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建立人际资源圈Financial accounting paper---Paper论文范文
2016-07-25 来源: 51Due教员组 类别: Paper范文
51Due论文代写平台Paper代写范文:Financial accounting paper这篇Paper范文讲述了由于全球化的影响，新经济技术可以提供质量，创意和创新，可以嵌入到所有经济部门，因此，FASB开展了这项专题报告与提高业务和财务报告质量的有很大帮助，并提出了建议。
New Economy referring to an evolution of developed countries from an industrial-based wealth producing economy into a knowledge-and-idea-based economy due to effect of globalization. The key to success in the new economy are the extent to which technology can be utilized, quality can be provided, and ideas and innovation can be embedded in all sectors of the economy. Some features of a new economy are described as intellectual capital, The Internet, information, knowledge sharing, network effect and etc.
Due to the changing of economy, many commentators remarked on the disconnect between the new economy and traditional business and financial reporting. Information provided in the financial statements is deemed to be inadequate for its users in making investment decision. It is contended that more disclosure of nonfinancial and forward-looking information such as intangible assets, goodwill, management decision and analyst ant etc. are needed.
Therefore, FASB had carried out this Special Report with the intention to improve the quality of business and financial reporting. The main concern of the report is whether there is a need to change the existing reporting model, if so, how it will be done. This Special Report examine the following three areas and some recommendations from agencies in US and Europe which will be discuss in the next few chapters.
Vast information about nonfinancial value drivers
Forward-looking financial statement which present the entity抯 creation of value.
Recognition and measurement of (externally required and internally generated) intangible asset in financial statements
Chapter 1 Introduction to the Problem
Chapter 1 reviews the new economy and its impacts to the business and financial reporting. It is said that there are two assertions that lead to theinteraction between new economy and business and financial reporting. First, a change of economy of 2000 compare to economy of 1950 and before (From the Industrial Revolution to the digital age). Second, traditional financial reporting may not be able to capture the nonfinancial value drivers that dominate the new economy.
There are three propositions that some people view as accounting抯 failure to keep pace with a changing economy. (Attributes of the disconnect between new economy and the business and financial reporting).
Proposition 1- Traditional financial statements are reported based on historical information and focus on the entity抯 ability to realize the value from existing assets and liabilities.
Proposition 2- The key value drivers of the new economy are usually nonfinancial and do not present in a traditional financial report.
Proposition 3- Existing financial statements recognized only those intangible assets that acquired from others, there is no treatment or recognition and measurement for internally generated intangible assets.
Proposition 4 (rarely stated) ?Existing business and financial reporting is adequate to the purpose for which it is intended (e.g. provide useful information for users of business and financial reporting in investment their decision making). A mandated change in the existing business and financial reporting might be harmful to the credibility of reporting.
In additional, there are several solutions that recommended by some accounting bodies, standard setter and government regulators such as AICAP, ICAEW, Netherland Ministry of Economic Affairs and etc. Mostly, all the agencies stated in this Series Report suggested at least a new metric that would measure and report information about nonfinancial value drivers while few of the agencies also proposed new paradigms that would measure information about future cash flow and recognition of intangible assets in balance sheet.
Chapter 2 New Reporting Paradigm
Traditional financial statements are mostly backward-looking because the value was capture from the existing assets and liabilities. The new financial reporting paradigm comes out with the creation of value. There are two types of new reporting paradigm being proposed in this chapter- CICA Total Value CreationTM (TVC? System and Accounting For The Future (AFTF).
The CICA Total Value CreationTM (TVC? emphasises on the value-creating activities, different from the traditional financial statement which focuses on the value-realizing activities. It is initially designed for the internal reporting, and later after research process, brings into consideration to make the value creation performance accessible for the external stakeholders. Basically, TVC is a continuum step from traditional financial reporting to the measurement of the non-financial performance through capture the value creation. It is an event-based present value model which provides information related to company抯 planned activities. It uses a fully discounted cash-flow model which offers timely information, complete transparency and professional assurance, due diligence, on changes to assumptions. It also disclose and analysis outcome variance. Through TVC, all the stakeholders would be able to assess the performance of the organization by assessing the ability of company to create value and future revenue. According to CAmagazine, some people think that TVC is leading towards the value-creation performance which has internationally accepted measurement and reporting standards.
