Article Analysis Article Analysis HISTORICAL DEVELOPMENT OF THE FINANCIAL REPORTING MODEL FOR AND LOCAL GOVERNMENTS IN THE USThe study focuses on how financial reporting model developed from the 1800s to 1999 for state and local governments in the United States. The model aimed at resolving some issues concerning the financial statements leading to issue of the Government Accounting Standard Board. For instance, it addressed the issue of bringing together or rather combining the financial statements of both state and local governments. It focused on addressing the issue concerning the scope of economic resources of both governments.
Additionally, it addressed the importance or reason for preparing the financial statements-for external or internal use. There were two types of financial reporting: governmental and commercial. The two models are similar in a sense that they all deal with financial data to specific stakeholders. The difference is that governmental reporting addressed issues of government expenditure and revenue in determining the surpluses and deficits whereas the commercial reporting addressed the issue of cash inflows and cash outflows in determining the profits and losses of a firm. The commercial financial reporting addressed stakeholders like creditors, investors, directors among others whereas the government reporting addressed the citizens, legislative bodies, government administrators among others.
Additionally, the commercial stakeholders focus on evaluating the financial statements of the business in order to understand its stability in financial performance. This helped them in making financial decisions towards the business. For instance, the investors will study the financial statements and make investment decisions in order to avoid the risk of losing large sums whereas the creditors studies the financial statement in order to know the credit worthiness of the borrower in order to avoid default risk.
On the other hand, the government stakeholders study the financial reports to ensure and facilitate accountability and transparency within public finance. This ensures that government officials are accountable, operate according to the budget, and eradicate the issue of corruption (Patton & Hutchison, 2013). Two accounting groups facilitated this process: the National Municipal League and Municipal Research Bureau. These two groups published accounting books concerning government expenditure and revenues. This led to development of balance sheet to record the government assets and liabilities in 1909. THE RELATIONSHIP BETWEEN RELIGIOUS BELIEFS AND THE ACCOUNTING AND ECONOMIC PRACTICES OF A SOCIETY: EVIDENCE FROM THE DEAD SEA SCROLLS The Examiner was the Essenes’s guardian and leader.
He made decisions concerning both social life and economic matters. For instance, he handled issues of marriage, divorce, and discipline in the Essenes community. He handled economic issues concerning property, wealth, business among others as well. Examiner kept records concerning property, signed contracts with outsiders, and regulated the rules concerning the foreigners; he was responsible for collecting taxes and performed auditing to facilitate accountability and transparency.
There were many literacy texts in the Dead Sea Scrolls: Damascus Document and the Community Rule among others. The two texts differed in a style. For instance, the property belonged to the community and taxation was evil according to the community Rule but Damascus Document opposes this and supported that there was personal property and communal property and it was sinful to lie about it- there was a two day taxation of the community members. Religious values influenced an organization’s accounting practices because the practices had to meet the society’s expectations and needs.
The Essenes community believed in an economic system that would save their faith because they believed in life after death. The community believed that there would be a God’s final judgment after death- the evil ones would burn in hell, and the sons of light will celebrate. For instance, they forbid anyone working on Sabbath day, practicing fraud or corruption, greedy and not helping others and giving tithes among other practices. Furthermore, Community Rule supported the idea that there should be equal distribution of the community’s economic resources among all the members to support the needy.
This would fulfill the law of ‘loving your neighbor as you love yourself’ (Herda et al. , 2013). The community forbids the business transactions within the community with aim of earning profits. They practiced barter trade for mutual help not benefits. Any buying or selling transaction was evil and ungodly. They only allowed this when dealing with outsiders. RAILROAD INVESTING AND THE IMPORTANCE OF FINANCIAL ACCOUNTING INFORMATION IN 1880s AMERICA Growth of railroads facilitated growth of the American economy.
For instance, it facilitated production of coal and iron. This is because proper transportation of the materials led to increase in demand. To cope with this demand, the rate of production increased in order to increase supply of the material. These expansions lead to increase in the railroad revenues to the government and profits. This encouraged investment in the security market. The majority of New York Stock Exchange shares and bonds came from railroads. In the 1885, many industries joined regardless of their inability to provide financial information to the stock exchange.
This gave the railroads a competitive advantage because they were able to produce financial statements. In 1887, the state passed the Act of Regulate Commerce. This act favored the railroads because they were able to regulate their own charging rates. This facilitated financial reporting where the railroad produced information concerning dividends, debts, interest, equipment, salaries and wages, earnings, payments among other contents in the balance sheet. This was important to many investors to avoid making investment mistakes. This enabled them to buy stocks when the price was low and sell their stocks at the right time when returns were high.
Additionally, the investors will be able to learn the competitors in the market and choose the right stock options that will earn them dividends (Thompson, 2013). THE IASB AND ASBJ CONCEPTUAL FRAMEWORKS: SAME OBJECTIVE, DIFFERENT FINANCIAL CONCEPTS The objective or the general purpose of financial reporting is to make decisions concerning investments in entities and stock markets among others. The investors make investment decisions based on the income of the entity and their financial forecasting.
Both IASB and ASBJ agree on this. However, the two conceptual frameworks disagree in financial performance. Financial performance concept deals with the financial information of a firm or business that displays its financial position. There are elements like assets, liabilities, equity, cash inflows and cash outflows among others that shows how good or bad a business is performing. The 2010 IASB Framework considers the changes in balance sheet items assets and liabilities as earnings or spending whereas 2006 ASBJ Framework DP considers the changes in assets and liabilities as profits and losses in cash flow statements where they are either cash receipts or cash payments or assets disposed off (Mourik & Katsuo, 2015). References Herda D., Reed S.
& Bowlin W. (2013). The relationship between religious beliefs and the accounting and economic practices of a society: evidence from the Dead Sea scrolls. Accounting Historians Journal, 40 (2), 115-144. Mourik C. & Katsuo Y. (2015). The IASB and ASBJ Conceptual Frameworks: Same Objective, Different Financial Performance Concepts. Accounting Horizons, 29 (1), 199-216. Patton T. & Hutchison P. (2013). Historical development of the financial reporting model for state and local governments in the united states from late 1800s to 1999.
Accounting Historians Journal, 35 (2), 21-54. Thompson J. E. (2013). Railroad investing and the importance of financial information in 1880s America. Accounting Historians Journal, 55-90.