The Optimization Method of Financial Statements Bad on Accounting Management Theory
ABSTRACT
This paper develops an approach to enhance the reliability and ufulness of financial statements. International Financial Reporting Standards (IFRS) was fundamentally flawed by fair value accounting and ast-impairment accounting. According to legal theory and accounting theory, accounting data must have legal evidence as its source document. The conventional “mixed attribute” accounting system should be replaced by a “gregated” system with historical cost and fair value being kept strictly apart in financial statements. The propod optimizing method will significantly enhance the reliability and ufulness of financial statements.
I.. INTRODUCTION
Bad on international-accounting-convergence approach, the Ministry of Finance issued t
he Enterpri Accounting Standards in 2006 taking the International Financial Reporting Standards (hereinafter referred to as “the International Standards”) for reference. The Enterpri Accounting Standards carries out fair value accounting successfully, and spreads the n that accounting should reflect market value objectively. The objective of accounting reformation following-up is to establish the accounting theory and methodology which not only u international advanced theory for reference, but also accord with the needs of China's socialist market economy construction. On the basis of a thorough evaluation of the achievements and limitations of International Standards, this paper puts forward a stand that to deepen accounting reformation and enhance the stability of accounting regulations.
II. OPTIMIZATION OF FINANCIAL STATEMENTS SYSTEM: PARALLELING LISTING OF LEGAL FACTS AND FINANCIAL EXPECTATION
As an important management activity, accounting should make u of information systems bad on classified statistics, and rve for both micro-economic management a
nd macro-economic regulation at the same time. Optimization of financial statements system should try to take all aspects of the demands of the financial statements in both macro and micro level into account.
Why do companies need to prepare financial statements? Who demands should be considered while preparing financial statements? Tho questions are basic issues we should consider on the optimization of financial statements. From the perspective of "public interests", reliability and legal evidence are required as qualitative characters, which is the origin of the traditional "historical cost accounting". From the perspective of "private interest", curity investors and financial regulatory authorities hope that financial statements reflect changes of market prices timely recording "objective" market conditions. This is the origin of "fair value accounting". Whe企业理念
ther one t of financial statements can be compatible with the two different views and balance the public interest and private interest? To solve this problem, we design a new balance sheet and an income statement.
From 1992 to 2006, a lot of new ideas and new perspectives are introduced into China's accounting practices from international accounting standards in a gradual manner during the accounting reform in China. The ideas and perspectives enriched the understanding of the financial statements in China. The achievements derve our full asssment and should be fully affirmed. However, academia and standard-tters are also aware that International Standards are still in the process of developing .The purpo of proposing new formats of financial statements in this paper is to push forward the accounting reform into a deeper level on the basis of international convergence.
III. THE PRACTICABILITY OF IMPROVING THE FINANCIAL STATEMENTS SYSTEM
Whether the financial statements are able to maintain their stability? It is necessary to mobilize the initiatives of both supply-side and demand-side at the same time. We should consider whether financial statements could meet the demands of the macro-economic regulation and business administration, and whether they are popular with millions of accountants.Accountants are responsible for preparing financial statements and auditors
are responsible for auditing. They will benefit from the implementation of the new financial statements.
Firstly, for the accountants, under the isolated design of his青年志愿者服务日
torical cost accounting and fair value accounting, their daily accounting practice is greatly simplified. Accoun珠的成语
ting process will not need asts impairment and fair value any longer. Accounting books will not record impairment and appreciation of asts any longer, for the historical cost accounting is comprehensively implemented. Fair value information will be recorded in accordance with asssment only at the balance sheet date and only in the annual financial statements. Historical cost accounting is more likely to be recognized by the tax authorities, which saves heavy workload of the tax adjustment. Accountants will not need to calculate the deferred income tax expen any longer, and the profit-after-tax in the solid line table is acknowledged by the Company Law, which solves the problem of determining the profit available for distribution.Accountants do not need to record the fair value information needed by curity investors in the accounting books; instead, they only need to list the fair value information at the balance sheet date. In addition, becau
the data in the solid line table has legal credibility, so the legal risks of accountants can be well controlled.
Secondly, the arbitrariness of the accounting process will be reduced, and the auditors’ review proce人物图
ss will be greatly simplified. The independent auditors will not have to bear the considerable legal risk for the dotted-line table they audit, becau the risk of fair value information has been prompted as "not supported by legal evidences". Accountants and auditors can quickly adapt to this financial statements system, without the need of training. In this way, they can save a lot of time to help companies to improve management efficiency. Surveys show that the above design of financial statements is popular with accountants and auditors. Since the workloads of accounting and auditing have been substantially reduced, therefore, the total expens for auditing and evaluation will not exceed current level as well.