The profitability is dropping at Elijah Heart Center (EHC), the coronary care unit, because of high wages to contract nurses, low Medicare reimbursement, and unused equipment, which is not billed. The main points of the financial accounting plan for improving the turnaround of the organization include covering the capital shortage, cost-effective equipment acquisition strategies, and the selection of options for capital expansion.
Capital shortage
Selecting the cost-saving strategies for preventing the potential working capital shortfall, the finance department should focus on saving costs in the long run and ensuring the high quality of the health care services. The optimal cost-cutting options are reducing agency staff and changing the skills mix of the employees. Gordon (2005) noted that “In a cost-competitive system, persons with the lowest level of training who can do the job are employed, under the assumption that higher training leads to greater compensation” (p. 253).
Though a number of researchers criticized the decision of hiring the unlicensed personnel because of its impact on the quality of the services, this strategy allows delegating simple tasks to the less trained workers and reducing costs on their wages because of the salaries of agency-contracted employees are twice as unlicensed assistive staff.
As to the choice of a suitable loan option for maintaining good cash flow, the first option with 9.45 % of the fixed interest rate and without the prepayment limitation is preferable for meeting the cost-saving target. Zelman et al. (2003) noted that “Health care providers are attracted to fixed-rate debt because of the predictability of future payments” (p. 279). On the other hand, the prepayment limitations become a hindrance for closing the loan earlier. Though the interest rate in the first option is higher than in the second one, it is possible to close it in three months, saving the costs in the final analysis.
Reducing the agency staff and changing the skills mix of the employees would allow EHC to save $ 811 249 in the first quarter that is even more than the target, and the loan option without the prepayment limitations would help to maintain the cash flow.
Funding options for equipment acquisition
One of the problems at ECH, causing the drop in profitability of the unit, is the unused equipment, which is not billed, and this issue should be handled for using the available resources effectively. Health care institutions can decide between buying new equipment, buying refurbished equipment, and options of operating or capital lease for replacing the aging equipment. Nah and Osifo-Dawodu (2007) noted that “Cost per use is usually more significant than initial purchase price” (p. 212).
A comparison of the current prices on the equipment in the market is insufficient for selecting the best options. Each of High-Speed CT Scanner, X-Ray Machine, and Ultrasound Systems, which the department plans to buy, should be treated separately for selecting the cost-effective equipment acquisition options in every individual case. Considering the fact that a High-Speed CT Scanner is medium technology equipment, and its useful life is ten years, buying a refurbished one would be an optimal decision. A capital lease is the best option for acquiring an X-Ray Machine because the opportunities for potential technology upgrades are minimal, and this equipment can be utilized for a rather long period of time.
As to the Ultrasound Systems, its useful life is five years, and operating lease is the best option, which allows the department to cut costs on buying the new model and taking advantage of the technological advancements when its useful life is over. Eastaugh (2004) noted that “The main advantage of lease financing is that it allows the healthcare institution to be more flexible with regard to rapid technological changes in medical equipment” (p. 203).
The outcome of implementing various strategies for buying refurbished health care equipment or deciding between the capital and operating lease options would allow using the resources effectively and considering the demands of upgrading the equipment when it is necessary.
Funding options for capital expansion
As to the third issue of choosing the strategies for capital expansion, the option of the HUD 242 Loan Insurance Program is the most effective strategy, which is helpful for maintaining the successful turnaround of EHC. Gregg, Knott, and Moscovice (2002) noted that “The HUD 242 program has made billions of dollars available for hospital projects that otherwise might not have been completed” (p. 41). This funding option allows saving costs in the long run and is the optimal decision for this coronary care unit.
The loan maturity is 25 years, while the annual premium of 0.5 % coupled with 3.40 % of bonds of the cost funding is the advantage of the strategy.
Swayne, Duncan, and Ginter (2006) noted that the examination of the financial resources is prior to the selection of capital expansion strategies (p. 398). The outcome of the implementation of the chosen strategy was not only the maintenance of the cash flow at EHC but also the expansion of the capital, which opened up new opportunities for further development of the unit.
Summary and conclusions
Working on the simulation plan, I learned the main financial indicators, which are crucial for developing a cost-effective program for bridging the capital shortage, acquiring health care equipment, and expanding the capital, taking into account the long-run perspectives of the health care unit.
If I performed the simulation again, I would pay more attention to the selection of other equipment acquisition strategies analyzing their advantages in a particular health care environment.
It is important that the simulation plan helps to establish the cause-and-effect relationships between the implementation of effective strategies and their impact on the turnaround of the whole unit. The knowledge of the available options of equipment acquisition would be valuable for my job.
Reference List
Eastaugh, S. (2004). Health care finance and economics. Sudbury, MA: Jones and Bartlett Publishers.
Gordon, S. (2005). Nursing against the odds. New York, NY: Cornell University Press.
Gregg, W., Knott, A., and Moscovice, I. (2002). Rural hospital access to capital: issues and recommendations. University of Minnesota Rural Health Research Center- Working Paper 41.
Nah, S., and Osifo-Dawodu, E. (2007). Establishing private health care facilities in developing countries: A guide for medical entrepreneurs. Washington, DC: The World Bank.
Swayne, L., Duncan, W., and Ginter, P. (2006). Strategic management of health care organizations. Malden, MA: Blackwell Publishing.
Zelman, W. et al. (2003). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications. Malden, MA: Blackwell Publishing.
Definition of carbon management accounting and four different ways within which companies can approach carbon management
Environmental pollution is one of the major issues that the corporate world faces. Therefore, it is critical for organisations to ensure their operations are sustainable. Carbon is one of the major environmental pollutants. Therefore, companies strive to reduce the carbon footprint in their products. Cap-and-trade system forces companies to reduce their carbon emissions.
Carbon management is one of the contemporary management issues of companies. Carbon management is the “management system that identifies greenhouse gas (GHG) emission opportunities from the production processes and implements corrective measures to reduce the GHG emissions” (Wimmer et al, 2010, p. 89).
Sequestration, separation, capture, and conversion to useful productions are the major techniques of carbon management. Sequestration involves removal of carbon from flue gases prior to storage for other purposes. Sequestration also involves use of non-carbon energy production processes (Tester et al, 2005, p. 179). These include nuclear, solar, or biomass. A company can convert waste carbon carbon to useful products.
These include plastics and construction materials, which the company may sell to earn an income. In addition, a company can separate carbon from fuels prior to combustion. This would create a hydrogen rich fuel, which is easily combustible. Separation and capture lead to a significant reduction in the amount of carbon in the fuel and waste of the company.
The company may use captured carbon in other production cycles within the manufacturing process of the company. This would lead to a significant reduction in the amount of carbon that the company releases (Eliasson, Riemer & Wokaun, 1999, p. 457). In future, technological advancements would make it cheaper for companies to manage their carbon emissions.
Currently, conversion of carbon to useful products is the most economically viable carbon management technique. This is because sale of the products offsets the cost of carbon management (Wang, Pereira & Hung, 2004, p. 101).
Characteristics of both monetary carbon accounting and physical carbon accounting: past oriented routinely generated short term and long term information; and future oriented routinely generated short term and long term information
There are two major methods of quantifying ecological debt of a company’s activities. These are monetary carbon accounting and physical carbon accounting. Physical carbon accounting is a measure of the ecological damage through pollution, depletion, or degradation. On the other hand, monetary carbon accounting is a monetary quantification of the effects of a company’s activities (Paredis, Goeminne & Vanhove, 2009, p. 71).
Monetary and physical carbon accounting information may be past oriented or future oriented. In addition, the focus of the information may be short term or long term. Cost accounting is the major short term, past oriented information of monetary carbon accounting. Carbon capital expenditure is the major long term, past oriented information of monetary carbon accounting.
On the other hand, carbon flow accounting is the major short term, past oriented information of physical carbon accounting. Carbon capital impact is the major long term, past oriented information of physical carbon accounting (Burritt, Schaltegger & Zvezdov, 2010, p. 82).
Monetary carbon operational budgeting is the major short term, future oriented information of monetary carbon accounting. Carbon long term financial planning is the major long term, future oriented information of monetary carbon accounting.
Physical carbon accounting is the major short term, future oriented information of physical carbon accounting. Long term physical carbon planning is the major long term, future oriented information of physical carbon accounting (Burritt, Schaltegger & Zvezdov, 2010, p. 82).
Determinants of the volume and type of information in an EMA system
Managers of an organisation are the primary users of carbon related information. Therefore, the quantity of managers who may require the carbon related information is the major factor that determines the volume and type of the information. The information needs of managers are dependent on the organisational structure. An organisation may have functional or decentralized managers.
Handling of carbon related issues may determine the likelihood of an organisation changing its organisational structure to accommodate the needs of the organisation. An organisation may add a new functional department to handle carbon related issues or develop new systems within the existing departments to handle carbon related issues (Burritt, Schaltegger & Zvezdov, 2011, p. 83).
In addition, the major activities of the organisation determine the type and volume of information that an EMA system provides. An industrial firm may provide more volume of information due to the huge financial impact of waste on the company’s profitability and competitiveness than a non- industrial firm (United Nations, 2002, p. 13).
Four factors that determined the selection of companies for the purpose of the exploratory study involving 10 German companies
An exploratory study involving 10 German companies helped in determining the efficient carbon management practice. Interviewers asked the German companies 40 questions. Researchers chose the companies on the basis of their sustainability management commitment and sustainability programmes. Interviewers chose companies that had recently worn sustainability awards and had exemplary sustainability reports.
