Introduction
Positive accounting theory (PAT) is a general term for any theory that provides descriptive information regarding the behavior of accountants. The title has been used by Watts and Zimmerman and this is largely an expansion of previous studies carried out firstly by Fama and later by Ball & Brown in the 1960’s. In looking at the apparent acceptance by politicians, firms and wide publication in academic journals PAT could easily be mistaken as being a success. A deeper analysis of the premises of PAT, its questionable scientific status, and the groups upon whom this theory has appealed to would suggest that it is flawed on many levels and is little more than an argument for deregulation and market capitalism. This opposes its claim to be a useful theory used regularly by those concerned with the effects of accounting policy on the status of the firm.
The Premises of Positive Accounting Theory.
Positive Accounting Theory finds its roots with the Efficient Market Hypothesis (EMH). The EMH was developed by Fama in the 1960’s and is based on economic principles and assumes a perfect market where there is information symmetry and no transaction costs. The semi strong form of EMH argues that capital markets will reflect all information that is publicly available and it is this form that Watts and Zimmerman claim to be predominant. Read more…
AUSTRALIAN economy
There have been significant changes to Australia’s place in the world economy since 1900. From a marked dependence on the United Kingdom for `men, money, and markets’ down to the 1950s, where the `lucky country’ evolved into a key player in the emerging Asia-Pacific group of dynamic economies by the 1980s. Yet such shifts obscure the fundamental continuities, which have characterised Australian development ever since European settlement began. Australia’s place in the global economy is primarily one of an exporter of primary produce and a heavy borrower.
Australia has always been at the mercy of external elements over which it has little apparent control. Long before the concept of globalisation acquired its modern currency, Australia’s dependence on the outside world made it prone to recurrent economic crises because of a periodic inability to earn export surpluses to pay for capital inflows. It is for this reason that the extent to which external, rather than domestic, forces have shaped the growth of the Australian economy is very evident. This is not to say the peculiar domestic forces have also helped to drive the Australian economy. Read more…
The term Application Service Provider describes companies that supply software applications and software-related services over the Internet. The Application Service Provider (ASP) owns and operates a software application, as well as operates and maintains the servers and employees the people needed to maintain the application.
Subscribing to an ASP allows a company to avoid the purchasing, installing and supporting, and upgrading expenses that go along with software applications. Businesses choose to subscribe to an ASP based on economic factors driven by frequency of use and the cost of entry and maintenance much in the same way a business chooses other service providers, such as shipping or electrical companies. Businesses use shipping and electrical companies to provide services to them because it would be far too expensive for a company to operate its own distribution network as well as generate electricity for its self. Therefore, businesses use theses service providers to lower the incremental cost of these processes much in the same way subscribing to an ASP lowers the cost of software.
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Introduction
Over the last few years, several factors have caused concern over the reliability of corporate financial statements. The downturn in the economy put additional pressure on management to meet financial targets. The complexity of business structures and transactions and the difficult accounting standards have become too complex for the average financial statement user. The greed and dishonesty of some auditors and high-profile business failures have caused criticism and scrutiny of the relationships between accountants and their clients. The scandals surrounding the business failures have also diminished the public’s confidence in the accounting profession and company management.
Many organizations, including the Securities and Exchange Commission and the American Institute of Certified Public Accountants, have debated over the issues that led to the business failures. There have been countless suggestions of how to correct the problems that caused the failures. In an attempt to restore investor confidence in the capital markets, new rules for accountants and their clients have already been enacted. Numerous studies and proposals are also being considered to strengthen the reliability of audited financial statements. Read more…
What is the role of accounting and financial decision making in Business? Why is essential to consider accounting data in relation to other factors in other decisions in all situations.
The word ACCOUNTING can firstly be defined as the collection, recording, compiling and forecasting of financial information.
There are two different strands in accounting, and these are FINANCIAL accounting and MANAGEMENT accounting. Financial accounting has information about reports of the past, it can be used by external users, it needs to be reliable, accurate and consistent, it is ruled by accounting conventions and legal requirements, and it covers the company as a whole.
Management accounting focuses on the present and the future of the company, it is purely for internal users, it is usually easy to use, relevant and up-to-date, and it covers the departments and divisions rather than the company as a whole. Read more…
