the defined benefit and contribution plans as a part of the employee benefits. Both the GAAP and the IFRS also have to come up with measures on enhanced disclosures on the benefits plans and measures necessary in cutting down costs associated with employee benefits.

Prediction of the Roles of the FASB and the EITF

The accounting professions should adopt one global set of accounting standards, then both the FASB and the EITF will be mandated with the roles of ensuring that there is effectiveness at the companies’ levels accounting and financial reporting. The EITF will have to identify all the emerging accounting issues and come up with the relevant measures for dealing with the issues. As for the FASB, it will play a vital role in ensuring that there is the accountability and transparency in the financial reporting of companies. The efficiency of the FASB is linked to its ability in dealing with accounting issues. The FASB concept number eight establishes the concepts, which stress financial reporting standards. The conceptual framework provides the organization to come up with a financial statement that will help it deal with the underlying problem in the organization. Moreover, as seen in the FASB, “a creditor will account for a troubled debt restructuring involving a partial satisfaction except for the assets of the organization.”

Conclusion

Based on the above argument, it is clear that one of those factors that contribute to the success of an organization is the efficiency in its financial reporting. The integration of the Emerging Issues Task Force (EITF) within firms has contributed to the mitigation of accounting issues that have negative effects in terms of financial performance. The accountability and transparency have also been enhanced within those firms that have adopted the EITF. It will, thus be vital for companies guided by the GAAP to embrace the EITF in their quest for dealing with accounting issues. 

References

Bradshaw, M., et al. (2014). Financial Reporting Policy Committee of the American Accounting Association's Financial Accounting and Reporting Section: Accounting standard setting for private companies. Accounting Horizons, 28(1), 175-192. Retrieved on March, 2014 from http://dx.doi.org/10.2308/acch-50656
Easton, P. (2016). Financial reporting: An enterprise operations perspective. Journal of Financial Reporting, 1(1), 143-151. Retrieved on Spring, 2016 from http://dx.doi.org/10.2308/jfir-51333
FASB (Financial Accounting Standards Board) (2017). Employee Benefit Plan Simplifications (EITF 15-C). Fasb.org. Retrieved on August 25, 2017 from http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProjectUpdatePage&cid=1176164785357
IAS Plus (2017). IAS 19 – Employee benefits (2011). Iasplus.com. Retrieved on July 11, 2017 from https://www.iasplus.com/en/standards/ias/ias19

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