The researchers also used the necessity to have a complex structure, and an accounting system that incorporates non-financial information in choosing the companies. The researcher chose the companies on the basis of the industry of the operation of the companies. The researchers ensured that the research covered a wider variety of industries.
Researchers also used the willingness of companies to allocate resources to facilitate their active participation in the research, instead of merely providing published reports, in choosing the companies that participated in the research (Burritt, Schaltegger & Zvezdov, 2011, p. 84).
How researchers collected the information
In any research, it is critical for researchers to get an overview of the research issues prior to the research. This increases the effectiveness of the research. In the study, researchers used initial interviews with sustainability managers of the companies to get a synopsis of the carbon related issues of the companies. Afterwards, the researchers interviewed a senior accountant of the company who was in charge of carbon related information.
Interviewers also interviewed internal users and providers of carbon related information. Interviewers carried out the bulk of the interviews on site. The researchers conducted the rest of the interviews by telephone. In conducting the research, the interviewers used 40 interviews. Each interview took around 90 minutes (Burritt, Schaltegger & Zvezdov, 2011, p. 84).
The researchers used semi-structured questionnaires prior to them main research. The semi-structures questionnaires helped the interviewers concentrate on management and information collection practices of the companies. The interviewers collected climate change related information with relation to the importance of the information to the company (Burritt, Schaltegger & Zvezdov, 2011, p. 84).
Analysis of Information that researchers collected from German companies for the purposes of carbon accounting in terms of physical and monetary information
Usually, monetary and physical quantification of carbon accounting is complementary. In most instances, monetary quantification is not a necessary step in determining the ecological debt of human activities. Physical quantification is the main measure that has policy implications. However, companies give special emphasis to the monetary quantification as shows the financial implications of carbon related information on the company.
Regulatory bodies usually give special emphasis to the physical quantification (Paredis, Goeminne & Vanhove, 2009, p. 71). However, the complexity of quantifying carbon in monetary terms makes it hard for some organisations to use monetary carbon accounting.
In the research, two companies collected only monetary information and four companies collected only physical information. The other four companies collected both physical and monetary information. Ease of collecting physical information makes most companies employ physical carbon accounting.
The Enterprise Resource Planning (ERP) system of a company can easily collect the physical information. The companies collected the physical information in order to determine the future costs of physical flows (Burritt, Schaltegger & Zvezdov, 2011, p. 86).
In some instances, companies used the physical carbon information to produce monetary information. Therefore, regardless of the focused on monetary or physical data, it had to collect physical information.
From the research, it was clear that the companies strived to reduce their emissions beyond the environment agencies requirements. CMA helps the companies in tracking their emissions (Burritt, Schaltegger & Zvezdov, 2011, p. 87).
Focus and orientation of the carbon related information
The focus of carbon related information of four companies that took part in the research was long term short term, whereas nine companies had a short term focus. On the other hand, eight companies focused on past oriented information and seven companies focused on future oriented information (Burritt, Schaltegger & Zvezdov, 2011, p. 88).
The companies were justified in employing the diverse information collection practices in their Environmental Accountability Framework. The companies fulfilled the four dimensions of the framework. The dimensions are physical and monetary, short term and long term, routinely generated and ad-hoc, and past and future oriented. The German companies recorded their weekly emissions of carbon due to traveling.
In addition, the companies had monthly collection of the expenses that they incurred due to emission reducing measures. Some of the emission reducing measures of the companies included purchasing carbon neutral electricity and emission certificates.
The companies also had investment appraisals that took into consideration the future price of carbon emissions, and the amount of funds that the company would save by utilising various alternatives (Burritt, Schaltegger & Zvezdov, 2011, p. 88). Thus, the companies had a long term carbon budgeting. This ensured the long term profitability and survival of the company (Marinova, Annandale & Phillimore, 2006).
Explain why the collection of carbon related information presents a “serious challenge” to existing information systems
The existing information systems of various companies face a serious challenge in collection of carbon related information. One of the major challenges is due to the vast amount of carbon related information. Carbon related information may traverse all departments of the organisation. This makes it difficult for an organisation to organize the vast amounts of information for use within the company.
In addition, the vast amount of information limits the integration of the information systems of a company, which is vital for the efficient running of the company. Lack of technical solution leads to generation of greater amounts carbon related information, which increases the inefficiency of the organisation’s processes (Burritt, Schaltegger & Zvezdov, 2011, p. 89).
Generally, different departments of an organisation collect information that is directly related to the department. However, if there are no uniform management systems, various departments may collect the same information instead of utilising information that a different department has collected previously.
This leads to inefficiency of the organisation. Therefore, it is vital for an organisation to have an integrated that system of collection of carbon related information (Burritt, Schaltegger & Zvezdov, 2011, p. 90). It is vital for an organisation to have an ERP system that incorporates carbon management accounting in its activities.
Differentiation of settings in terms of the number of professionals or departments that are involved in the information collection practices
One can differentiate two settings while taking into consideration the number of professionals or departments that are involved in the collection of carbon related information. In the first setting, an organisation may use few departments in collecting carbon related information, whereas in the second setting an organisation use many departments in collection of carbon related information.
In the first setting, a carbon related department may ask other departments to collect their carbon related data. The carbon related department then compiles the data for presentation to the higher management of the organisation. Usually, few people are involved in the collection of carbon related data.
This limits the resources available for collection of the data. In addition, since the carbon related department does not understand the working of the other departments intricately, it may neglect information that is relevant in collecting the carbon related data of the department (Burritt, Schaltegger & Zvezdov, 2011, p. 90).
Allowing various departments to collect their carbon related data increases the number of people who undertake the activity. This results in collection of more relevant data, as the employees in the departments are conversant with the carbon related activities of their department.
In addition, it enables the carbon related department to concentrate on compiling data. This leads to the generation of highly accurate carbon related information (Burritt, Schaltegger & Zvezdov, 2011, p. 90).
Impact of the number of departments and professionals that take part in carbon accounting practices on the transaction costs
There is a direct relationship between the number of professionals or departments are involved in carbon accounting practices with the transaction costs. Increasing the number of departments or professionals that collect carbon related information may increase the costs of collection of carbon related data.
This is because departments and professionals may collect similar information. This increases the inefficiency of the collection method. On the other hand, having few professional or departments collecting the carbon related information may lead to disregard of certain vital information. This may make the carbon related information be irrelevant.
Ideally, the carbon related department should collect all carbon related department. The department must avail the information to other departments that may need it in their decision making processes. A company should ensure that it has an integrated system enables all employees of the organisation to access all the carbon related data that they may require.
References
Burritt, RL, Schaltegger, S & Zvezdov, D 2011, Carbon management accounting – practice in leading German companies, Australian Accounting Review, no. 56 vol. 21 issue 1, 80-98.
Eliasson, B, Riemer, P & Wokaun, A 1999, Greenhouse gas control technologies, Elsevier, Oxford.
Marinova, D, Annandale, D & Phillimore, J 2006, The international handbook on environmental technology management, Edward Elgar Publishing, Cheltenham.
Paredis, E, Goeminne, G, & Vanhove, W 2009, The concept of ecological debt: its meaning and applicability in international policy, Academia Press, Gent.
Tester, JW, Drake, EM, Driscoll, MJ, Golay, MW & Peters, WA 2005, Sustainable energy: Choosing among options, MIT Press, Cambridge, MA.
United Nations, 2002, Environmental management accounting policies and linkages, United Nations Publications, Washington, DC.
Wang, LK, Pereira, NC & Hung, Y 2004, Advanced air and noise pollution control, Springer, London.
Wimmer, W, Lee, K, Quella, F & Polak, J 2010, ECODESIGN – The competitive advantage, Springer, London.
Curricula have a significant role in the education process as they clearly define how educators and students should spend their time to achieve outstanding results. It is possible to say that a curriculum determines the learning outcomes and individuals’ ability to apply acquired knowledge to practice. However, designing the curriculum can be a challenging task because it should consider various aspects of learners’ development, including not only academic performance but personal development and intelligence. Thus, it is necessary to develop a comprehensive curriculum addressing individuals’ needs along with classic learning standards.
There are several methods in which a curriculum can be organised, two of which are based on aims and knowledge. The main differences between these approaches are that the first one is based on achieving learning objectives and meeting personal needs while the second one concentrates on gained knowledge; these points will be discussed in detail below. Basing on my own background, I will discuss the curriculum about accounting. My major in undergraduate is Accounting and Finance. Therefore, I am interested and eager to learn more about the curriculum in accounting, at the undergraduate level in particular. Because of the familiarity with accounting, the study on this field seems to be more convenient. The purpose of the accounting curriculum is to ensure that lessons are organised in a way to help students in preparing for their future occupation effectively. It means that the curriculum should be examined and tailored to this objective. As accounting involves various stakeholders, such as potential investors, private individuals, and corporations, they may have different perceptions.
The primary question this paper answer is: Should the curriculum be the aims-based or knowledge-based approach to study in accounting? The objective of the paper is to analyse each of these approaches to curriculum, outlining their strong and weak points, and conclude which of them is the most effective in the field of accounting. The report provides a literature review on existing studies on the issue and develops an argument based on the findings. The paper features several studies that address both types of curriculum, discussing their benefits and potential limitations. In addition, the report offers a discussion of the selected researches and their arguments and provides a possible example of an effective curriculum. The report concludes that an aims-based approach to developing a curriculum should be used in accounting as it is more beneficial for students.
