Future Of Accounting

Accounting has evolved as human beings have evolved and as the concepts of the accounting field have been directly coined out from the fundamental principle of conservatism, it isn’t difficult to see why the fashion of accounting at every point in time has a direct connection with the era.

Future of Accounting

As man has evolved from a primitive era to a contemporary interdependence age, living has progressed from being subsistent as a hunter-gatherer to a knowledge driven globalized world concept of ‘effectiveness turning into greatness’ and along with this development itself accounting with the abacus has developed through stewardship accounting to financial accounting and today managerial accounting; that has an emphasis on decision making.

Future of Accounting

The Financial Accounting Standards Board (FASB) of the US which generally standardized and fortified the internationally adopted Generally Accepted Accounting Principles (GAAP) took significant strides in the year 2012 to come along with the International Accounting Standards Board (IASB) in a manner termed as ‘International Convergence’.

Such a convergence is anticipated to gradually harmonies the GAAPs and the IFRS until they become one and the same in a bid to flow line corporate/company reports to some uniform process globally.

1. Statement of the Problem

There is no absolute certainty as to what the future holds for the Accounting Profession. It consequently seems however, the future age which definitely would be one of scientific progress, would move man from greatness to something worthier for the moment. Spiritualism, Environmentalism and Developmentalism could be key elements in the future age.

This newspaper would be to learn if Accounting itself would be more of a reality supplying accurate answers to financial problems where man’s ability to value natural capital fairly would give rise to a substantial asset on the balance sheet in contrast to the industrial age when even man himself was regarded as labour rather than being considered as important as the machinery he operated.

2. LITERATURE REVIEW

This paper was approached from a content analysis perspective — both conceptual and relational. The conceptual analysis was simply to analyze the presence of the problem, i.e.

Whether there is a stronger existence of positive or negative words used with respect to the particular argument while the hierarchical analysis assembled on the conceptual analysis by analysing the relationships among theories. Much like other sorts of inquiry, initial choices in regards to what being studied has determined the chance of this particular paper.

3. Evolution of Accounting Theory

According to investopedia.com, Accounting Theory in the light of its evolution can be defined as the review of the two historic foundations of accounting training as well as the manner by which accounting practices are verified and added into the analysis and application of financial fundamentals. Accounting as a discipline is thought to have existed since the 15th Century.

From that time to now businesses and markets have continued to evolve considerably. Accounting theory must adapt to new ways of doing business, new technological criteria and gaps which are discovered in reporting mechanisms hence, it is a continuously evolving topic.

As professional accounting organizations help companies interpret and use accounting criteria, so perform the Accounting Standards Board help continually create more efficient functional applications of accounting theory? Accounting is the basis of efficient and effective small business management and intelligent managerial decision making, without which businesses and commerce world-wide would function blindly and fatally. It is therefore necessary to link how it’s evolved into its future function.

Luca Pacioli wrote a Maths publication in 1494 (ehow) that consisted of a chapter about the mathematics of business. While this book is thought to be first official book on accounting, Luca Pacioli has happen to be considered as ‘the father of bookkeeping’. In his Math’s book, Pacioli explained that the successful merchant needed 3 things:

Sufficient money or credit; a bookkeeping system which could tell him he is doing; and also a good book keeper to run it. Pacioli’s theory still holds now, it comprised both journals and ledgers and it’s thought to have popularized the use of the double entry accounting that was in place since the late 1300s.

The First Change in Accounting

The concept and the thought were transformed into a method determining if a company is operating effectively or utilizing a surplus of labour and resources.

The new concept of price accounting enabled a trained book-keeper or an accountant to utilize the publication kept to extract financial reports to show the efficiency represented by such data. This new idea led to the survival of companies during the depression; business that could otherwise have neglected without an intelligent management decision making informed by means of a price accounting breakthrough.

The American Revolution British Courts Impact

The conclusion of the American Revolution saw the very first United States (US) governmental bookkeeping system being created in 1789 and it was established to account for and manage the treasury of the United States. The double entry practice and concept were adopted. The British courts ruled that they wanted professional accountants to earn financial data in relation to court cases. Chartered accounting bodies/ concepts were introduced in Britain (and in the US in particular, the Certified Public Accountant — CPA). Back in 1887, the first Icelandic exam emerged with Frank Broker becoming US’s initial CPA.

