Some aspects regarding the quality of the accounting infirmation and its users
The accounting information is a corner stone when making appropriate managerial decisions and providing economic indicators to external contractors. To this end it is necessary that while keeping business accounts the enterprise should provide neutrality of the information coming from it, i.e., it s...
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irk-123456789-240172013-02-13T03:25:52Z Some aspects regarding the quality of the accounting infirmation and its users Dochev, M. Scientific reports The accounting information is a corner stone when making appropriate managerial decisions and providing economic indicators to external contractors. To this end it is necessary that while keeping business accounts the enterprise should provide neutrality of the information coming from it, i.e., it should exclude one-sided gratification of the interests of certain groups of information users, if through a selection of a definite from of presentation it impacts the decisions and assessments made by them in view of reaching predetermined results and ramifications. Key words: accounting, information, quality, aspects. Облікова інформація — наріжний камінь для ухвалення відповідних директорських рішень і забезпечення економічних показників для зовнішніх контрагентів. Вона повинна виключити одностороннє задоволення інтересів певних груп інформаційних користувачів. Ключові слова: звітність, інформація, якість, аспекти. Учетная информация — краеугольный камень для принятия соответствующих директорских решений и обеспечения экономических показателей для внешних контрагентов. Она должна исключить одностороннее удовлетворение интересов определенных групп информационных пользователей. Ключевые слова: отчетность, информация, качество, аспекты. 2010 Article Some aspects regarding the quality of the accounting infirmation and its users / M. Dochev // Економічний вісник Донбасу. — 2010. — № 4(22). — С. 226-230. — англ. 1817-3772 http://dspace.nbuv.gov.ua/handle/123456789/24017 [338:005.53]:657 en Економічний вісник Донбасу Інститут економіки промисловості НАН України |
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The accounting information is a corner stone when making appropriate managerial decisions and providing economic indicators to external contractors. To this end it is necessary that while keeping business accounts the enterprise should provide neutrality of the information coming from it, i.e., it should exclude one-sided gratification of the interests of certain groups of information users, if through a selection of a definite from of presentation it impacts the decisions and assessments made by them in view of reaching predetermined results and ramifications. Key words: accounting, information, quality, aspects. |
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Dochev, M. |
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Some aspects regarding the quality of the accounting infirmation and its users |
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Some aspects regarding the quality of the accounting infirmation and its users |
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Some aspects regarding the quality of the accounting infirmation and its users |
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Some aspects regarding the quality of the accounting infirmation and its users |
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Some aspects regarding the quality of the accounting infirmation and its users |
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some aspects regarding the quality of the accounting infirmation and its users |
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Інститут економіки промисловості НАН України |
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Some aspects regarding the quality of the accounting infirmation and its users / M. Dochev // Економічний вісник Донбасу. — 2010. — № 4(22). — С. 226-230. — англ. |
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226
Економічний вісник Донбасу № 4 (22), 2010
M. Dochev
SCIENTIFIC REPORTS
The accounting information is a corner stone when
making appropriate managerial decisions and providing
economic indicators to external contractors. To this end
it is necessary that while keeping business accounts the
enterprise should provide neutrality of the information
coming from it, i.e., it should exclude one-sided
gratification of the interests of certain groups of
information users, if through a selection of a definite from
of presentation it impacts the decisions and assessments
made by them in view of reaching predetermined results
and ramifications.
In this case the difficulty lies in the fact that the
very concept of “users” is rather indefinite and obscure:
in fact, the users are many and each of them has certain
interests. The latter stem mainly from their interests,
though many of them do not become aware of their
interests. One should aim at striking a balance between
the interests of the various groups of accounting
information users.
In order to study the relation of the accounting
information users to the fairness principle it is necessary
for one to outline target groups of information users,
who are interested, one way or another, in its correct
handling and utilization.