Importance of Curriculum
In education, the topic of curricula is vital as they are the basis for the teaching content and methods (Null 2017; Taylor et al. 2015). It is vital for educators to develop an appropriate curriculum to ensure that students not only can gain the necessary knowledge and skills but retain them and be able to apply them to practice and their future work. An effective curriculum has a role in identifying what individuals learn in a program and how the educational process should be designed in terms of measuring, planning, and evaluating (Alghazo 2015). It helps an educator to align personal learning objectives with the school’s ones and assess whether students are gaining an understanding of the subject area.
Two types of curriculum, including aims-based and knowledge-based ones, can be outlined. An aims-based curriculum is designed according to the learning objectives. It means that the focus of such a type of curriculum is the results students are expected to achieve. Its components are developed based on students’ needs and serve the idea that individuals should be prepared for an autonomous life. Such an approach exposes learners to available options in their future career and allows them to make a choice based on their preferences (Reiss & White 2013). The knowledge-based curriculum, on the contrary, uses objective data to develop instructional techniques and design academic programs. It considers existing knowledge on students’ performance and the factors that affect it.
It is possible to say that this approach is more concentrated on learning standards compared to an aims-based one; it utilizes existing experiences and techniques that have shown effectiveness. If an accounting curriculum were aims-based, educators would develop lessons according to graduate students’ future needs. For instance, learners would gain knowledge in accounting but also learn how to manage challenging situations at work. Each of these types of curricula has benefits and disadvantages. The knowledge-based curriculum, in its turn, is focused both on gaining necessary knowledge in accounting. It is vital to analyse these approaches because an inappropriate strategy of teaching may lead to poor learning outcomes.
Challenges within the Accounting Curriculum
The primary challenge within the accounting curriculum is that accounting students are not only expected to have the necessary skills and knowledge in the field but also be aware of potential biases of the decision-making process, have enough experience in tax and auditing problems, and be able to lead an accounting team (Galletta 2015). It may be difficult to ensure all of these capacities using only one type of curriculum. Another challenge is that accounting involves various stakeholders, such as potential investors, private individuals, and corporations. They may have different perceptions of aims and knowledge-based approaches because their purposes vary. For instance, the knowledge-based approach may align with the needs of organisations wanting to employ single-functioned specialists, while the aims-based curriculum may ensure that an employee can resolve various issues in accounting and related fields. Thus, it is important to think about the offered curricula and their usefulness for students’ future needs and success.
Literature Review
Various arguments for both aims-based and knowledge-based approaches to developing curriculum can be found in the existing body of literature. As this paper addresses the field of accounting, several issues should be addressed before performing the literature review to evaluate the applicability of future findings correctly. First, accounting is a universal discipline related to all business dealings; for this reason, it is associated with change. Undergraduate students should be prepared to adapt to the development of the various spheres of business as the field is associated with continuous changes in tax policies, accounting services, and reporting (Garasym 2018). Second, there are several factors that affect the accounting curriculum. They include globalization, innovation, changes in the business environment, and common global practices (Babajide, Samuel & Egbide 2014). Considering these issues, the following arguments for aims-based and knowledge-based curricula can be outlined.
Aims-Based Curriculum
According to the aims-based approach, education should provide individuals with the ability to lead a prosperous life and help others to do so, too (Reiss & White 2013). Reiss and White (2013) argue that moral education is a significant part of this approach to developing a curriculum; educators should encourage individuals to achieve their goals and cooperate with each other. The authors argue that, generally, curricula are based on high-level mission statements and do not utilize a holistic approach to education (Reiss & White 2013). They claim that schools should need to transform from gaining academic knowledge to obtaining an understanding of how to perform necessary tasks, which is more related to students’ personal qualities. Reiss and White (2013) believe that aims-based education is an effective strategy as it teaches individuals how to assimilate and use available data, be confident, and lead a lifestyle that they enjoy. They add that it is necessary to challenge a conventional method of organising curricula because it may not provide efficient, practical skills to students.
Moore (2014) addresses the topic of the aims-based approach to education too. The author’s ideas are similar to the ones presented by Reiss and White (2013), as he notes that the curriculum should provide students with a capacity to think rationally, creatively, and critically, as well as enable them to respond positively to the difficulties the rapidly changing world presents. Individuals should be prepared to manage the diversity of the society, advocate for equal opportunities for all, a healthy democracy, and a productive economy (Moore 2014). The author claims that standard school curricula are based on international economic competition and focused on future employment prospects. It means that educators prepare students for becoming excellent candidates for employment but do not consider their ability to resolve non-standard issues. However, Moore’s (2014) ideas are slightly different from other authors’ ones, as he focuses on a therapeutic aspect of teaching, that is, the ability to enjoy the learning process. The author claims that such a factor is necessary for education as it allows for personal enrichment and development.
Another argument for developing an aims-based curriculum is presented in the research by Deng (2015). The author states that, in the modern world, schools are more concerned with learning outcomes, effective evaluation methods, and students’ competencies. Educational institutions in many countries, such as the United States or Palestina, are focused on standards and accountability rather than actual, not academic, knowledge (Ammar et al. 2017; Durand et al. 2016). The study shows that a lack of attention to this factor may be considered concerning because the modern learning discourse affects the way the public perceive education in general. Teaching is seen as facilitation of the learning process, which, in its turn, has become constructivist, enhanced by technology, and learner-centred (Deng 2015). In these settings, teachers and learners neglect the fact that knowledge itself has no educational value; it is a tool that students can use to achieve their goals. The author concludes that it is necessary to shift from the traditional approach to developing curricula and implement more knowledge-related questions in educational policies (Deng 2015). The study reveals that scholars should use critical and sociological theories to design more practically significant and innovative curricula.
The study by Young (2013) also addresses the aspect of non-academic “powerful knowledge” (109). The author notes that students are taught to perceive effective learning as a factor that can help them to progress to the next stage of education and lead to a successful future career. It means that the focus of training has shifted from individuals’ internal needs and crucial intellectual development to external ones, such as employability. This transition may be considered logical due to the capitalistic trends in the sociology of education (Young 2013). Learners gain an understanding that, in order to succeed in life, they should follow prescribed rules. The study shows that it is vital to shift from this model of education and concentrate on students’ personal development, capabilities, and experience, which is one of the ideas of the aims-based approach.
Knowledge-Based Curriculum
As mentioned above, the knowledge-based curriculum is focused on the existing standards and knowledge students are expected to gain. There are several arguments for developing a knowledge-based approach to curricula. For instance, the report by Vahey et al. (2018) claims that traditional teaching practices with the implementation of technologies help students to learn effectively. The authors argue that it is vital for individuals to achieve measurable learning outcome as, otherwise, it is impossible to evaluate their learning experiences. Vahey et al. (2018) show that, like the aims-based curriculum, the knowledge-based approach may also encourage personal development and engagement in the educational process among individuals. They note that such an approach can help individuals to gain an understanding of sophisticated concepts while allowing them to participate in learning actively.
The study by Beerkens (2018) claims that the knowledge-based approach is necessary to ensure the quality of education because it implies adherence to the existing standards-based on effective approaches to teaching. The author argues that the knowledge-based approach can be used for developing various teaching models, including knowledge-driven, problem-solving, interactive, tactical, and enlightened ones (Beerkens 2018). She adds that such a strategy can help an educational institution to avoid mistakes by learning from each other’s experiences. It is necessary to mention that although the author advocates for the knowledge-based approach, she agrees that adhering to “gold standards” may be a challenging and ineffective method of encouraging quality education.
Discussion
The literature review shows arguments for both types of curricula. It reveals that the aims-based approach is more concerned about individuals’ personal needs and desires; it encourages their development and helps them to lead prosperous life. The studies reveal that this strategy of developing a curriculum can encourage individuals to think critically, develop their perspectives on various aspects of life, and become more sensitive to other people’s needs. It is necessary to mention that curricula are important and can affect students’ decisions and well-being significantly. An aims-based approach allows individuals to avoid the constraints of traditional evaluation methods and learning objectives. Aims-based curricula are designed to teach students how to learn and gain necessary knowledge; it ensures that they are able to retain vital capacities and skills after the programmes are finished. In addition, such an approach prepares learners for the constantly changing environment. Knowledge-based curricula are not concerned about the knowledge that can empower individuals; they are focused on academic achievements and potentially effective strategies that can lead to measurable improvements in performance in class. Such an approach can be considered limiting and potentially ineffective.
It is possible to say that an aims-based education provides students with more opportunities for growth compared to a knowledge-based one. While the knowledge-based curriculum is focused on future employment, the aims-based one provides students with the tools they can utilize to gain awareness of social issues, which, as a result, can help them to build a successful career. In accounting, the aims-based approach can be considered reasonable as well because, besides subjects traditionally taught within the discipline, individuals should gain a comprehensive understanding of other spheres of life. The discipline of accounting features a large amount of factual data; students should learn how to use and apply it rather than be able to show excellent performance during evaluations. The aims of individuals’ education, in this case, is to be able to operate financial data, develop business strategies, and communicate with investors, management staff, regulators, and other stakeholders. It means that these learning objectives should adhere to the curriculum an educational institution offers because, otherwise, students cannot acquire the necessary practical skills.