Modern Cost Accounting

This was first launched by General Motors (GM) Company in 1923 and it developed techniques that helped cut its costs and streamlined operations and this stayed important for more than 50 decades. The new accounting methods developed contained return on investment, return on equity and GM’s flexible/adjustable budget idea.

Accounting Concepts and Conventions

Back in 1953, the Generally Accepted Accounting Principles (GAAP) was updated to new criteria, CAP became Accounting Principles Board (APB) in 1959 and later in 1973, APB (having suffered from bad direction) was substituted by Financial Accounting Standards Board (FASB) with higher powers and opinion because of its professional stance.

International Financial Reporting Standards

It’s widely considered that development of accounting profession in any nation and around the globe is a combined effort of both bookkeeping theoreticians and practicing accountants. Thus, the framework of accounting is a harmony of efforts whereby professional accounting bodies are usually in the lead of a route to regulation and standardization of topics concerning accounting.

The Nigerian Scenario

Back in Nigeria, the case is not different from what’s already been discussed. The majority of the country’s accounting standards (concepts and traditions) were inherited from the British colonial masters. Because, the world has really turned into a large international village using globalized accounting bodies supervising and making certain that all member nations are abreast with current Generally Accepted Accounting Principles.

Nigeria has also labelled along making many public sector and private sector reforms the latest and famous of which include the endorsement by the Federal Government in July 2010 to adopt International Public Sector Accounting Standards (IPSAS) for its public sector along with also the International Financial Reporting Standards (IFRS) for its private sector as a conscious effort to ensure a uniform graph of coverage system throughout the country by both the public sector and private industry.

International Convergence of Accounting Standards

This idea is both a goal and a route taken to accomplish such a goal. The FASB believed that the ultimate objective of convergence is one set of high-quality, international accounting standards that, companies world-wide would use for both national and cross-border fiscal reporting. To this end, conscious attempts are being made with the FASB and the IASB to collectively eliminate the differences between the ‘GAAP’ and the ‘IFRS’.

One such conscious attempt was made on the April 5th 2012 when an update report has been submitted to the Financial Stability Board Plenary on Accounting Convergence. The increasing demand by international capital markets driven by investors’ desire for high-quality globally comparable financial information is as a result of the usefulness it’s anticipated to instantly provide for decision making and subsequently accurate answers to problem solving.

To provide a pictorial view to this paper, two (2) illustrations are utilized to produce presentations (interpretations) of the findings. Illustration.1 traces the growth of Accounting; its principles, roles, concepts, professionalism, standardization and internationalization. Illustration.2 on the 1 hand relates Accounting development with Human evolution and on the flip side it broadens the understanding of the reader with regards to the subject matter.

Idea of Natural Capital

The reader (consumer) of this paper readily discovers a past-present-future view of the part of Accounting and it succeeds to postulate finally exactly what the potential of underwriting could (or should) be. Self-Accounting is not a terminology found in the literature of Accounting but is used here to portray any crude Accounting system which was maintained by traders long before double-entry. Self-Accounting, thus, was the last of Accounting once the function of Accounting was merely to have records of Incomes and Expenses, reveal Liabilities and not necessarily showing Assets and profits as distinguished by the personal or private earnings/estates of a trader. Assets at times might have been recorded as expenses. These are assumable because most companies operated (and operate) as sole-ownerships.

These three provide the nexus of what Accounting is today. The stewardship aspect is so referred to since rich merchants in Europe and the Americas at that time educated their slaves to leave book-keeping services. So the merchants themselves did not have to do the jobs. Financial Accounting was designed to give standard to fiscal reporting especially for the users of these reports that are mostly to the companies concerned. Managerial Accounting evolved to supply records which would help the decision making process of the owners and managers of companies. Generally all three functions of bookkeeping as at present aid stakeholders to make good judgments regarding their dealings with companies.

These stakeholders might or ‘might not’ have rights to get the reports so discussed. The investigators include; lenders and government (having rights to receive just financial reports); the shareholders, investors and direction (who make use of the fiscal reports along with the managerial accounts ); the worker and the management group (who would be the users of all of the reports: book-keeping, financial reports and managerial reports); and the competitors, resident community and clients — who do not have rights to receive such reports but can recover financial reports (annual reports) to help their decisions with regards any company of interest to them.