CICA emphasize that TVC will not substitute for the traditional financial reporting for now and future because of its usefulness in reporting the realization of value. However, in this new economy, CICA see that the value creation process is always took place before the value realization. The traditional financial reporting has the limited capability to measure and report on this pre-transactional value creation. When the value is being realized and not being created, although traditional financial reporting will certainly captured the value, but it takes years to realize after creation.
Similar to TVC, in Accounting For The Future (AFTF), Mr Humphrey H. Nash presents a corporation抯 activities in financial terms by utilizing a system of projected future cash flows are. He assigns new meanings to the traditional labels such as assets, equity and liabilities. He proposes as below:
AFTF value = Present value of entire expected future net cash flows discounted at the market cost of capital
Value added = AFTPend of a time period - AFTPstart of a time period
AFTF assets refer to the present value of entire expected future cash inflows into the corporation. AFTF liabilities refer to the present value of entire expected future cash outflows from the corporation. AFTF shareholder equity equals AFTF assets minus AFTF liabilities. Net AFTF shareholder equity is known as company valuation. AFTP assess the value of actual shareholders using present value.
From the observation, building up a new reporting paradigm has some limitations. First, cash flow projections can be costly and complicated. Secondly, difficulties of businesses to define their life because most entities are continuing entities instead of limited life venture. This make them could not easily identify the stage of a cash flow. Besides that, there is a need of decision regulations in order to ensure the information is understandable and comparable. And lastly, the existence and consistence of assertions for TVC method is questionable. This is due to problems in examining the company assertions and company may not want to disclose some plans or business secret. In short, the author concludes that the above proposal cannot best satisfy users?needs as there are much more to be done with the current technology to provide future perspective information.
Chapter 3: New Metrics
In this new economy, the government, private and standard setting board now are emphasizing on financial and non-financial performance information. They are currently making some proposals to get the information in a systematic ways, especially in terms of measurement. Those include balance scorecard, Skandish Navigator, Intangible assets monitor, value chain scoreboard and the value creation index.
Balanced Scorecard is now considered as intellectual capital by many companies and used it as management reporting. Balance Scorecard is believed can be used as the bridge for the interaction between investor and the others outside the company. The creators of Balance Scorecard emphasize on financial measurement on financial measures, customer measures, internal process measure and learning and growth measure. Yet, there is still criticism on balanced scorecard because it can only translate the company strategy into objectives. The measurement of non-financial matters largly depends on the company抯 perception.
Swedish Insurance Company, Skandia, outlined that there are a few components under intellectual capital, which consist of human capital and structural capital (customer capital and organizational capital). Skandia has developed the Skandia Navigator to communicate the relationship between those components. For Skandia Navigator, they focus on customer, process, renewal and development, human and financial. There are some limitations with this metric. By looking at industry specific or business specific metrics, there are differences in relevant metrics from one industry to another industry. Therefore, we cannot make a judgement between the companies because comparable units do not present comparable metrics. Consequently, this outlines the importance of completeness by promoting voluntary disclosure culture whereby we can shift the burden from rule maker to preparer judgement. Another problem is the changing of metrics over time. Some people might think that manager is trying to undisclosed the bad news with the changing of metrics. In addition, some metrics in Skandia navigator are vague. There is no explanation about what抯 being measured by the metrics to the users. Lastly, Skandia navigator provides many impressive and interesting metrics, but it tells little about intellectual capital.
Swedish management consultant Karl-Erik Sveiby proposes intangible asset monitor which consists of three components- external structure, internal structure and competence. Each group is then subdivided into three sets of indicators which are growth, efficiency, and stability. The author observed that this metric is clearly build for professional services whereby some modification has been made to make it become more useful to business and environment. To ensure that the non- financial performance measurement can give a better picture to the user, it portrayed the trend of non-financial information and colour coding individual amounts. Last but not least, although intangible asset monitor is able to provide insights into individual metrics, it is based on subjective judgment.