Reviewed studies show that the aims-based approach to developing the curriculum may result in students’ ability to manage ethical issues in their future job. As traditional education is almost explicitly concentrated on gaining academic knowledge, knowledge-based strategies may lack consideration of moral aspects. However, accounting, similar to many other specialities, is associated with problematic issues in which ethical questions arise (Arfaoui et al., 2016). They may be related to merely financial topics, such as misappropriation of assets or disclosure violations, as well as communicating with international partners and corporations. The classic curriculum may be unable to address all potential problematic issues students can encounter in the future. At the same time, an aims-based approach allows individuals to use their knowledge to address and manage these issues, as well as avoid their possible negative consequences.
Another significant argument for the knowledge-based curriculum that can be retrieved from the literature review is that traditional educational standards perceive learning as work while this process should be engaging and entertaining as well (Walker et al., 2018). The traditional curriculum considers education a necessity; they imply that individuals should have an understanding of certain topics and show a particular level of performance to be successful. Such an idea is destructive because it prevents students from enjoying the learning process and requires them to work under pressure to achieve significant results (Walker et al., 2018). An aims-based approach is concentrated on what individuals need to know based on their values and perspectives; it may be considered work too, but, in this case, learners are aware of the benefits of studying and practical implications of knowledge. The knowledge-based approach has a significant disadvantage of not considering students’ dedication and engagement as a determinant factor for success, while the aims-based one places these aspects in the foreground.
It is vital to add that an aims-based approach does not contradict the gaining of necessary knowledge. Although founded on individuals’ needs, this strategy considers the information they should understand and apply to practice (Kasturi 2017). The aims-based curriculum offers a holistic approach to education; its main difference from the knowledge-based one is that it considers what tools and knowledge students may need to enrich their personal life, enhance their capacities, and be able to help others. In accounting, these factors are particularly significant as such an occupation requires an in-depth understanding of how society operates and what tendencies are common in today’s business community.
The knowledge-based approach has advantages that should be addressed too. First, knowledge-based curricula are usually founded on previous experiences and traditional practices, which implies that their implementation is associated with fewer risks (Durand et al., 2016). This approach can be considered traditional; it is related to well-developed assessment and feedback strategies. Second, educators can assess students’ performance using existing standards, while individuals can evaluate their understanding of the information during tests (Beerkens 2018). In addition, this type of curriculum is universally accepted and implemented in many educational facilities. Schools and universities may use each other’s examples to design classes and activities for students. There are various frameworks available that can help educators to improve learning outcomes and teachers’ effectiveness. It is possible to say that knowledge-based curricula are more simplified compared to aims-based ones because they are organised the way to attain specific universal goals and standards. Moreover, it is necessary to add that the knowledge-based approach can be multifaceted, too, as instructors may develop various teaching models with an emphasis on problem-solving, knowledge, and interaction.
It is observable that such an approach has significant disadvantages. First, as mentioned above, it does not consider learners’ personal needs and goals. The primary objective of the knowledge-based curriculum is to help students to adhere to prescribed learning standards rather than gain practical knowledge. Individuals may acquire an understanding of particular topics during classes but be unable to retain this information because educators’ main aim may be to teach them how to perform well during evaluation. Although this situation may not happen in all educational institutions, knowledge-based curricula are designed the way to assess individuals’ progress towards achieving the learning standards constantly. As a result, students’ desires and personal objectives are neglected.
Second, the possible limitation of the knowledge-based strategy is that traditional standards may not be related to the real aims individuals should or want to pursue. For example, in the field of accounting, students are expected to know basic accounting policies and practices, as well as reporting systems. They are taught to work with finances and develop solutions to common problems. However, the job of an accountant includes more functions; besides traditional responsibilities, individuals should be able to communicate with partners effectively, resolve potential ethical conflicts, and work with international teams. Knowledge-based education may not be unable to fully prepare individuals for these responsibilities as they are not included in the basic scope of practice. In accounting, students should be able to operate autonomously and cooperatively, find solutions based on the particular characteristics of a problem, and manage exceptional situations. In this field, an aims-based approach is more appropriate because it teaches individuals how to help others using their knowledge and skills rather than the rigorous data.
Another potential limitation of the knowledge-based curriculum is that it may discourage individuals from pursuing their personal goals. Traditional evaluation methods may be associated with emotional pressure for students because some of them require to memorise information rather than be able to use it. In addition, students are expected to adhere to particular learning standards; those who show lower levels of performance may be less dedicated to continuing their education because the standards are extremely high (Ammar et al., 2017). As a result, they may show little interest in the subjects they had wanted to study. On the contrary, as mentioned above, the aims-based approach is formed according to individuals’ needs. It uses holistic tools that initiate critical thinking, healthy social skills, personality formulation, and emotional development, ensuring that students feel comfortable in the learning environment. Thus, such a strategy can be considered less challenging and more engaging for students.
It is possible to say that the most effective approach to developing a curriculum may be using the aims-based approach with the elements of the knowledge-based one. For instance, educational institutions may establish curricula that consider individuals’ needs and provide them with an opportunity to choose their career paths and areas of interest. This curriculum should not be based on universal learning standards; instead, students can develop their personal aims and the methods to achieve them. Instruction should not be solely learner-centred, too, as it may deprive individuals of an opportunity to work autonomously and discover their capacities and life goals. Alternatively, teachers should assist learners in achieving personal objectives by addressing their concerns, providing them with the necessary information, and offering tools for development. As for the elements of the knowledge-based approach, curricula may include other educational institutions’ experiences in similar subject areas to eliminate possible mistakes in the teaching strategy. For example, schools may cooperate with each other to develop curricula according to the research in the field, transforming them into more holistic educational practices. As a result, they will use reliable and approved teaching methods while implementing the benefits of an aims-based approach.
Conclusion
It is possible to conclude that an aims-based approach to developing the curriculum is more feasible in accounting compared to the knowledge-based one. The primary reason for it is that this strategy considers individuals’ personal needs and is designed to foster growth and development. With the help of an aims-based approach, students have an opportunity to learn how to apply information to practice, solve difficult situations, communicate with international stakeholders, and address ethical issues. It is especially significant in accounting, as working in the field requires an employee to be able to think critically and creatively, as well as develop unconventional solutions to difficult situations. The aims-based curriculum encourages learners to work autonomously, pursue their own goals, and evaluate their skills and capacities. It offers a holistic teaching strategy designed to help individuals in establishing a prosperous life and help others. It does not rely on universal learning standards and places students’ needs at the forefront. Instead of offering the tools to gain solely academic knowledge, this approach provides strategies individuals can continue to use after the course is finished.
The knowledge-based approach has several advantages that should be outlined too. It relies on past experience and teaching strategies that have proven their effectiveness, which means that it has a high degree of accountability. In addition, this strategy allows educators to assess student’s performance using well-developed evaluation techniques, as well as provides individuals with an opportunity to analyse their understanding of the learning material. Finally, the knowledge-based curriculum can incorporate various teaching methods, including problem-solving, interactive, knowledge-driven, tactical, and enlightened ones. This approach can be seen as a more simplified curriculum design compared to the aims-based one that requires innovations and personalisation.
In summary, the aims-based curriculum is more effective not only in the field of accounting but in other subject areas compared to the knowledge-based one. Educators should strive to address students’ needs and concerns rather than prepare them for standardised tests and expecting them to adhere to universal learning standards. An inappropriate choice of the curriculum type may lead to significant constraints of the learning process, as a result of which students can be unable to implement innovations and approach non-standard situations. Educational institutions should not rely on individuals’ performance in class but concentrate on how knowledge can empower them. Such a perspective on education can lead to enhanced learning outcomes and result in a high level of confidence among students rather than a lack of dedication to studying and the inability to retain obtained knowledge. In addition, the aims-based curriculum ensures that students have a positive learning environment that encourages personal emotional and educational development.
Reference List
Alghazo, S 2015, ‘The role of curriculum design and teaching materials in pronunciation learning’, Research in Language, vol. 13, no. 3, pp. 316-333.
Ammar, TM, Al Shobaki, MJ & Naser, SSA 2017, ‘The efficiency extent of the internal control environment in the Palestinian higher educational institutions in Gaza Strip’, International Journal of Digital Publication Technology, vol. 01, no. 2, pp. 107-126.
Arfaoui, F, Damak-Ayadi, S, Ghram, R & Bouchekoua, A 2016, ‘Ethics education and accounting students’ level of moral development: Experimental design in Tunisian audit context’, Journal of Business Ethics, vol. 138, no. 1, pp. 161-173.
Babajide, O, Samuel, F & Egbide, BC 2014, ‘Curriculum design for accounting education in Nigeria’, British Journal of Education, Society & Behavioural Science, vol. 4, no. 12, pp. 1762-1774.
Beerkens, M 2018, ‘Evidence-based policy and higher education quality assurance: progress, pitfalls and promise’, European Journal of Higher Education, vol. 8, no. 3, pp. 272-287.
Deng, Z 2015, ‘Michael Young, knowledge and curriculum: an international dialogue’, Journal of Curriculum Studies, vol. 47, no. 6, pp. 723-732.
Durand, FT, Lawson, HA, Wilcox, KC & Schiller, KS 2016, ‘The role of district office leaders in the adoption and implementation of the Common Core State Standards in elementary schools’, Educational Administration Quarterly, vol. 52, no. 1, pp. 45-74.
Galletta, Z 2015, ‘Challenges and opportunities in teaching accounting research’, Journal of Accounting and Finance, vol. 15, no. 6, pp. 85-103.
Garasym, P, Klym, N & Khomyak, R 2018, ‘Features of taxation of forestry enterprises’, Economics, Entrepreneurship, Management, vol. 5, no. 1, pp. 55-62.
