ACC307 Individual Assignment Brief: Critical Evaluation of the Conceptual Framework

1. Assessment Details

• Unit Code: ACC307
• Unit Name: Financial Accounting Theory and Practice
• Assessment Type: Individual Research Report
• Weighting: 40%
• Word Count: 2000 words (+/- 10%)
• Due Date: 5:00 PM Friday, Week 5
• Submission Method: Turnitin (via LMS)

2. Task Description

You are required to write a formal report addressed to the Chairpersons of the Financial Reporting Council (FRC) and the Australian Accounting Standards Board (AASB). Your task is to critically evaluate the political and economic implications of the Conceptual Framework in accounting standard setting.

You must comment on and critique the following statement:

“Attempts to bring about radical change through the introduction of a conceptual framework have failed. When it appeared as though SAC 4 would require firms to report a greater number of liabilities, lobbying began in earnest and business ensured that any innovation was quashed. As such, the best that can be hoped for from a conceptual framework is that it legitimises current practice, maintains existing social and economic status, and staves off public sector attempts to control accounting standard setting.”

3. Specific Requirements

Your report must critically analyze the validity of the argument presented above. In doing so, you should address the following key points:

• Historical Context: Discuss the historical development of the Conceptual Framework in Australia, specifically referencing the controversy surrounding Statement of Accounting Concepts 4 (SAC 4) and the definition of liabilities.
• Political Economy of Accounting: Apply Positive Accounting Theory (PAT) or other relevant theoretical perspectives to explain the motivations behind corporate lobbying against strict conceptual frameworks.
• Legitimacy and Status Quo: Evaluate the claim that the framework merely serves to legitimize current practices and protect the profession’s self-regulation (regulatory capture) rather than improving financial reporting quality.
• Modern Relevance: Connect these historical arguments to the current 2018 Conceptual Framework for Financial Reporting. Does the revised framework solve these issues, or do the same political constraints apply?

4. Report Structure and Formatting

This assignment must be submitted in a professional report format. Please adhere to the following structure:

1. Title Page: Student name, ID, unit code, and word count.
2. Executive Summary: A concise overview of your report’s purpose, analysis, and key findings (approx. 150-200 words, included in word count).
3. Introduction: Introduce the topic, the specific argument being analyzed, and the scope of your report.
4. Body Paragraphs:
   • Critique of SAC 4 and the Lobbying Phenomenon.
   • Theoretical Analysis (e.g., Public Interest Theory vs. Private Interest Theory).
   • The Role of the Framework in Professional Legitimacy.
   • Comparison with the current AASB Conceptual Framework.
5. Conclusion: Summarize your findings and provide a final verdict on the validity of the prompt statement.
6. Reference List: A minimum of 8-10 academic and professional sources (e.g., peer-reviewed journals, accounting standards, AASB/FRC reports).

Formatting Guidelines

• Font: Times New Roman or Arial, 12 point.
• Spacing: 1.5 line spacing.
• File Type: Microsoft Word (.doc or .docx).
• Referencing: Harvard Style (Author-Date). Ensure accurate in-text citations and a comprehensive reference list.

5. Submission and Academic Integrity

Submit your report via the Turnitin link provided in the Unit LMS (Blackboard/Moodle/Canvas). The similarity index must be reviewed carefully:

• Green/Blue Zone (< 20%): Acceptable range.
• Yellow/Orange Zone (20% – 40%): Requires review; potential deduction if plagiarism is detected.
• Red Zone (> 40%): Immediate investigation for academic misconduct.

You may resubmit your assignment multiple times until the due date. The final submission on record at 5:00 PM will be marked. Late submissions incur a penalty of 10% per day.

The assertion that the Conceptual Framework functions primarily as a tool for professional legitimation rather than technical improvement finds support in Positive Accounting Theory (PAT). The demise of SAC 4 serves as a quintessential example of the economic consequences of accounting standards; when the proposed definition of liabilities threatened to worsen debt-to-equity ratios, corporate constituents mobilized to lobby against it, effectively neutralizing the standard. As noted by Deegan (2020), this reaction illustrates that standard setting is a political process where “regulatory capture” often occurs, allowing powerful industry groups to shape rules that protect their economic interests. Consequently, while the modern 2018 Conceptual Framework aims to provide a neutral basis for standard setting, it remains constrained by the need to maintain the “social contract” between the accounting profession and society, ensuring that changes do not destabilize the existing economic order.

 Resources

• Deegan, C. (2020). Financial Accounting Theory. 6th ed. Sydney: McGraw-Hill Education. [Standard Text]
• Barth, M. E. (2018). ‘The Future of Financial Reporting: Insights from Research’, Abacus, 54(1), pp. 66-78. Available at: https://doi.org/10.1111/abac.12124
• Chowdhury, A. and Shil, N. C. (2019). ‘Public Sector Accounting Reforms in Emerging Economies: A Review of the Literature’, Journal of Accounting & Organizational Change, 15(2), pp. 287-309. Available at: https://doi.org/10.1108/JAOC-01-2018-0006
• Australian Accounting Standards Board (AASB). (2019). Conceptual Framework for Financial Reporting. Melbourne: AASB. Available at: https://www.aasb.gov.au
• Henderson, S., Peirson, G., Herbohn, K., and Howieson, B. (2020). Issues in Financial Accounting. 17th ed. Pearson Australia.

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