The Accounting Principles Board ASOBAT

T M Rizki Azari (1101103010062)Dedi Setiawan (1101103010068)Mirza Firmansyah (1101103010133)The Accounting Principles Board ASOBATThe Rejection of ARS #1 and ARS #3 By The Accounting ProfessionFailure to resolve the issue of accounting for business combinations of goodwillThe Issue of Invesment Tax CreditThe Flow Through MethodThe Defferal Method

Factors Caused The APB To Struggle As A StandardThe flow-through method viewed the tax credit as a decrease in the income tax expense of the firm in the year the firm made the investment and obtained the credit. The defferal method viewed the tax credit as a reduction in the cost of the asset and reflected this over the life of the asset through reduced.

The Flow Through Method & The Defferal MethodSo based on their past experience, the American Accounting Association (AAA) Excecutive Committee decided to embark on a new and different type of theory effort. The committee took two years to produce the statement, meeting eight times (for a total of twenty days) during the process. They organized into subcommittees to complete the work. The operating principles of the committee allowed the publication of its statement if at least two-thirds of the committee members agreed. In fact, all nine members agreed, and the AAA published its statement in 1966, entitled A Statement of Basic Accounting Theory (ASOBAT) A Statement of Basic Accounting Theory (ASOBAT) To identity the field of accounting so that useful generalizations about it can be made and theory developed.To establish standards by which accounting information may be judgedTo point out possible improvements in accounting practiceTo present a useful framework for accounting researchers seeking to extend the uses of accounting and the scope of accounting subject matter as needs o society expand

The Objectives of ASOBATASOBAT indicated that the objective of accounting is to provide information for the purpose of:Making decisions concerning the use of limited resources, including the identification of crucial decision areas and determination of objectives and goalsEffectively directing and controlling an organizations human and material resourcesMaintaining and reporting on the custodianship of resourcesFacilitating social functions and controls

User's NeedRelevanceVerifiability/ObjectifityFreedom From BiasQuantifiability

Standards For Accounting InformationRelevant information is capable of making a difference in the decisions made by users. Relevance requires financial information to be related to an economic decision. Otherwise, the information is useless.RelevanceVerifiability helps to assure users that information represents faithfully what it purports to represent. Financial information is supported by evidence and independent individuals can check them to see whether such information is faithfully represented. In other words, information is verifiable if it can be audited.Verifiability/ObjectivityReferred to the ability of information to be impartial and neutral, that is, not being biased toward anyone or any sideFreedom From BiasDefined as the association of a number with a transaction or activity. This is how accounting oporates like a measurement systemQuantifiabilityIn audition to specifying the four standards of accounting information, ASOBAT described the communication process in accounting and provided five communication guidelines.Appropriateness to expected useDisclosure of significant relationshipsInclusion of environmental informationUniformity of practices within and among entitiesConsistency of practices through time

Communication GuidelinesEnd of SlideThanks For Everyone