Kasturi, N 2017, ‘Survey: designing curriculum for outcome based education’, International Journal of Scientific and Research Publications, vol. 7, no. 3, pp. 416-420.
Moore, A 2014, Understanding the school curriculum: theory, politics and principles, Routledge, New York.
Null, W 2017, Curriculum: from theory to practice, 2nd edn, Rowman & Littlefield, Lanham, MD.
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Taylor, JA, Getty, SR, Kowalski, SM, Wilson, CD, Carlson, J & Van Scotter, P 2015, ‘An efficacy trial of research-based curriculum materials with curriculum-based professional development’, American Educational Research Journal, vol. 52, no. 5, pp. 984-1017.
Vahey, PJ, Reider, D, Orr, J, Presser, AL & Dominguez, X 2018, ‘The evidence based curriculum design framework: leveraging diverse perspectives in the design process’, International Journal of Designs for Learning, vol. 9, no. 1, pp. 135-148.
Walker, RJ, Spangler, BR, Lloyd, EP, Walker, BL, Wessels, PM & Summerville, A 2018, ‘Comparing active learning techniques: the effect of clickers and discussion groups on student perceptions and performance’, Australasian Journal of Educational Technology, vol. 34, no. 3, pp. 74-87.
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In using generally accepted accounting principles (GAAP), it is critical to distinguish whether public or private colleges and universities express their statement in different forms. Public or private colleges and universities have different operations, which can help distinguish them. There is a need for clarification on which institution follows the same reporting guidelines as non-governmental organizations. Integration of financial statement presented by either private or college and university help understand their operations and preparedness. Lastly, the essay will discuss financial reporting differences for public and private colleges and universities with formulation on revenues and statements accrued on restricted resources.
Identifying Whether an Institution is Public or Private
A few critical issues determine if an institution is private or public. Uniquely, public institutions are funded mainly by the state government and inform state appropriations. In contrast, private universities/institutions are funded by their endowment funds and students’ tuition fees or donations. Private institutions have higher tuition levels and small class sizes. The selection of students is small as they major on a more technical and professional level, which is evaluated based on the owner’s interest (Copley, 2022). In private, there is full attendance where most of the students live in the on-campus residence. In public institutions, a class might have over 200 students, higher enrollment in student rates, and a larger selection of professors and majors evaluated based on their level of teaching (Sepasi et al., 2019). However, some public students are commuters and have that notion of part-time attendance.
Private or Public: Reporting Strategies as Non-governmental, Not-for-profit Organizations
Private colleges and universities always adhere to almost all of the set standards established by the Financial Accounting Standards Board (FASB). They comply with the same guidelines as those on non-governmental not-for-profit organizations. Public institutions abide by set standards that Government Auditing Standards Board (GASB) establishes. Most public measures and procedures give a report with a special purpose on how government participates in business-related activities (Sepasi et al., 2019). Based on this influence and impactful view, both private and public institutions have the measure which accrues based on accounting and how various economic resources have that realignment of focus where its reporting accrue on the level of change as per the accounting level.
Analysis of Financial Statements Prepared by Private and Public Institutions
Private and public institutions give out their financial reports in the effect of audits for the college or university. Some of the financial statements considered are the balance sheet, the statement of change in fund balance, and the statement of current funds revenue amongst expenditures. The usefulness of this statement is vital as it enhances change in employee ratio analysis which is similar to defined commercial analysis. Therefore, various financial statements prepared in public universities and colleges are balance sheet, statements of revenues, and expenses (Copley, 2022). There are also management discussions and analyses and changes in funds’ net position and cash flow statement, which are more direct methods. The required financial statement for private institutions is a statement of activities, balance sheet, statement of cash flow, indirect or direct, and notes that comply with financial statements.
Major Format Differences in Financial Reporting for Public or Private Institutions
Various major format differences concur with financial reporting for private and public institutions. For instance, in a statement of activities, its presentation makes a huge difference where major focus aligns on whether interests are shown as separate or allocated to functional activity. The residual equity account titles concur with balances as of major impact in the balance sheet. Equity on accounts for public institutions is a new investment in capital assets and unrestricted net position based on a section of the new position investment (Dillard & Vinnari, 2019). Equity on accounts for private institutions is net assets that act without donor restrictions and net assets that affect donor restrictions as per the statement of financial position section.
At the level of statement cash flows, public institutions require a direct method and format it into four sections with different definitions for each set term. State appropriations and Pell grants are reported in this case. They relate to financial activities where interest expense is reported amongst financial level and how its investment is reported on invested activity (Dillard & Vinnari, 2019). Private colleges and universities are allowed for a select indirect method with three valid sections.
Opinion on Transparent Information Regarding Revenue and Restricted Resources
Various provided statements give more transparent information regarding revenue and the number of restricted resources, more so on the activity statement. FASB standards require the recording of unconditional pledges that give support, while GASB standards do not permit recording some of the restricted revenue. Therefore, a statement is used to easily understand how much fund is restricted temporarily (Copley, 2022). In another view, it helps determine available unrestricted funds in which the financial year must be evaluated based on expenses, revenue, and other changes in position concerning the restriction.
Conclusion
Public institutions mostly obtain their funds from the state government, while private institutions obtain donations, tuition, and other credited income. Private institutions are set on standards formed by FASB, while public institutions are set on standards formed by GASB. These institutions measure their reports based on transactions and credit though they are similar and have minimal changes. Public institutions mostly utilize GAAP set measures, while private institutions recognize some unconditional support permitted on revenue restriction.
References
Copley, P.A. (2022). Essentials of accounting for governmental and not-for-Profit organizations (13th ed.). McGraw Hill
A presentation concerning accounting and finances was provided by Dr. Ebenezer. In his presentation, Dr. Ebenezer provided a brief overview of the phenomenon of financial accounting, as well as the process known as operational accounting. The presented identified the key functions of FA and the means of carrying out the procedure within an organisation.
Though the issues related to finances and accounting are traditionally perceived as “dry,” the lecture provided by Dr. Ebenezer seemed really enthralling to me. I was literally captured by the new and exciting facts about the phenomenon of accounting, the possibilities that it opens for a businessman, and the benefits that a company may obtain with the choice of a proper accounting strategy.
Particularly, the fact that financial accounting is opposed to operational accounting was quite a surprise for me. Before reading the lecture, I had no idea that the concept of FA had any phenomenon to oppose it to begin with. The resulting discovery of to two phenomena and the way, in which they completed the concept of accounting, made me feel that eventually some light has been shed on the issue.
The consequences of understanding the specified detail are beyond impressive – by using only FA in my practice, I would suffer considerable losses because of the lack of focus on the internal users1. The idea of taking huge losses, which may even exceed an organisation’s revenues (e.g., around $ 500,000 from the lack of attention to the knowledge management issues), literally made be relieved that I have acquired this essential piece of information.
The concept of financial accounting can be related to the Positive Accounting Theory. Allowing for an identification of the methods of accounting that lead to maximising the company’s profits, the specified theory strikes me as truly brilliant.
Suggested in 1990s as the means to explore the methods of accounting further and increase revenues, the specified theory, in fact, allows for improving the performance of a company to an impressive extent. The theory in question seems especially viable once the material covered in the lecture is integrated into it.
Indeed, by including both the processes related to the financial transactions, and the ones that concern organisational behaviour, into the accounting strategy, one will be able to predict the efficacy of specific actions taken by the company with huge precision.2
The presentation in question has clearly affected my decision-making strategies. Impressed beyond belief by the information concerning two types of accounting, I will necessarily make sure that the methods for both are well developed in the organisation that I will work for.
The possibilities, which the use of efficient accounting strategies with regard to the two accounting types opens, enthral me, and I feel very enthusiastic about my future professional progress. Though the challenges, which I may face in the course of these strategies implementation, frighten me and make me feel somewhat uncertain, I am positively sure that I will be able to come up with a viable approach for addressing them.
I have strong doubts that the two types of accounting described in the lecture occur in reality in a manner just as distinctive and obvious as Dr. Ebenezer represents them in his lecture; nevertheless, the fact that I already know so much about the financial issues in general and the process of accounting in particular fills me with hope for achieving success.
Bibliography
Ebenezer, S. “ChE 423 Process Economics & Management. Introduction to Financial Accounting.” Presentation for Project Management & Decision Analysis School of Chemical & Petroleum Engineering, 2014.
Mourik, Carien van and Peter Walton. The Routledge Companion to Accounting, Reporting and Regulation. New York, NY: Routledge, 2013.
Footnotes
1. S. Ebenezer, “ChE 423 Process Economics & Management. Introduction to Financial Accounting” (presentation, Project Management & Decision Analysis School of Chemical & Petroleum Engineering, 2014).
2. Carien van Mourik and Peter Walton, The Routledge Companion to Accounting, Reporting and Regulation (New York, NY: Routledge, 2013), p. 104.
How changing world environment is leading to an increased focus on international accounting
Saudagaran (2009) says, “The purpose of accounting is to provide information that is useful for making business and other economical decisions.”
The growth for businesses from small companies to multinationals has raised the need for international accounting since the accounting information is needed by the stakeholders for making business and economical decisions. (Saudagaran).
In the capital markets where capital is graded, listed companies need to apply international accounting standards especially if the market is experiencing a steady growth.
This will make it easy for foreign investors to make timely and well informed decisions on investing in the market without undergoing the consultation cost or learning the new accounting standards.