The fourth one is the Value Chain Scoreboard. It is designed to communicate information about the fundamental economic process of innovation and how the metrics fix into the cycle of development and commercialization. The measurement should be in quantitative form, standardized and confirmed based on evidence. Through the observation, users are able to compare companies by using the standardization common language. However, there are still underdeveloped notions in the proposal.
The fifth is value creation index. This is developed to measure the importance of different non-financial metrics in explaining the market value of companies. A research shows that the value perceived by the customer who drives corporate value are different with those perceived by the corporate themselves. Through observation, it provides two insights- what management perceived important may not same as the factors that market considered as important and non- financial metric need to be industry specific.
There are some similarities between these proposals and the description of AICPA Special Committee on Financial Reporting- the performance of key business process largely depend on the factors that create longer tem value. The author concludes a few elements of useful presentation of non financial elements from the observation. First of all, the metrics need to be presented in a systematic and ordered way. The environment promotes measure of performance metrics for each rather than measuring the performance in theoretical terms. Another element is metrics presented must be shown in terms of industry or market. The author also observed that although unusual metrics is interesting, traditional measures is more useful as it can provide the information for the relationship between customer and employees, less costly to develop, more understandable, and more comparable from one entity to another. Besides that, the changes of metrics over time can provide consistency. Lastly, the metrics should, have ability to show changes over time, should show both good and bad news and provide information that enable comparison with comparable metrics presented by other companies,
Concerning on the cost and benefit, AICPA Special Committee outlined some ways for managers to control the cost of non-financial measurement. First, managers do not need to disclose the information that is outside the managers?expertise. Secondly, managers do not need to report those information which will harm a company憇 competitive position. Additionally, managers do not need to forecast a company抯 financial future. However, the users should be the one who take part in forecasting the financial future of the company. Moreover, managers do not need to gather information to manage the business. They just need to disclose the information that they know. Last but not least, manager can use flexible reporting.
In the modest proposal, the main objective of metrics for both old and new economy should be to capture and report business information that is not readily apparent from the financial statements. The approaches are in aim of having better metrics than those of in traditional so as to perceive value drivers in the new economy in terms of workforce, customers and ability to innovate.
Chapter 4: Intangibles Assets
This section examines the issues surrounding recognition and measurement of internally generated intangible assets such as research and development cost, computer software cost and so on. The discussion will be started from the definition of assets and intangible assets and follow by the structure of recognition criteria as well as three existing accounting standards that address intangible assets. It then continues to analyze the issue surrounding the recognition of intangible assets.
Both FASB and IASC similarly defines asset as a 揻uture economic benefits as a result of a past transaction or event, and is controlled by the entity? Assets can be divided into two parts which are noncurrent asset and current asset. The examples of noncurrent assets are properties, plants and equipment (PPE), building, machines and so on. While, cash on hands, bank and account receivables are the example of current assets. On top of that, FASB Exposure Draft also defines intangible asset as a noncurrent asset that lack of physical substance such as research and development cost, computer software cost, patent, goodwill, franchises and so on.
Besides that, there are four fundamental recognition criteria under Paragraph 63 of FASB Concepts Statement No. 5 to be followed to avoid any omission of recognition assets in financial statement. The first criterion is definition. As long as the item meets the definition of an asset, then it can be recognized in financial statement. Next, the second criterion is measurability. If the item has relevant attribute measurable with sufficient reliability, then it also can be recognized in the financial statement. The third criterion is relevance. If the information of an item is capable to make a difference in user decisions, then it can also be recognized in financial statement. Last but not least, the forth criterion is reliability. As long as the information could represent the faithful, verifiable and neutral, then it can be recognized in financial statement.
