W7
D1
post how the Concepts Statements impact and/or could impact decision making relative to your research topic. The various standard setting bodies (e.g., FASB, GASB, PCAOB, IASB) all have Concepts Statements. You are required to have a section of your final research report to include your creative analytical thoughts on how the Concepts Statements impact and/or could impact decision making relative to yourresearch topic.
Comment #1
Concepts Statements are intended to set forth objectives and fundamental concepts that will be the basis for the development of financial accounting and reporting guidance (FASB, 2010, para. 2). Concepts Statements provide a decision-making framework for the Boards. The Conceptual Framework is a consecutive system of interrelated objectives and fundamental concepts, that prescribes the nature and function expected to lead to consistent guidance. Determination of objectives and identification of fundamental concepts will not immediately solve accounting and auditing problems. However, these objectives give direction, and concepts or conceptual frameworks are tools for solving problems. Concepts statements are not part of the generally accepted accounting or auditing standards. But they help new rules to flow easily and logically.
Practically all standards imply concepts statements or conceptual frameworks as detailed and clear guidance for further decision making. IESBA issued the Code of Ethics that followed by all professional accountants, including international. The Code of Ethics contains a section 120The Conceptual Frameworkthat the professional accountant should apply to identify, evaluate, and address threats to compliance with the fundamental principles. Theconceptual frameworkspecifies an approach for aprofessional accountantto:
a. Identifythreatsto compliance with thefundamental principles;
b. Evaluate the threats identified; and
c. Address the threats by eliminating or reducing them to anacceptable level (IESBA, 2019, para. 2).
The Non-Compliance with Laws and Regulations (NOCLAR) is incorporated into the Code of Ethics for ProfessionalAccountants and will apply toallprofessional accountants whether in practice, commerce, or industry.The NOCLAR pronouncement set out a framework to guide auditors, other professional accountants in public practice, and professional accountants in business in deciding how best to act in the public interest when they come across an act or suspected act of NOCLAR (IESBA, 2017, para. 14).
Comment# 2
The Tax Cuts and Jobs Act made a great number of modifications to the income tax provisions of businesses. TheFASB Statement of Financial Accounting Concepts No. 6 Elements of Financial Statementsdefines the main elements of the financial statements and provides other details such as their preferred or required method of accounting. The TCJA modified the Internal Revenue Code to allow taxpayers to defer recognizing income for tax purposes until it is recognized in the financial statements (Torosyan & Razani, 2019). This would serve to eliminate timing differences between income as presented in the financial statements and taxable income (Torosyan & Razani, 2019). The Statement of Financial Accounting Concepts No.6 requires items that can be recognized and measured to be accounted for using accrual method accounting (FASB, 2008). The TCJA now allows the deferral of income for tax purposes if this is also deferred in the financial statements prepared using the accrual method of accounting.
The American Institute of Certified Public Accountants (AICPA) has also issued a set of Tax Policy Concept Statements to promote good tax policy. TheTax Policy Concept Statement No. 1Guiding Principles of Good Tax Policy: A Framework for Evaluation of Tax Proposalsdiscusses guiding principles for good tax policy. Among these principles are equity and fairness, certainty, information security, simplicity, neutrality, transparency, and others (AICPA, 2017). This concept statement provides the necessary information for decision-makers to evaluate and compare different tax policies and proposals. There are three more Tax Policy Concept Statements that more specifically address the guiding principles for tax simplification, the guiding principles for tax law transparency, and the guiding principles for tax equity and fairness (AICPA, n.d.). These concept statements are designed to aid in the development of simpler and more transparent tax legislation and regulation.
Decision-makers can take advantage of the changes brought by the TCJA that relate to the way items are recognized and accounted for both financial statement and income tax purposes. The TCJA made considerable changes to tax accounting some of which also have an effect on accounting for financial statements and that should be carefully examined by decision-makers to take the most advantage of these provisions. Additionally, the information provided by the AICPA Tax Policy Concept Statements can be used by decision-makers in the development of new tax law and the evaluation of proposed tax policies and policy changes.