(Saudagaran, 2009). In 2008, during the sub-prime loan crisis in America, financial institutions and investors worldwide experienced massive losses from the meltdown. The crisis provided evidence that in a global financial system, national borders are porous. (Saudagaran)
Difference in accounting method as they are applied internationally
There are two types of accounting methods the cash and the accrual method. According to Rich et al 2009, cash method mainly deals with incomes.
Under cash basis accounting, revenue has to be recorded when the cash is received regardless of when it is actually earned. Similarly, an expense is recorded when cash is paid.
In addition, by recording only the cash effects of transactions, cash-basis financial statements may not reflect all the assets and liabilities of the company at a particular date. For this reason, most companies do not use cash method. (Rich et al, 2009).
Accrual method is an alternative of cash method and transactions are recorded when they occur. (Rich et al 2009) He further says that “the reason why accrual accounting is superior to cash method is because it ties income measurements to selling which is the principle activity of the company.”
So this means that all revenues are recognized as they are earned and all expenses are recognized when incurred. Accrual method also has a more complex system that records both cash and non cash transactions. (Rich et al).
Time period assumption
Most stakeholders usually demand timely information from companies so companies have to frequently produce financial report like the quarter year report, half year report and end year report to satisfy information users (Rich et al, 2009). Since companies are involved in different activities every time, there is great need to record every transaction on time for proper accountability.
Revenue recognition period
This principle is used to determine when revenue is recorded and reported. Under this principle, revenue is to be recognized or reported in the period in which these two conditions are met; the revenue is earned and collection of cash is reasonably assured.
According to Rich et al (2009), the requirements are met when goods or services have been delivered or performed to the customer since at this point the risk of ownership has been transferred from the seller to the buyer regardless of when the cash is received.
Matching principle
In matching principle expenses are incurred regardless of when the cash is paid. (Riahi, 1985) Expenses of an accounting period should include only those costs used to earn revenue that was recognized in an accounting period and exclude cost used to earn revenue in early or later periods thus the key to expense recognition is matching the expense with revenues. (Rich et al, 2009).
Classification of accounting models used in different geographical regions
Bhattacharyya 2005 states that, “accounting model is a key that unlocks the mystery of double entry accounting”. Accounting models are based on two major parts; the T model, the five ledger accounts model which are also the accounting models.
Accounting models include asset account, revenue account, liability account, equity account and the expense account. The accounting model used in a particular geographical region basically falls under either of the above mentioned depending on the preferred model and business.
Role of International Accounting Standards Committee and International Accounting Standards Board
The role of International Accounting Standards Committee through committees and consultations with the International Accounting Standards Board in establishing International Accounting Standards is issuing interpretation of standards since was replaced by the International Accounting Standards Board. (Mattessich, 2007).
The International Accounting Standards Board’s role is to regulate and amend International Accounting Standards and International Financial Reporting Standards and also to create new standards if possible. They essentially oversee the application of the standards to ensure uniformity.
Examination of different accounting standards and determinants of national accounting standards
Political and economical ties
Countries which are geographically close usually create trade unions for free movement of goods, services and capital between them. Political and economical ties play a major role in the formation of these trade unions which relatively affect the accounting standards used by the union nations. (Riahi, 1985).
Nations like Germany have adopted the cash method since it’s a communist government and its main focus is the welfare of every individual.
Britain, a capitalist government has adopted accrual method since in a capitalist government the main focus is about competition which will in turn influence growth. Therefore, all the nations allied to the two countries tend to have similar accounting practices. (Riahi, 1985).
Level of inflation
During inflation firms tend to choose a different accounting policy for stock keeping, either LIFO or FIFO, to ensure maximum profitability. (Mattessich, 2007). The governments usually try to cub the level of inflation by employing both scholars and professionals to try and regulate inflation.
In Zimbabwe, a country that has the highest level of inflation, very minimal growth can be achieved so the government tries so much to fight inflation. In developed countries like America, inflation has very minimal effect so the two countries are forced to adopt different accounting standard for the welfare of the people.
Level of economic development
Germany is a major producer of goods and low producer of services since most of its population comprises of the elderly. This means the government receives more taxes from exports. The government has adopted the cash accounting model since this model ensures that the welfare of the people is well catered for.
In Britain, the government has adopted both the accrual and the cash model. This is because Britain is a major producer of goods and services. They have adopted a capitalist kind of government which encourages people to work hard.
National culture
The national culture is usually carried down from one generation to another. Germany colonized most of the African and European countries.
Germany has adopted a communist kind of government. Such countries adopted a similar kind of government and accounting practices that were carried down to the subsequent generations.
Relationships between business and capital providers
This is especially important if the capital providers are foreigners. This is because the capital providers will need accounting standards that they best understand.
This is mostly experienced in the capital market especially when a steady growth is noted and most investors are foreigners (Bhattacharyya, 2005).
Both Brazil and India have been forced to change their accounting standards to influence capital inflow from foreign investors which is healthy for growth. This is because the two countries have had a steady growth.
Therefore, in conclusion, these various determinants impact significantly in the determination of a country’s accounting standards. Thus such factors should be put into consideration in understanding the reasons of adopting one accounting model over another.
References
Bhattacharyya, U. (2005). Municipal accounting: concepts and practical issues. Mittal Publications: India.
Mattessich, R. (2007). Two Hundred Years of Accounting Research. Routledge: Britain.
Riahi, B. (1985). International Accounting: issues and solutions. Quorum Books: California.
Rich, J., Mowen, M., Hansen, D. & Jones, J. (2009). Cornerstone of Financial Accounting. Cengage Learning: Florence.
Saudagaran, S. (2009). International accounting: A User Perspective. (3rd ed.) CCH: Chicago.
An accounting ratio that is also called a financial ratio is a relation of two numerical values from a company’s performance or its financial statement. Regardless of the industry of operation, business itself generates ratios. In their turn, investors and analysts use ratios as a financial tool to compare strong and weak points of a company or several companies. One ratio cannot be considered sufficient to conduct a financial analysis and provide a statement, while a set of ratios is rather beneficial for companies. (Kimmel, Weygandt, & Kieso, 2007).
The latter helps to understand changes occurring within the same company and between the organizations. In addition, organizations of different size may be contrasted. The revealed tendencies may be used while designing financial statements in both short-term and long-term periods.
There are several ratios, which compose three categories such as profitability, liquidity, and solvency. The category of liquidity focuses on identifying the amount of cash that can be received rapidly and involves quick ratio (acid test ratio), accounts receivable turnover ratio, inventory turnover ratio, etc. (Porter & Norton, 2015).
The quick ratio (acid test ratio) characterizes an organization’s ability to repay its short-term obligations through the sale of liquid assets. It is calculated as the ratio of the most liquid part of working capital (cash, receivables, and short-term financial investments) to short-term liabilities. It can also be calculated as the ratio of all current assets except stocks to short-term liabilities. The accounts receivable turnover ratio measures the speed of repayment of an organization’s receivables: how quickly it receives payment for the goods or services sold from its customers. It may be calculated as the ratio of net sales volume or sales volume on credit to the average for the period of the number of receivables.
The mentioned ratio is measured in the number of times per period. As for the inventory turnover ratio, it demonstrates how many times a company used the average available stock balance in a given period. This ratio characterizes the quality of the reserves and the effectiveness of their management as well as allows specifying the remains of unused, obsolete, or substandard reserves.
Another category of the ratios that may be discussed is solvency, namely, debt to equity ratio, debt service coverage ratio, and times interest earned ratio (Bodie, Kane, & Marcus, 2017). The first one can be identified as an indicator of the total liabilities to the total stockholders’ equity. It belongs to the group of the most important indicators of a company’s financial position, which includes similar in meaning coefficients of autonomy and financial dependence.
The debt service coverage ratio refers to a net income from commercial real estate for a certain period to the amount of the cost of servicing the loan for the same period. A greater ratio characterizes a higher quality. The times interest earned ratio is a financial indicator that measures the amount of profit received prior to the interest on the loan and the payment of taxes. The corporations use this ratio to assess the level of protection of creditors from non-payment of debts by a borrower.
Within an organization, the ratios are to be used to reveal internal weaknesses and strengths and identify further strategies. While the ratios are utilized to compare financial results with outside corporations, they serve as tools to specify a company’s position in the given industry, clarify competitiveness and potential, and understand others’ performance indicators.
References
Bodie, Z., Kane, A., & Marcus, A. J. (2017). Essentials of investments (10th ed.). New York, NY: McGraw-Hill.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2007). Financial accounting: Tools for business decision making (5th ed.). Hoboken, NJ: Wiley & Sons.
The 2008 global financial crisis compelled governments to rethink their spending patterns by introducing major cuts in budgets coupled with coming up with strategies to reduce deficits. In other words, austerity policies focus mainly on cutting public spending. However, Schui (2014, p. 18) faults this definition by insisting that the rationale of austerity is to “restore balance in government finances and regain economic dynamism and competitiveness”. Therefore, austerity policies have evolved with time to maintain a balance between cutting government expenditure and providing quality services to the public. For instance, the introduction of New Public Management (NPM) sought to shift the austerity policy’s focus from routine expenditure cuts to ways of improving efficiency and value for the money that governments spend on the public. After the 2008 financial crisis, governments reverted to public expenditure cutbacks as the central definition of austerity. However, this move is myopic because the long-term impacts of such cutbacks do not contribute to the intended objectives. This paper holds that the introduction of austerity policies should lead public service organisations to reconsider their accountability, reduce reliance on rules and procedures, and introduce performance management based on targets, monitoring, and incentives.