However, several questions about how to recognize intangible assets such as capitalizing or expensing it had been argued. Thus, three accounting standard have address on these questions. The first standard is FASB Statement No. 2. In this statement stated that the research and development (R&D) cost (internally generated intangible asset) should be charged to expense as it incurred. This is because there is an uncertainty of future benefits. The failure rate for the project is high even after the R&D stage. Besides that, there is also lack of causal relationship between research and development (R&D) expenditures and extended future benefits. So, it is better to recognition the R&D costs as an expenditure instead of capitalizing it. In addition, the R&D cost should be charged to expenditure because of inability to measure future benefit. This means that unless a resource抯 future benefits can be identified and objectively measured, it cannot be recognized as an asset for accounting purpose. Moreover, according to FASB Statement No. 2, capitalized research and development cost is not useful in assessing the potential profit of an entity. Thus, R&D costs should be recognized as expenditure because it is lack of usefulness if capitalizing it.
The second standard is FASB Statement No. 86. This statement divided the recognition of computer software cost (internally generated intangible asset) into two phases. The first phase is under Statement 2, the cost incurred to build the technological feasibility of a product is included in research and development (R&D) and should be recognized as expenditure. While, the second phase stated that the costs should be capitalized after establishing the technological feasibility and before the product is obtainable for general release. However, FASB chairman Dennis Beresford argues that, 搕he subsequent cost is inherently immaterial, so software development costs should be charged to research and development cost? This will result in more consistency in financial reporting because there are obstructions in determining when technological feasibility is found.
The third standard is International Accounting Standards (IAS) 38. This standard is similarly with Statement 86 where no intangible asset will be raised from research project instead it should be recognized as expenditure. A research project will only be recognized as an intangible asset if there have technical feasibility; intention and ability of adequate technical, financial and other resources to complete, use or sell it; generate probable future economic benefits and the ability to measure the expenditure attributed.
Furthermore, there is a significant gap between the expenditure and efforts that create the item and the identification of the item as a candidate for recognition. Some intangible assets are valuable items but it is hard to estimate. For example, the value of a particular brand name and newspaper mastheads are hard to estimate. Thus, several questions have arisen from it. For instance, the values will become apparent at what point? What expenditures gave risk to the value of the brand name, if the cost is measurement attribute? Therefore, three possible approaches had been address on it.
51Due原创版权郑重声明：原创范文源自编辑创作，未经官方许可，网站谢绝转载。对于侵权行为，未经同意的情况下，51Due有权追究法律责任。
51due为留学生提供最好的作业代写服务，想获取更多Paper代写范文，亲们可以进入主页 www.51due.com 为留学生提供Paper代写服务，了解详情可以咨询我们的客服QQ:800020041哟。-lc
New Economy referring to an evolution of developed countries from an industrial-based wealth producing economy into a knowledge-and-idea-based economy due to effect of globalization. The key to success in the new economy are the extent to which technology can be utilized, quality can be provided, and ideas and innovation can be embedded in all sectors of the economy. Some features of a new economy are described as intellectual capital, The Internet, information, knowledge sharing, network effect and etc.
Due to the changing of economy, many commentators remarked on the disconnect between the new economy and traditional business and financial reporting. Information provided in the financial statements is deemed to be inadequate for its users in making investment decision. It is contended that more disclosure of nonfinancial and forward-looking information such as intangible assets, goodwill, management decision and analyst ant etc. are needed.
Therefore, FASB had carried out this Special Report with the intention to improve the quality of business and financial reporting. The main concern of the report is whether there is a need to change the existing reporting model, if so, how it will be done. This Special Report examine the following three areas and some recommendations from agencies in US and Europe which will be discuss in the next few chapters.
Vast information about nonfinancial value drivers
Forward-looking financial statement which present the entity抯 creation of value.
Recognition and measurement of (externally required and internally generated) intangible asset in financial statements
Chapter 1 Introduction to the Problem
Chapter 1 reviews the new economy and its impacts to the business and financial reporting. It is said that there are two assertions that lead to theinteraction between new economy and business and financial reporting. First, a change of economy of 2000 compare to economy of 1950 and before (From the Industrial Revolution to the digital age). Second, traditional financial reporting may not be able to capture the nonfinancial value drivers that dominate the new economy.
There are three propositions that some people view as accounting抯 failure to keep pace with a changing economy. (Attributes of the disconnect between new economy and the business and financial reporting).
Proposition 1- Traditional financial statements are reported based on historical information and focus on the entity抯 ability to realize the value from existing assets and liabilities.
