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    Behavioural Accounting Research & Qualitative Characteristics Identified by the IASB.
    See attached file for full problem description.


    One goal of behavioural accounting research is to assess the effect of accounting numbers and presentations on decision making.

    Design a case with alternative presentations of the same material or alternative numbers to be used to assess the impact of information on decision making.


    The International Accounting Standards Committee's Framework for the Preparation of Financial Statements identifies four primary qualitative characteristics

    a. Discuss the four qualitative characteristics identified by the IASB.
    b. Contrast and compare these qualitative characteristics with the qualitative characteristics identified by the FASB in SFAC No. 2.

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    Case 3-4
    a) Four qualitative characteristics identified by IASB:

    The International Accounting Standards Board is a renowned accounting body. It is autonomous and is located in London, UK. Its mission statement is "committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. In addition, the IASB co-operates with national accounting standard-setters to achieve convergence in accounting standards around the world."

    (Source www.iasb.org)

    The founder of it is IASC, International Accounting Standards Committee (IASC), which operated from 1973 until 2001. The main objectives are to make and publish in the public interest accounting standards and to work for the harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements.

    There are fourteen members of the IASB each having one vote of whom twelve are full-time members (ie employed only by the IASB). The Trustees of the International Accounting Standards Committee(IASC) appoint the Board members. The IASB is currently chaired by Sir David Tweedie.

    Its major functions are:

    1. It is responsible for setting International Financial Reporting Standards.
    2. It has taken the role of unification of the international standards worldwide, which will ensure transparency and dissemination of superior information to the users of the accounting information.
    3. It will also promote the use and rigorous application of those standards.

    http://cbdd.wsu.edu/kewlcontent/cdoutput/TOM505/page9.htm as retrieved on 24 Jul 2006 16:24:35 GMT.

    Four qualitative characteristics identified by IASB:

    Four principal qualities that make information useful: understandability, relevance, reliability, and comparability.

    Four qualitative characteristics identified by FASB in SFAC No.2 :

    The mission of the Financial Accounting Standards Board is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information" (FASB, 2006). Standards are necessary to allow the economy to function efficiently, because decisions about the distribution of resources rely heavily on credible, concise, and understandable financial information. Financial information about the operations and financial position of individual companies is also used by the public in making various kinds of decisions.

    The FASB framework has also disclosed these characteristics, but there is a hierarchy on them. SFAC No. 2 notes that useful information must have the characteristics of relevance, reliability, and comparability/consistency:
    "Primary Qualities
    ? Relevancy -- Information should be timely and bear on the decision-making process by possessing feedback and/or predictive value.
    ? Reliability -- Information must be faithful in representation; free from bias, neutral, and verifiable.
    Secondary Qualities
    ? Comparability -- Even though different companies may use different accounting methods, there is still sufficient basis for valid comparison.
    ? Consistency -- Deviations in measured outcomes from period to period should be the result of deviations in underlying performance (not accounting quirks)."
    In order to ...

    Solution Summary

    The solution answers two questions on behavioral accounting research and the IASB.