What is now known as IFRS started in 1973 with the formation of the International Accounting Standards Committee. The purpose was to have a single set of standards to facilitate trade and investments. IASC was replaced by the Intrrnational Accounting Standards Board in 2001.
The SEC has done a study of a Principle based system which is within SOX Requirements of 1)certification of company financials by the CEO/CFO, 2) empowerment of the audit committee to approve external audit services, 3) more stringent auditor independence standards,and 4) greater oversight of auditors by PCAOB and also to conduct a principle-based study.
The SEC recommends that principle-based study: 1) Be based on an improved and consistently applied conceptual framework, 2) Clearly state the accounting objective, 3)Provide sufficient detail and structure so it can be applied on a consistent basis, 4)Minimize exceptions, and 5)Avoid use of percentage tests that allow for financial engineering to achieve technical compliance.
In contrast to objectives-based, rules-based standards often leads to avoidance which rewards those who are wiling to go around the intent of the standards.
Representational faithfulness means that the information presents what actually happened or exists. Rather than being considered an element of reliability, the faithful representation of the economic phenomena is a foundation element of useful information in the framework. Relevance and reliability are the primary qualities of decision- useful information in the joint-framework.
SFAS No. 13 establishes rules that can undermine the substance over form concept. One problem with the rules-based criteria for capitalization is that they rely on implementation guidance that can be manipulated. By contrast, IAS 17 provides that if the substance of the transaction is effectively to transfer ownership, then it is accounted for as a purchase and sale (capitalization). This is an example of an objective-based system versus rules-based syst which rewards dishonesty with more access to capital with which to be even more dishonest. I believe the slowness with instituting IFRS is because the U.S. Culture is CEO based and with the freedom to use judgement over rules, there will be even more abuse of the public trust.
A
Sunday, May 8, 2011
Sunday, May 1, 2011
Project Runway
Watching Project Runway and it definitely relates to ethics. There are rules that go with being a contestant on the show. One very important rule is that the contestants are not allowed to have any instructional materials such as pattern making or how-to books. Infraction of this rule can lead to dismissal from the show.
On this particular episode, the contestants were to be broken up into groups of three to make items for Macy's. The winners will have their outfit sold in Macy's stores. They were given budgets with which to purchase their materials.
Each team has a team leader who, in turn, chooses their teammates.
One gentleman, who had been successfully progressing throughout the show, chose two teammates based upon their expertise in areas where he was lacking. He was the one to actually sketched the outfit according to his vision of what Macy's customers would want to purchase.
First, the contestant in question, talked the fabric store into giving him discounts to make his budget since he was clearly overspent. Next, they showed his competitors whispering about materials that he had in his possession. They were deliberating as to whether they should or should not tell the producers, whether they should speak with him themselves. They decided that they should take the matter up with the producers of the show.
I thought it was interesting that the other competitors tried to make it seem as if they were doing what was best for the integrity of the show. It was easy to tell that they saw it as a way to easily eliminate someone to keep themselves from being eliminated from the show since the offending competitor was doing so well week after week.
In the end, the competitor was sent home packing and his fellow teammates were left to execute the making of the outfit on their own. The outcome of the episode is that none of the competitors who "ratted" him out were sent home so their strategy worked.
So, are we as a society capable of making ethical decisions. Of course we are. But it takes a special person to overwrite basic instincts and always make the right decisions in every situation.
On this particular episode, the contestants were to be broken up into groups of three to make items for Macy's. The winners will have their outfit sold in Macy's stores. They were given budgets with which to purchase their materials.
Each team has a team leader who, in turn, chooses their teammates.
One gentleman, who had been successfully progressing throughout the show, chose two teammates based upon their expertise in areas where he was lacking. He was the one to actually sketched the outfit according to his vision of what Macy's customers would want to purchase.
First, the contestant in question, talked the fabric store into giving him discounts to make his budget since he was clearly overspent. Next, they showed his competitors whispering about materials that he had in his possession. They were deliberating as to whether they should or should not tell the producers, whether they should speak with him themselves. They decided that they should take the matter up with the producers of the show.
I thought it was interesting that the other competitors tried to make it seem as if they were doing what was best for the integrity of the show. It was easy to tell that they saw it as a way to easily eliminate someone to keep themselves from being eliminated from the show since the offending competitor was doing so well week after week.
In the end, the competitor was sent home packing and his fellow teammates were left to execute the making of the outfit on their own. The outcome of the episode is that none of the competitors who "ratted" him out were sent home so their strategy worked.
So, are we as a society capable of making ethical decisions. Of course we are. But it takes a special person to overwrite basic instincts and always make the right decisions in every situation.
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