Having precise records (reports) support good decision making but sometimes bad interpretation and judgment of the reports and their listed results may result in poor decisions taken. The three characters of bookkeeping presently have been the bed-rock by which accounting standardization of principles and processes have evolved to date. The Emerging Role (Future) of Accounting then must be expected with keen readiness with respect to what should be probable. Illustration.2 will do justice to this concept.

What is Reality Accounting and what should Truth Accounting encompass? Wikipedia.com defines reality as the totality of things, structures (actual and Profession), events (past or present) and happenings whether visible or not. Truth is thus seen as a term that connects ideologies to world views or part of them (conceptual frameworks). Reality Accounting is near ‘Fair Value Accounting’, which is both a foundation and theory of accounting. And it appears to be changing into the Future Role of Accounting.

In Financial Accounting, it is easily found that accounting reflects corporate and economic realities as they are, even though it’s common sense to understand that accounting cannot adequately reflect reality particularly in relation to the technical limitation of double-entry accounting and Fair Value Accounting. Included in the changes emanating from Reality Enforcement, a new concept of’Natural Capital’ has surfaced.

In the Conference, a Natural Capital declaration was made such that Natural capital is now known to be containing of Earth’s natural resources (soil, air, water, flora and fauna) and the ecosystem services resulting in them, making human life possible. It estimated that ecosystem products and services out of natural capital are worth trillions of US dollars each year and comprise food, fibre, water, health, energy, climate security and other essential services for everybody.

The Idea of Natural Capital

Neither the solutions, nor the inventory of Natural Capital that supplies them are adequately valued in comparison with social and financial capital despite being fundamental to all that exists. The daily usage of Natural Capital remains grossly undetected within our financial system. There is therefore the need to utilize Natural Capital in a manner that is sustainable. All stakeholders, including the private sector and authorities must start to appreciate and accounts for the usage of Natural Capital and recognize the real price of its economic growth in addition to sustaining human wellbeing now and later on.

Natural Capital Framework

Natural Capital though handled as a free great but have to be seen as part of a global pool of wealth for which governments must act now and wisely to create a frame that shall govern, reward or tax the private sector because of its usage. Reliable policy frameworks that may report the value, use and depletion of natural capital must be the intent of any government desirous of creating a fantastic beginning with this new accounting occurrence.

Deeper economic effect is given to accounting under Truth Accounting since all that are regarded as real are only truly real in their own outcome and not in their own physical. Thus the value of Natural Capital for instance could be the value determined after considering a variety of factors that give rise to such valuation. These variables include the size, existence of mineral assets, location, other natural resources, presence of animal and plant life etc..

CONCLUSION

As man sees greater heights in a modern world full of scientific and research discoveries, Applicants should ponder what the emerging part of their profession must be. From merely providing information on the wellbeing of a business to financial reporting as a corporate obligation and now decision making managerial approach for future predictions.

What then does this future hold for bookkeeping or how is bookkeeping anticipated to stay professional and applicable in that future which seems would be molded by environmental and developmental challenges all over the globe. As accurate reports and records have affirmed great decision making though occasionally bad interpretation and conclusion of their reports and their recorded results have contributed to bad decisions taken, the current roles of bookkeeping, which have shaped the bed-rock with which accounting standardization of fundamentals and procedures have evolved are now confronting noticeable alterations.

Under the scope of Truth Accounting, it’s clearly observed that concepts such as International Convergence, Natural Capital, Environmentalism, Develop mentalism and Fair Value Accounting will sooner than latter set the route for the future of accounting.

This newspaper will be to stimulate academic arguments against or for the subject matter in order to bring to the consciousness of accountants about a subconscious shift that’s already happening. It is strongly recommended therefore that seasoned investigators should come forth with further thoughts, summaries and reviews that can boost a clear pathway to the future of accounting.

This paper derives that Truth Accounting is close to ‘Fair Value Accounting’, which is both a foundation and theory of bookkeeping which seems to be transforming in the Future Role of Accounting.

It also uncovered the character and concept of natural capital in regard to Natural Capital framework and finally submits that International Convergence, Natural Capital, Environmentalism, Develop mentalism and Fair Value Accounting will be theories which will sooner than latter type a path to the future of bookkeeping.

The paper calls for academic arguments for or against the topic and recommends that seasoned investigators should come forth with further thoughts, summaries and reviews which may improve a clear pathway for the future of accounting.