The Austerity Problem in the Contemporary Times
In the wake of the 2008 financial meltdown, the majority of countries across the world adopted the exceptional stimulus measures to spur growth as a way of managing the crisis. However, Blyth (2013) laments that by the end of 2010, most countries had replaced such measures with austerity programs. Allegedly, during the 2010 G20 Toronto meeting, international governments agreed that reducing budgetary deficits through austerity measures would moderate the growing public debt and expenditure (Wolf 2014). The way forward would see “a mix of public spending cuts, reducing/freezing labour costs, and the privatisation of public assets and reducing the welfare state and public services in general” (Whitfield 2012, p.76). The contemporary problem with austerity lies with the failure of these objectives to spur economic growth as intended. Whitfield (2012, p. 80) notes that austerity has failed “to achieve its rhetorical and theoretical aims, such as government debt reduction, increased GDP and rising levels of full-time employment”.
Apparently, austerity seems to achieve the opposite of its objectives with soaring unemployment rates, shrinking workers’ benefits and wages, business failures, and foreclosures among others. For instance, the privatisation of health care provision has led to poor service delivery and increased costs as opposed to the intended outcomes (Grimshaw 2013). A study by Kurunmaki and Miller (2008) shows that regulating and accounting for health care provision by NHS using payments by results (PbR) does not improve service delivery. The conclusion formed here is that introducing austerity measures in healthcare provision will have adverse effects on the quality of the services delivered. Another study by Oxfam (2013) shows that close to 25 million people may be living in poverty by 2015 in case the current austerity measures are not revisited. Therefore, austerity measures have evidently failed to spur economic growth and reduce poverty. With this knowledge, the overarching question is on how public organisations can integrate accounting into austerity measures to improve accountability and efficiency.
Austerity Policies and Economic Growth
The primary role of public service organisations is to offer quality services by utilizing the available resources even in the face of austerity. Even with budget constraints, such organisations should employ innovative strategies through the application of best accounting principles to ensure improved performance to meet the set targets and offer incentives. Accounting under austerity should help citizens to hold governments to accountability by availing information on public expenditure and tailoring ways of achieving economic growth under constrained budgetary allocations. Public services organisations are known for resource wastage and inefficiency. Accounting tools that have been used successfully in the private sector should be incorporated into public services organisations to improve efficiency and accountability. For instance, the adoption of accruals accounting allows prudent financial management in public service organisations thus reducing resource wastage in the sector. According to Bracci et al. (2015, p. 887), “Accruals accounting provides a complete and reliable picture of the financial and economic position and performance of a government, by capturing in full the assets and liabilities as well as revenue and expenses of an entity, over the period covered by the accounts and at the moment they are closed”.
There have been arguments that austerity is a short-term solution to financial crises and thus the long-term implications like loss of motivation amongst employees are counterproductive. A 2015 study in the Netherlands showed that austerity measures led to strong financial stability albeit in the short term (Van der Kolk, ter Bogt & van Veen-Dirks 2015). However, at this point, public service organisations should capitalise on the positive impacts of austerity like financial stability and use innovative ways to counter the negative effects. For instance, public services entities can introduce performance management to ensure that employees operate in a competitive environment to achieve certain targets (Jabeen 2011).
Such organisations could also use incentives as a way of motivating employees in the long term to counter the negative outcomes of austerity. In other words, public service organisations should only pick what works with austerity and implement best management practices to ensure quality service delivery and spur economic growth. In another case, Newcastle City Council used creative approaches to weather the adverse effects of austerity imposed by the central government. According to Ferry and Ahrens (2015, p. 920), Newcastle City Council improved accountability in the face of government cutbacks by enrolling grassroots groups “via new budgetary emphases, in different ways of working, becoming policy proposers with local government acting as assessors and arbiters of competing funding proposals”. This way, the council’s accountability improved as the beneficiaries of public services were involved directly in determining how the available resources would be utilised.
Accounting for Austerity: More Than Balancing Books
Given the ever-changing environment under which public service organisations operate, austerity measures will remain in place moving forward. However, Anderson and Minneman (2014) argue that austerity can be replaced with alternative ways of managing government expenditure. Nevertheless, the view of austerity measures as mere government spending cutbacks will continue to hold due to the politics surrounding the issue. Therefore, public services organisations should become innovative and come up with ways of working under constrained budgets without compromising service delivery to the citizenry. In other words, organisations should stop working against austerity policies and instead respond proactively to the emerging issues concerning reduced budgetary allocations from the state. As such, public services organisations should leverage accounting technologies as a way of managing austerity.
Therefore, accounting cannot be reduced to balancing books given the resource challenges facing such organisations. In this sense, Vosselman (2010, p. 192) argues that accounting “has to be seen as a performative activity that can only be defined through its operationalization”. Accounting for austerity should thus shift focus from the traditional financial perspective to other broad areas like “social, institutional, political and organisational contexts” (Parker & Guthrie 2014, p. 1222). From a social perspective, accounting for austerity will reduce its reliance on rules and procedures and focus on security, care, equality, prosperity, and happiness among other societal issues. Piketty and Goldhammer (2014) argue that even though measuring social well-being may not be conclusive, there is a growing need to account for human, social, environmental, and natural capitals. Consequently, constructing accounting responses to austerity from a multidisciplinary approach will spur economic growth and maintain quality service delivery without being pushed to the brink of bankruptcy due to tight budgetary allocations.
Conclusion
The conventional understanding of austerity policies implies the reduction of government spending through budgetary cutbacks as a way of spurring economic growth and bridging deficits. However, public services organisations need to approach the issue of austerity proactively and come up with ways of functioning normally even under limited resource allocation. The adoption of accruals accounting will promote accountability and the involvement of the public in decision-making. Additionally, such organisations should introduce performance management and come up with ways to motivate employees as a way of ensuring improved service delivery. Likewise, organisations in public service should reduce their reliance on rules and procedures and shift their focus on proactive responses to austerity. Accounting for austerity is more than balancing books. Emerging trends in accounting demand the broadening of austerity responses to encompass social, human, natural, and environmental capitals.
Reference List
Anderson, B & Minneman, E 2014, ‘The abuse and misuse of the term ‘Austerity’ implications for OECD countries’, OECD Journal on Budgeting, vol. 14, no. 1, pp. 109-122.
Bracci, E, Humphrey, C, Moll, J & Steccolini, I 2015, ‘Public sector accounting, accountability and austerity: more than balancing the books?’, Accounting, Auditing, & Accountability Journal, vol. 28, no.6, pp. 878-908.
Blyth, M 2013, Austerity: the history of a dangerous idea, Oxford University Press, New York.
Ferry, L & Ahrens, T 2015, ‘Newcastle city council and the grassroots: accountability and budgeting under austerity’, Accounting, Auditing, & Accountability Journal, vol. 28, no. 6, pp. 909-933.
Grimshaw, D 2013, ‘Austerity, privatisation and levelling down: public sector reforms in the United Kingdom’, in Vaughan-Whitehead, D. (ed), Public sector shock, Edward Elgar and ILO, London, pp. 1-27.
Jabeen, M 2011, ‘Impact of performance appraisal on employees motivation’, European Journal of Business Management, vol. 3, no. 4, pp. 197 – 204.
Kurunmaki, L & Miller, P 2008, ‘Counting the costs: the risks of regulating and accounting for health care provision’, Health, Risk & Society, vol.10, no.1, pp. 9-21.
Parker, L & Guthrie, J 2014, ‘Addressing directions in interdisciplinary accounting research’, Accounting, Auditing & Accountability Journal, vol. 27, no 8, pp. 1218-1226.
Piketty, T & Goldhammer, A 2014, Capital in the twenty first century, Belknap Press, London.
Schui, F 2014, Austerity: the great failure, Yale University Press, Boston, MA.
Van der Kolk, B, ter Bogt, H & van Veen-Dirks, P 2015, ‘Constraining and facilitating management control in times of austerity: case studies in four municipal departments’, Accounting Auditing & Accountability Journal, vol. 28, no. 6, pp. 934-965.
Vosselman, E 2014, ‘The ‘performativity thesis’ and its critics: towards a relational ontology of management accounting’, Accounting & Business Research, vol. 44, no. 2, pp. 181-203.
Whitfield, D 2012, In place of austerity: reconstructing the economy, state and community, Spokesman Books, Nottingham.
Wolf, M 2014, The shifts and the shocks, Penguin Books, London.
International accounting and financial reporting are the accounting standards which are based on accounting interpretations and the framework as they have been stipulated by the international accounting Standards Board which were formed in 1989.
It is a business trend and technique that the financial report of a business enterprise should be prepared at the end of the financial period. The financial period in this case may be at the end of the year or the middle of the year.
Whichever the case, the system adopted in making the financial report made is referred to as the Interim financial report system (IFRS) (IASB, 2009, p.405).
This paper seeks to compare the non-accounting variables that might influence the disclosure and financial reporting regulations in developing and non-developing countries.
The time at which the financial report is prepared depends on the organizations mode of operation and when the company started counting it is fiscal year.
In other terms, international Accounting and financial reporting permits one to have an understanding of how IFRS are interpreted and their application in preparing the financial statements (IFRS, 2008). Financial Reporting is a system which is stipulated and has a guideline which ought to be followed to the latter.