Proposition 2- The key value drivers of the new economy are usually nonfinancial and do not present in a traditional financial report.
Proposition 3- Existing financial statements recognized only those intangible assets that acquired from others, there is no treatment or recognition and measurement for internally generated intangible assets.
Proposition 4 (rarely stated) ?Existing business and financial reporting is adequate to the purpose for which it is intended (e.g. provide useful information for users of business and financial reporting in investment their decision making). A mandated change in the existing business and financial reporting might be harmful to the credibility of reporting.
In additional, there are several solutions that recommended by some accounting bodies, standard setter and government regulators such as AICAP, ICAEW, Netherland Ministry of Economic Affairs and etc. Mostly, all the agencies stated in this Series Report suggested at least a new metric that would measure and report information about nonfinancial value drivers while few of the agencies also proposed new paradigms that would measure information about future cash flow and recognition of intangible assets in balance sheet.
Chapter 2 New Reporting Paradigm
Traditional financial statements are mostly backward-looking because the value was capture from the existing assets and liabilities. The new financial reporting paradigm comes out with the creation of value. There are two types of new reporting paradigm being proposed in this chapter- CICA Total Value CreationTM (TVC? System and Accounting For The Future (AFTF).
The CICA Total Value CreationTM (TVC? emphasises on the value-creating activities, different from the traditional financial statement which focuses on the value-realizing activities. It is initially designed for the internal reporting, and later after research process, brings into consideration to make the value creation performance accessible for the external stakeholders. Basically, TVC is a continuum step from traditional financial reporting to the measurement of the non-financial performance through capture the value creation. It is an event-based present value model which provides information related to company抯 planned activities. It uses a fully discounted cash-flow model which offers timely information, complete transparency and professional assurance, due diligence, on changes to assumptions. It also disclose and analysis outcome variance. Through TVC, all the stakeholders would be able to assess the performance of the organization by assessing the ability of company to create value and future revenue. According to CAmagazine, some people think that TVC is leading towards the value-creation performance which has internationally accepted measurement and reporting standards.
CICA emphasize that TVC will not substitute for the traditional financial reporting for now and future because of its usefulness in reporting the realization of value. However, in this new economy, CICA see that the value creation process is always took place before the value realization. The traditional financial reporting has the limited capability to measure and report on this pre-transactional value creation. When the value is being realized and not being created, although traditional financial reporting will certainly captured the value, but it takes years to realize after creation.
Similar to TVC, in Accounting For The Future (AFTF), Mr Humphrey H. Nash presents a corporation抯 activities in financial terms by utilizing a system of projected future cash flows are. He assigns new meanings to the traditional labels such as assets, equity and liabilities. He proposes as below:
AFTF value = Present value of entire expected future net cash flows discounted at the market cost of capital
Value added = AFTPend of a time period - AFTPstart of a time period
AFTF assets refer to the present value of entire expected future cash inflows into the corporation. AFTF liabilities refer to the present value of entire expected future cash outflows from the corporation. AFTF shareholder equity equals AFTF assets minus AFTF liabilities. Net AFTF shareholder equity is known as company valuation. AFTP assess the value of actual shareholders using present value.
From the observation, building up a new reporting paradigm has some limitations. First, cash flow projections can be costly and complicated. Secondly, difficulties of businesses to define their life because most entities are continuing entities instead of limited life venture. This make them could not easily identify the stage of a cash flow. Besides that, there is a need of decision regulations in order to ensure the information is understandable and comparable. And lastly, the existence and consistence of assertions for TVC method is questionable. This is due to problems in examining the company assertions and company may not want to disclose some plans or business secret. In short, the author concludes that the above proposal cannot best satisfy users?needs as there are much more to be done with the current technology to provide future perspective information.
Chapter 3: New Metrics
In this new economy, the government, private and standard setting board now are emphasizing on financial and non-financial performance information. They are currently making some proposals to get the information in a systematic ways, especially in terms of measurement. Those include balance scorecard, Skandish Navigator, Intangible assets monitor, value chain scoreboard and the value creation index.