This is a possible classification of accounting
information users:
The business’s managerial bodies are interested in
receiving information for making managerial decisions
within the entire spectrum of issues: strategic and
practical planning, short-term and long-term funds
management, current management of assets and liabilities,
etc…Therefore, the managing board is interested in using
high-quality information in view of achieving a fair
assessment in reducing the risks of the managerial
decisions made.
The company’s personnel need information enabling
them to predict stability and solvency of the employer’s
business, who duly disburses salaries and provides steady
work for those employed in the business. In so far as the
level of salary and bonuses impacts the business1s profit,
the assistants are not interested in the fair value of the
economic performance outcome in cases when the
financial result is underestimated. However, when the
amounts for salaries are harshly devaluated owing to
inflation and factors related to the world economic crisis,
the employees incur a direct material and moral damage
the adoption of the principle of fair price is a key social
guarantee to the company“s personnel.
Shareholders can directly participate in the business/
the ones included in the internal users/ and those having
shares in the business. Both show an increased interest
in the capability of the business to provide income to
their invested capital, as well as owing to the possibility
of their shares“ value being increased. Therefore, they
should show an obvious interest in the quality of the
information concerning the fair evaluation of the
performance outcome. Jacques Richard is of the
following opinion on this issue: “…in a rather trivial
fashion current shareholders and their managers are not
interested in more information, but in more short-term
money, and accountancy plays a key role namely with
regard to these demands”.1 It is necessary that many
more shareholders heed the quality of information.
The suppliers and creditors providing to the business
their commodity and financial resources are interested in
information enabling to determine the reliability of the
contractor, the probability of timely disbursement and
securing the credits made. The more the supplier depends
on the business client, the more carefully they keep track
of its financial status and results to assess its performance,
which is related to the degree of reliability and timeliness
of disbursement. The given group of information users
is also very interested in its operational utilization.
The clients and buyers are dependent on the business
in so far as they look upon it as a supplier of the necessary
goods and services and they are interested in the
steadiness of deliveries and in the conducting of the
services. The stronger the clients are dependent on the
supplier the more interested they are in the stability of its
financial condition and from here comes their interest in
УДК [338:005.53]:657
M. Dochev,
PhD, D. Tsenov Academy of Economics, Svishtov,
Bulgaria
SOME ASPECTS REGARDING THE QUALITY OF THE ACCOUNTING INFIRMATION
AND ITS USERS
1 Jacques Richard. The New Accounting Capitalism. In Le monde diplomatique, Bulgarian edition, issue 7/2006, p. 7.
227
Економічний вісник Донбасу № 4 (22), 2010
M. Dochev
observing the contractual obligations. This is also
accomplished by the availability of high-quality- and duly
received information.
The state authorities embodied by the tax
administration in most cases are opponents of adopting
the principle of the fair price of financial results. They
are not interested in the principle of fair price, neither are
they interested in prognostic information. Very often they
are guided by their own rules regulated in normative acts
for endorsing and evaluating the objects of accounting.
Although there is an ambiguous relation of the fair price
principle to the interests of the treasury, in fact its
acceptance in separate cases results in tax profit lowering
or taxes on assets rise owing to the effect of the fair
value on the size of the local taxes and charges.
Thus, the principle of the fair evaluation of results
impacts the quantities of the financial indicators. It affects
differently the business sharers and the users of financial
information as far as each group pursues its own goals
and carries out its own tasks. Most often the interests of
accounting information users are opposing as concerns
the employment of the fair price principle. In this light it is
very difficult for one to characterize the concept of “users`
needs”. In some cases the needs are related to the interests
and they complement one another. In other cases needs
and interests can be various, even unbounded and often
radically different. In yet other cases sometimes users do
not themselves realize the needs and then things become
even more difficult. To this end, it is necessary that each
concrete case be studied with regard to the necessary and
useful accounting information for each user.