The financial service mostly comprises of three steps and this includes; 1. The status of international accounting system board (IASB) – entails integrating the project to bring authenticity of the accounting records; 2 An account for the foreign companies, and for this matter only those that keep their files with the IFRFS; and 3. Documents having major accounting standards that affects the foreign investments.
Contents in International Accounting and Financial Reporting
The system is updated on a quarterly basis and is based on the following procedure ‘
It is an accounting procedure which classifies diverse sets of standards within the accounting option
It also highlights a numerous examples of IFRS which can be computed in compliance to the standards
The international finance report system (IFRS) has a capability to disclose all the requirements needed in making the report.
It holds a good number of examples on financial statement presentation and supporting evidence from the original IFRS, both the yearly and quarterly reports.
It also maintains numerous extracts from recent form 20-F filings and this discloses on the variations from the U.S.A. G.A.A.P.
It also harbors a swift reference material which discloses relevant differences which subsist between IFRS and U.S G.A.A.P.
Non-accounting variables that might influence the disclosure and financial reporting in a developed country (U.S.A)
Non – accounting variables are the costs or the conservatives which do no change with any changes within the organizations, they are more of the fixed variables. In other words they remain untouched regardless of whatever happens within the organization.
United States of America is considered as one of the developed Nations among nations, and this therefore will be the reference in relation to the developed countries. It is the role of the financial officer to present financial report and this should portray transparency, accountability besides being very authentic.
Some factors within the organization may compel or influence presentation of financial reporting since they may appear very crucial within the organization (IASB, 2008, p.2500).
Information technology in the developing countries is one of the aspect or a non-accounting variable which may influence presentation of financial reporting. Unlike in the developing countries such as Zimbabwe, the factor has well been embraced in almost all the organization.
This has been a bit easy since most of the emerging trends within the organizations are from the developed countries. For instance, Automation is a non- accounting variable which has greatly influenced making of financial reporting.
As an emerging trend it may impact great changes within the organization because the manual labor used in accounting for products is changed but in a way but at the same time their no effect in the production quota.
This means that it remains to be a fixed variable since the change in technology does not influence the working conditions of the employees. This is because the developed nations have been used to diverse technologies and thus any changes do not affect the production (IASB, 2009, p.405).
However, it influences disclosure of financial re porting since introduction of technology into an organization means a lot of finances have been used thus ought to be accounted for in order to portray transparency and accountability both internally and externally.
This sets an organization on better position as opposed to those organizations which do not distinguish between the variables. This raises eyebrows as to why investors do invest in the developed countries instead of uplifting the developing countries.
Organizational structure within an organization is another non-accounting variable which may not affect the production process within the organization but may influence disclosure of financial reporting.
A well set up organizational structure is a strong determinant for a stable and consistent organization as the hierarchy is well defined and therefore no conflict of duties or dies. Each person is satisfied and contented with his or her position and this comes from the favorable working conditions besides satisfactory payments.
In essence, this will boost their motivation and thus increasing the rate of production and therefore accelerating the sales. In order to upshot this within the organization; a report ought to be prepared to the shareholders in order to alert them (Timothy, 2007, p.100).
The changes in organizational structure made by the strategic management team may be required to be financed, thus a need to also effect this in the books of account.
Environmental uncertainties are another non-variable factor which compel or influence an organization to disclose the financial report regulations. Though, an organization may try as much as possible not to disclose some vital information regarding it is operations, some un-predetermined factors may force them to reveal.
Natural calamities for instance, earthquakes may dilapidate an organization but since the developed nations such as the U.S have always kept some reserves for such miss-happenings, may try to cover up the mess by reimbursing everything to its original situation but it may be difficult.
The difficulty in this case may be lack of enough resources to cover up the mess and due to fear that the organization may lose reputation by collapsing, they may decide to open up and ask for finances from outside sources.
The borrowing of funds will therefore be determined by the financial report. The lenders will be in a position to decide whether the business was a going concern or not.
New management accounting policies is another factor which may influence an organization to disclose their financial report.
Developed countries work under the healthy competition strategy and since the organizations have common objective of making profit and boosting their own economy, they are compelled to disclose some of the vital information within the financial report in order to keep them moving.
Non-accounting variables which might influence disclosure of financial report in developing countries (Zimbabwe)
Developing countries such as Zimbabwe experience many non-accounting variables as compared to developed nations. To begin with, management credibility is one of the major factors that affect the reporting of organizations’ financial positions in a rather shaky economy of Zimbabwe.
Transparency, accountability and trustworthy among the management team is a factor which has in a way affected the overall organizations in the developing world or nations. This being a non- accounting variable has extensively compelled most of the organizations to openly expose their financial for the public interest.
This is another way to reveal those that behind the fall or collapse of a given organization. When the responsible find themselves in such circumstances and they have no other ways to cover up the reputation of the organization they disclose the documents to the public (Timothy, 2007, p.200).
Market share is seen as another factor. Market share is the amount of portion which an individual or an organization holds out of a given proportion.
Since it is a fixed asset and cannot directly affect the production of the country since the company does not depend on its operations, it always appears on the financial accounts as an additional capital.
Due to the instability and inconsistency of most of the organizations in Zimbabwe, any minor changes in the additional capital will have an impact in the whole system and thus this may influence disclosure of the same in the financial report.
Moreover, developing countries might find it difficult to be able to maintain the competent and skilled manpower within the organization.
Therefore, this being a non-accounting variable may influence the organization to disclose its financial report to the shareholders and public with an aim of getting viable and incompetent workforce who may demand for less fee for the services offered.
This is a factor which has made the developing countries to remain in the same state for quite a long time (Jerry, Et al, 2009, p.250).
In conclusion, financial reporting is essential in any organization and managers are urged to consider the non-financial variables that may influence this disclosure. The US and Zimbabwe are the countries analyzed in this paper.
The major non-financial variable in US is information technology since many organizations are compelled to provide information that can be audited using computer applications. In Zimbabwe the main factor is management credibility which aims at withstanding the shaky economy in the country.
Other factors in both countries include market structure, organizational structure, and ability to retail talented employees. It is therefore essential for any organization seeking to enter the international market to consider all the non-accounting variables in order to have proper management plans.
References
IASB, 2009, International Financial Reporting Standards, New York: Kluwer.
International Accounting Standards Board, 2008, International Financial Reporting Standards IFRS, 2008, International Accounting Standards Board Chicago: Kluwer.
International Accounting Standards Board , 2008, International Financial Reporting Standards (IFRSs®) 2008: Chicago: Kluwer.
Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, 2009, Financial Accounting, Edition7, New York: John Wiley and Sons.
Timothy, J, 2007, Advances in International Accounting, Volume 20, Elsevier Book Series on Science Direct, Chicago: Elsevier.
Mason Gaffney is one of the philosophers in the economic world who has created the philosophy of public finance. One of the principles of this philosophy is that a person does not pay taxes from the land, this is the land gives money for payment. Therefore, Gaffney draws a line between an owner and a land.
Then, Gaffney refers to the ways when taxes should be either reduced or eliminated, these are the cases when money are gained for public purposes, when the owner uses the land to serve others and when he/she has to hire labor. The finances presupposed for taxes should be spend on other issues.
Gaffney is also sure that people who possess land should pay more in comparison with those who do not possess it as it is obvious that those who have land have more income and can pat taxes in comparison with those who do not have land as additional indirect income. The “ability-to-pay” idea seems rather attractive to many philosophers of public finances. This point of view is interesting as it preserves incentives.
The core idea of this philosophic idea is “a logical extension of the productivity theory of distribution where people are to be rewarded according to their contribution to the joint products of the economy” (Gaffney, 1998, p. 177). Considering the building on the new houses, the landowners in this case should be reduced from the taxation as new buildings promote the development of the city and land, in this case, is considered as public value. Additionally, the flourishing of a city increases the land taxation and the income for public needs.
Governmental Accounting and Nongovernmental Accounting
According to Governmental GAAP Guide 2009, governmental accounting deals with public corporations and the bodies which work with politics. Additionally, the entities may be considered as the government if they meet the following requirements, the elections to one or more states takes place, “the potential for unilateral dissolution by a government with net assets reverting to a government” (in Crawford & Loyd, 2008, p.1-24) and an entity possess the power to enact a tax levy.
Nongovernment accounting deals with the entities which do not possess any of these characteristics. Therefore, it may be said that the main difference between governmental accounting and nongovernmental accounting is the details of payment. If the financial operations are directed at elections and other supportive aspects, the accounting is governmental. If payment is directed at other particular purposes, the accounting is governmental.
The Relationship between Budgeting and Financial Reporting in Government
Reposting has become one of the most essential aspects of budgeting and governmental accounting. The information resented in reports is aimed at helping control budget expenses and follow the violation if it takes place. In most cases the information is delivered every 45 days after the end of a fiscal year, however, there are situations when reports are to be completed within a month or for special demand. The reports are created by the audits which work in and auditory companies.
Audits work in accordance with the particular rules and they bare responsibility for the reports they complete. Audits may give the company several days to eliminate the violations where they took place and present the report without those violations however with the mentioning that they were. Audit report is an important document which shows the current state of affairs in finances of the company.
Works Cited
Crawford, M. A. & Loyd, D. S. (2008). Governmental GAAP Guide 2009. New York: CCH.
Gaffney, M. (1998). The Philosophy of Public Finance. In F. Harrison (Ed.), The Losses of Nations: Deadweight Politics versus Public Rent Dividends (175-206). London: Othila Press.