T M Rizki Azari (1101103010062) Dedi Setiawan (1101103010068) Mirza Firmansyah (1101103010133)

The Rejection of ARS #1 and ARS #3 By The Accounting

Profession
Failure to resolve the issue of accounting for business

combinations of goodwill
The Issue of Invesment Tax Credit
The Flow Through Method The Defferal Method

 The flow-through method viewed the tax credit as a

decrease in the income tax expense of the firm in the year the firm made the investment and obtained the credit. The defferal method viewed the tax credit as a reduction in the cost of the asset and reflected this over the life of the asset through reduced.

So based on their past experience, the American Accounting Association (AAA) Excecutive Committee decided to embark on a new and different type of theory effort. The committee took two years to produce the statement, meeting eight times (for a total of twenty days) during the process. They organized into subcommittees to complete the work. The operating principles of the committee allowed the publication of its statement if at least two-thirds of the committee members agreed. In fact, all nine members agreed, and the AAA published its statement in 1966, entitled A Statement of Basic Accounting Theory (ASOBAT)

To identity the field of accounting so that useful generalizations about it can be made and theory developed. 2. To establish standards by which accounting information may be judged 3. To point out possible improvements in accounting practice 4. To present a useful framework for accounting researchers seeking to extend the uses of accounting and the scope of accounting subject matter as needs o society expand
1.

ASOBAT indicated that the objective of accounting is to provide information for the purpose of: 1. Making decisions concerning the use of limited resources, including the identification of crucial decision areas and determination of objectives and goals 2. Effectively directing and controlling an organizations human and material resources 3. Maintaining and reporting on the custodianship of resources 4. Facilitating social functions and controls

Relevance 2. Verifiability/Objectifity 3. Freedom From Bias 4. Quantifiability

1.

 Relevant information is capable of making a difference in

the decisions made by users. Relevance requires financial information to be related to an economic decision. Otherwise, the information is useless.

Verifiability helps to assure users that information represents faithfully what it purports to represent. Financial information is supported by evidence and independent individuals can check them to see whether such information is faithfully represented. In other words, information is verifiable if it can be audited.

Referred to the ability of information to be impartial and neutral, that is, not being biased toward anyone or any side

Defined as the association of a number with a transaction or activity. This is how accounting oporates like a measurement system

In audition to specifying the four standards of accounting information, ASOBAT described the communication process in accounting and provided five communication guidelines. 1. Appropriateness to expected use 2. Disclosure of significant relationships 3. Inclusion of environmental information 4. Uniformity of practices within and among entities 5. Consistency of practices through time

End of Slide Thanks For Everyone