Financial economic indicators are leading in
determining the necessary accounting information. The
interaction of the fair evaluation principle with the other
principles of financial accountancy has an impact on
organizing and keeping the accounts of the business. It
is obvious that the assets and liabilities critical to the
business at a specific point in time should necessarily be
subject to a fair evaluation. The methods of keeping
financial accounting presume the fact that without
knowledge of those methods it is impossible for one to
make an authentic evaluation of the financial status of
the business. For that purpose one is faced with the
necessity of studying the existing criteria, which rank
the information as essential to the individual users of
accounting information.
In some cases accounting information can be
viewed as essential provided the knowledge gained from
that information is crucial to the users of financial
accountancy. In fact, the essence as a quality of
information should impact the decisions made by the users
of the financial accountancy. It helps one determine the
tactic of the business“s behavior to select the sequencing
and related consistency of their accounting policy. For
example, the relatively cheap assets can be accounted
for as outlays at the point of their acquisition, although
they themselves can be used within a longer timeframe.
This is useful in some cases. In other cases the approach
should be vise versa — the value of cheap assets should
be incorporated in the newly created product for a longer
period of time.
The stance of the International Financial Reporting
Standards /IFRS/ recognizing information as essential is
when its non-releasing would impact economic decision-
Fig. 1. Accounting Information Users
Accounting Information Users
External Internal
Business
management
Business
assistants
Shareholders
Shareholders
Suppliers and
Creditors
Customers and
Buyers
Governmental
Bodies
228
Економічний вісник Донбасу № 4 (22), 2010
M. Dochev
making. For this purpose they ought to be acknowledged
by most of the explorers of the report when using their
information. Here the most important of all the
requirements is that essential information should impact
decision-making. One can say that essence is established
as a selection of criteria for information, though it is a
different issue whether those criteria are unequivocal.
The essence can be set by qualitative or quantitative
characteristics. Qualitative characteristics are typical of
the facts on the business being crucial to the users of
reporting in a situation of unpredictability, non-typicality,
in a crisis situation.
We can also note that information essence depends
on the size of the object or the mistakes assessed in
concrete conditions as lapses or contortion. Thus, the
essence is a starting threshold or point and not a key
qualitative characteristic, which must embrace
information, concerning what would be useful.
The quantitative features of the essence are even
more difficult to determine, so often there is no unanimous
interpretation of such features. Thus for example, we
can assume that the margin between the reported amount
and the amount found as a result of the conducted
verification exceeding 10% is recognized as essential.
Should the margin be between 5-10%, the decision
whether this is essential is made by the analysts —
managers, accountants, auditors — at their discretion. A
margin not exceeding 5% is considered immaterial. In
some countries as the USA the concept of information is
not set as per quantitative indicators. In the USA the Board
of financial reporting standards /Statements of Financial
Accounting Concepts — SFAC/ in the Formulations of
the conception on the financial report lays stress on the
relativity of the concept of essence. Information essence
is determined by frameworks /beyond which/whereby
accounting may be reduced or presented incorrectly.
Disregarding those frameworks may deceive the users
of information or impact them by partly reduced or
misrepresented information. When determining the
essence of information in various countries it must be
tied down to the currently applicable laws related to the
performance of each business and country.
In the practice of Bulgaria often the category of
essence is viewed from the standpoint of taxation. The
reasoning on this topic is along the lines of the following:
as far as a piece of information is significant from the
standpoint of taxation, it is also essential to the users of
financial reporting, and thence as accounting information.
Te sequencing of setting up accounting indicators
for a given business extends its independence when
evaluating the indicators for essence. Specifically, it is
recommended that an indicator be considered essential if
its inability to be unveiled may impact the economic
decisions of the interested user made on the basis of the
financial information. Also the business“s decision as to
whether an indicator is essential is conducted depending
on the evaluation of the indicator, its nature and the
concrete circumstances of its origin. In other words,
the business has the right to make its own decision. To
recognize whether a piece of information is essential or
not, one can also employ as a reference point the quantity
or the individual weight of the indicators within the totality
of indicators. Information must also be regular and stable
within the framework of one reporting period of time.