Balanced Scorecard is now considered as intellectual capital by many companies and used it as management reporting. Balance Scorecard is believed can be used as the bridge for the interaction between investor and the others outside the company. The creators of Balance Scorecard emphasize on financial measurement on financial measures, customer measures, internal process measure and learning and growth measure. Yet, there is still criticism on balanced scorecard because it can only translate the company strategy into objectives. The measurement of non-financial matters largly depends on the company抯 perception.
Swedish Insurance Company, Skandia, outlined that there are a few components under intellectual capital, which consist of human capital and structural capital (customer capital and organizational capital). Skandia has developed the Skandia Navigator to communicate the relationship between those components. For Skandia Navigator, they focus on customer, process, renewal and development, human and financial. There are some limitations with this metric. By looking at industry specific or business specific metrics, there are differences in relevant metrics from one industry to another industry. Therefore, we cannot make a judgement between the companies because comparable units do not present comparable metrics. Consequently, this outlines the importance of completeness by promoting voluntary disclosure culture whereby we can shift the burden from rule maker to preparer judgement. Another problem is the changing of metrics over time. Some people might think that manager is trying to undisclosed the bad news with the changing of metrics. In addition, some metrics in Skandia navigator are vague. There is no explanation about what抯 being measured by the metrics to the users. Lastly, Skandia navigator provides many impressive and interesting metrics, but it tells little about intellectual capital.
Swedish management consultant Karl-Erik Sveiby proposes intangible asset monitor which consists of three components- external structure, internal structure and competence. Each group is then subdivided into three sets of indicators which are growth, efficiency, and stability. The author observed that this metric is clearly build for professional services whereby some modification has been made to make it become more useful to business and environment. To ensure that the non- financial performance measurement can give a better picture to the user, it portrayed the trend of non-financial information and colour coding individual amounts. Last but not least, although intangible asset monitor is able to provide insights into individual metrics, it is based on subjective judgment.
The fourth one is the Value Chain Scoreboard. It is designed to communicate information about the fundamental economic process of innovation and how the metrics fix into the cycle of development and commercialization. The measurement should be in quantitative form, standardized and confirmed based on evidence. Through the observation, users are able to compare companies by using the standardization common language. However, there are still underdeveloped notions in the proposal.
The fifth is value creation index. This is developed to measure the importance of different non-financial metrics in explaining the market value of companies. A research shows that the value perceived by the customer who drives corporate value are different with those perceived by the corporate themselves. Through observation, it provides two insights- what management perceived important may not same as the factors that market considered as important and non- financial metric need to be industry specific.
There are some similarities between these proposals and the description of AICPA Special Committee on Financial Reporting- the performance of key business process largely depend on the factors that create longer tem value. The author concludes a few elements of useful presentation of non financial elements from the observation. First of all, the metrics need to be presented in a systematic and ordered way. The environment promotes measure of performance metrics for each rather than measuring the performance in theoretical terms. Another element is metrics presented must be shown in terms of industry or market. The author also observed that although unusual metrics is interesting, traditional measures is more useful as it can provide the information for the relationship between customer and employees, less costly to develop, more understandable, and more comparable from one entity to another. Besides that, the changes of metrics over time can provide consistency. Lastly, the metrics should, have ability to show changes over time, should show both good and bad news and provide information that enable comparison with comparable metrics presented by other companies,
Concerning on the cost and benefit, AICPA Special Committee outlined some ways for managers to control the cost of non-financial measurement. First, managers do not need to disclose the information that is outside the managers?expertise. Secondly, managers do not need to report those information which will harm a company憇 competitive position. Additionally, managers do not need to forecast a company抯 financial future. However, the users should be the one who take part in forecasting the financial future of the company. Moreover, managers do not need to gather information to manage the business. They just need to disclose the information that they know. Last but not least, manager can use flexible reporting.
In the modest proposal, the main objective of metrics for both old and new economy should be to capture and report business information that is not readily apparent from the financial statements. The approaches are in aim of having better metrics than those of in traditional so as to perceive value drivers in the new economy in terms of workforce, customers and ability to innovate.
