Financial Accounting Theory Essay Example | Topics and Well Written Essays - 3000 words

Financial Accounting Theory - try on ExampleOne of the prominent implementations of accounting theory is in terms of developing prescriptive standards. In these regards, accounting theory functions as a doer of legitimizing the discipline of accounting in that articulates standards and regulations that establish universe faith in the process (Deegan & Unerman 2011). Specific instances such normative theories are implemented can be witnessed in terms of assets, wherein normative theories explore how these elements should be recorded (Deegan & Unerman 2011). Another such instance is prescriptive standards regarding the amount of accounting information that should be supplied to various stakeholders. In addition to normative accounting theories, in that respect is also predictive or electropositive accounting theories. Positivist theory seeks to develop predictive insights establish on objective occurrences. There is an array of positivist perspectives. For instance, its noted tha t positivist theory seeks to vex predications regarding the nature of managerial compensation and accounting practices (Deegan & Unerman 2011). In these ways positivist accounting theories function twain to allow investors or stakeholders increased insight into accounting motivations, as well as a means of gaining a broader understanding of financial markets as a means of contri thating to more accurate normative structures. There are a number of concerns related to positivist accounting theory. To an extent I would take that I am a positivist. The notion of positivist accounting is linked to philosophical notions of theory. While virtuoso of the central tenants of positivist accounting theory is that markets are efficient, clearly this constitutes a low-cal version of the EMH as contained within it is the notion that corporations and accountants will act in self-interest contingent upon at times a partial understanding that accounting procedures will affect market conditions (T inker, Merino, and Neimark 1982). I accept the notion this weak notion of EMH, with markets responding to all available information, but also recognize that in many situations human deportment plays a highly important role in security valuations. Not simply in investor behaviour, but also in the self-interested behavior of accounting professionals. Considering that markets are oftentimes driven by external and intimate behavioral elements the propensity of a positivist approach to accounting theory, while to a great spot fallible, nonetheless holds the propensity towards tangible and functional insight (Chua 1986). In these regards I believe that positivist supposititious explanations of accounting practices and market conditions are essential to a progressive understanding of both human behavior and market impact. Ultimately, a furthered understanding, while understandable imperfect, can still contribute to more equitable and absolute accounting practices. In these regards, I while I would not entirely refer to myself as positivist I recognize the importance and effectiveness of positivist theory to the accounting profession. 2. Explain why you theorize regulation of financial accounting is needed or not needed. Recent occurrences in financial markets pitch brought to light the tremendous need for regulation of financial accounting. From an overarching qualitative perspective, one considers erroneous accounting procedures in organizations such as Enron, or the recent MF Global scandal wherein customer funds were unsuitably