In conclusion, from the stance on the quality of the
accounting information, its essence must be determined
by the accountant and he should pursue and employ his
professional skills and reasoning in their capacity as
arguments in the organization of the entire accounting
process.
Accountancy is the key information system of the
business. Accounting as an organized system of
information in the first place must determine the place of
the balance of payments as a basic form in the system of
information. In general, in economic science the concept
of balance is used for designating a system of interval
indicators characterizing the resources in view of their
utilization for a given period of time/interval/ and their
sources depicted in definite tables as of certain dates.
From a technological standpoint the functioning of
the accounting system of the business constitutes a
process of uninterrupted aggregation of data. In this
process it is important that an optimum be established.
The low degree of data aggregation results in a lack of
system and uncontrollability of huge volumes of
circulating information. The overwhelmed aggregation
of data, including accounting ones results in a harsh
reduction of the synthetic and analytical nature of
information. The level of data aggregation determines the
degree of analytical nature of the balance sheet and in
this case the relation is contrariwise proportional: the
higher the level of aggregation the less analytical is the
balance. For this reason the issue of expedience and the
necessary degree of complexity are a matter of discussion.
This concerns the necessity of extending entries,
introducing additional groups, etc… Particularly, this issue
was handled by the science of balances, which came
into being at the turn of the 19th century in Germany.
Within this school of thought balance requirements were
set up: precision, completeness, clarity, fair-dealing,
continuity and unity. These requirements in their greater
part are valid today as well. They also determine the
requirements to the accounting information contained in
the balance sheet.
The degree of precision depends on the opinion of
jurists and managers, i.e., the law and objectives put forward
229
Економічний вісник Донбасу № 4 (22), 2010
M. Dochev
by the high-ranking administration of companies. At the basis
should be stipulated the requirements of the Commercial
Law, Accountancy Law and other related laws.
The requirement for clarity is related to the fact
that the balance sheet should be comprehended by a
specialist as well as everyone who is interested in the
matter. Recognizing all of the accomplishments of the
theory and practice of financial reporting, we can
differentiate several reasons concerning the lack of
possibility for the clear understanding of the balance sheet
and its information capacity:
1. Inaccurate name of the entries and sections in
the balance sheet, and insufficiently established balance
sheet terminology. The key concepts of economic activity
in practice and theory are interpreted in different fashions;
2. Non-systematic, in some cases illogical
sequencing of the balance entries. In order for the balance
sheet to be clear and comprehensible it is necessary that
one should pursue the road of a simplified balance —
without regulating entries, via grouping of several entries
into one, etc…;
3. Ambiguity with regard to the accounting
information in the balance sheet;
4. The contradictions, which are often made
manifest among accounting information users.
In line with the requirement for a fair price of the
property the balance sheet must be drawn up recognizing
the requirements of the normative foundation based on
primary documents. There are many factors having an
impact on the authenticity of the balance sheet:
1. Correctness in composing the primary
information bearers;
2. Correctness in covering the facts of economic
life on the accounts;
3. Precision of the accounting reports;
4. Validity of the balance sheet and covering the
results of the conducted stock-takings;
5. The methods employed for reporting the
accounts;
6. The accounting software, and
7. Other.
By continuity we mean sustaining through the
corresponding years the structure of the balance and
maintaining the principles of evaluation from precious to
current year. This is necessary for the continuity of the
very accounting information by calendar years.
By balance unity we mean that the balance of the
mother company must incorporate the results of the
balances of the daughter companies. In contemporary
accounting practice the issue of accounting data aggregation
in the balance sheet to date is extensively being discussed
by specialists. The accounting report/in particular, the
balance sheet as well/ must be concise and embracing a
small size of paper bearers. But in practice the balance
sheet information is utilized by various information users
with various information requirements. In this light we
must note that it is expedient that several forms of balance
sheet be drawn up, oriented to different users.