Chapter 4: Intangibles Assets
This section examines the issues surrounding recognition and measurement of internally generated intangible assets such as research and development cost, computer software cost and so on. The discussion will be started from the definition of assets and intangible assets and follow by the structure of recognition criteria as well as three existing accounting standards that address intangible assets. It then continues to analyze the issue surrounding the recognition of intangible assets.
Both FASB and IASC similarly defines asset as a 揻uture economic benefits as a result of a past transaction or event, and is controlled by the entity? Assets can be divided into two parts which are noncurrent asset and current asset. The examples of noncurrent assets are properties, plants and equipment (PPE), building, machines and so on. While, cash on hands, bank and account receivables are the example of current assets. On top of that, FASB Exposure Draft also defines intangible asset as a noncurrent asset that lack of physical substance such as research and development cost, computer software cost, patent, goodwill, franchises and so on.
Besides that, there are four fundamental recognition criteria under Paragraph 63 of FASB Concepts Statement No. 5 to be followed to avoid any omission of recognition assets in financial statement. The first criterion is definition. As long as the item meets the definition of an asset, then it can be recognized in financial statement. Next, the second criterion is measurability. If the item has relevant attribute measurable with sufficient reliability, then it also can be recognized in the financial statement. The third criterion is relevance. If the information of an item is capable to make a difference in user decisions, then it can also be recognized in financial statement. Last but not least, the forth criterion is reliability. As long as the information could represent the faithful, verifiable and neutral, then it can be recognized in financial statement.
However, several questions about how to recognize intangible assets such as capitalizing or expensing it had been argued. Thus, three accounting standard have address on these questions. The first standard is FASB Statement No. 2. In this statement stated that the research and development (R&D) cost (internally generated intangible asset) should be charged to expense as it incurred. This is because there is an uncertainty of future benefits. The failure rate for the project is high even after the R&D stage. Besides that, there is also lack of causal relationship between research and development (R&D) expenditures and extended future benefits. So, it is better to recognition the R&D costs as an expenditure instead of capitalizing it. In addition, the R&D cost should be charged to expenditure because of inability to measure future benefit. This means that unless a resource抯 future benefits can be identified and objectively measured, it cannot be recognized as an asset for accounting purpose. Moreover, according to FASB Statement No. 2, capitalized research and development cost is not useful in assessing the potential profit of an entity. Thus, R&D costs should be recognized as expenditure because it is lack of usefulness if capitalizing it.
The second standard is FASB Statement No. 86. This statement divided the recognition of computer software cost (internally generated intangible asset) into two phases. The first phase is under Statement 2, the cost incurred to build the technological feasibility of a product is included in research and development (R&D) and should be recognized as expenditure. While, the second phase stated that the costs should be capitalized after establishing the technological feasibility and before the product is obtainable for general release. However, FASB chairman Dennis Beresford argues that, 搕he subsequent cost is inherently immaterial, so software development costs should be charged to research and development cost? This will result in more consistency in financial reporting because there are obstructions in determining when technological feasibility is found.
The third standard is International Accounting Standards (IAS) 38. This standard is similarly with Statement 86 where no intangible asset will be raised from research project instead it should be recognized as expenditure. A research project will only be recognized as an intangible asset if there have technical feasibility; intention and ability of adequate technical, financial and other resources to complete, use or sell it; generate probable future economic benefits and the ability to measure the expenditure attributed.
Furthermore, there is a significant gap between the expenditure and efforts that create the item and the identification of the item as a candidate for recognition. Some intangible assets are valuable items but it is hard to estimate. For example, the value of a particular brand name and newspaper mastheads are hard to estimate. Thus, several questions have arisen from it. For instance, the values will become apparent at what point? What expenditures gave risk to the value of the brand name, if the cost is measurement attribute? Therefore, three possible approaches had been address on it.
51Due原创版权郑重声明：原创范文源自编辑创作，未经官方许可，网站谢绝转载。对于侵权行为，未经同意的情况下，51Due有权追究法律责任。
51due为留学生提供最好的作业代写服务，想获取更多Paper代写范文，亲们可以进入主页 www.51due.com 为留学生提供Paper代写服务，了解详情可以咨询我们的客服QQ:800020041哟。-lc
