Simplifying CCA: An Institute Research Project

Article Abstract:

The Institute of Chartered Accountants of Scotland have been conducting research on the Statement of Standard Accounting Practice (SSAP) No.16 concerning current cost accounting. It was deemed complex by the public, so researchers have sought to simplify particularly the calculations of current cost of sales and of depreceation. Two methods, current cost accounting (CCA) and last in first out (LIFO) algebraic expressions, were offered. Results employing each method were compared. The largest variance between the two comes when physical stock is declining. LIFO was not considered as a widely adopted alternative to the CCA cost of sales adjustment. The 'specific index', 'general index' and 'taxation' methods are alternative simplified current cost accounting methods. The specific index method is most effective and results appear similar to those obtained under SSAP No.16's method.

Accounting and auditing, Inventories, Cost accounting, Inventory accounting

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What Makes an Accounting Standard Acceptable?

Article Abstract:

In July 1977, a resolution rejecting current cost accounting was passed by the members of the Institute of Chartered Accountants in England and Wales. Three years later, a revised form of current cost accounting was passed by British accountants. These incidents emphasize the need for a standard to be accepted by the financial community in order to be used. It is easy for standard- setters to be political and simply lean toward popular opinion, but report writing would then lose its credibility. Relevance and reliability are the two measures by which standards should be judged, not social impact. Current cost figures appear to have the advantage in these two categories over historical cost. Foreign currency translation and oil and gas are used as examples to demonstrate effective accounting standards.

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True and Fair - Time for the ASC to Act

Article Abstract:

The United Kingdom's Accounting Standards Committee (ASC) has obtained clarification of 'true and fair' view as it is used in the Companies Act of 1981. The interpretation explained the term as an abstract concept, yet stated that, in practice, it is considered to have been met if the accountant has followed GAAP. But, it is assumed that a greater responsibility was intended by using 'true and fair' than simply stating GAAP. The purpose of the balance sheet is still disputed; some claim it portrays historical value and others believe current value of a company's assets. The Counsel's opinion leaves the profession with the responsibility of defining the term. Even though this is a difficult task, the term should be adequately defined.

Methods

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