The requirements aimed at the balance sheet relate
to a large extent to the other components of the financial
report as well — the Profit and Loss Account, the
Monetary Flow Account and the Capital Account. All of
them provide the necessary accounting economic
information received via the accounting reports of the
different categories of users. On this topic there is
incremental talk concerning the composing and employing
the financial account for taxation, statistical and other
purposes, which results in distorting information. We
deem it necessary to support the opinion of composing a
unified account meeting the requirements of all
information users.
Those requirements can be complemented by the
indication — purpose of composing the account /in
particular, the balance sheet/: in view of showing the
financial result /dynamic balance sheet/, evaluation of
assets /static balance sheet/ or other. For example, when
diminishing the value of the depreciated assets a correct
financial result is reached, but given a contingent
realization their value would be distorted. And vise versa,
assigning a correct market price to the asset, we inevitably
distort the results — the profit and loss.
The accountancy balance sheet as a component of
the accounting method incorporates as follows:
— A formal section — requisites, dates, etc…;
— An information section — composition and
structure of entries;
— A methodical section — principle of making up
entries;
— A target-oriented section — users’ requirements.
It is well-known that the consumption value of
accounting is its information usefulness. In order to form
the most acceptable accountancy regarding the various
groups of users and judging from the principle of fair
evaluation of assets, capital and liabilities we should be
guided by the principles indicated in the following diagram.
In addition to the above diagram we should note
that the formal and information sections in total constitute
the form of accounting and the presented formally logical
scheme is feasible to accountancy as well as to managerial
reporting since it includes most general postulates needed
for its formation.
In conclusion, in the process of organizing and
keeping business accounts, which are a company’s key
information system, we can point out that accountancy is:
1. An element of communication between the
information users of the financial account and the
230
Економічний вісник Донбасу № 4 (22), 2010
M. Dochev
accounting scheme, i .e . , i t provides output
information;
2. An element of link between the users of
accounting and the accounting system, i.e., users would
be able to correct and complement the forms and
indicators of accounting in the process of development
of the object of management and the external
environment;
3. A method of control of the business and the
participants in it;
4. A stimulus for investors;
5. A guarantor to creditors;
6. A source of information on the state budget
proceeds.
All of the above underlies the receiving of high-
quality information by the various users.
Dochev M. Some aspects regarding the quality
of the accounting infirmation and its users
The accounting information is a corner stone when
making appropriate managerial decisions and providing
economic indicators to external contractors. To this end
it is necessary that while keeping business accounts the
enterprise should provide neutrality of the information
coming from it, i.e., it should exclude one-sided
gratification of the interests of certain groups of
information users, if through a selection of a definite from
of presentation it impacts the decisions and assessments
made by them in view of reaching predetermined results
and ramifications.
Key words: accounting, information, quality, aspects.
Дочев М. Деякі аспекти якості звітної інфор-
мації для її користувачів
Облікова інформація — наріжний камінь для ухва-
лення відповідних директорських рішень і забезпечення
економічних показників для зовнішніх контрагентів. Вона
повинна виключити одностороннє задоволення інтересів
певних груп інформаційних користувачів.
Ключові слова: звітність, інформація, якість, ас-
пекти.
Дочев М. Некоторые аспекты качества от-
четной информации для ее пользователей
Учетная информация — краеугольный камень для
принятия соответствующих директорских решений и
обеспечения экономических показателей для внешних
контрагентов. Она должна исключить одностороннее
удовлетворение интересов определенных групп инфор-
мационных пользователей.
Ключевые слова: отчетность, информация, каче-
ство, аспекты.
Received by the editors: 26.09.2010
and final form in 01.12.2010
Usefulness of
Accounting
Information
Section
Methodologic
al Section
Formal
Section
Target-oriented
Section
Sufficiency
Analytic
Approach
Authenticity
Lack of
Contradiction
Clarity
Precision
Convenience Neutrality
Fairness
Completeness
Fig. 2. Usefulness of Accounting
|