Tag: conservatism

Advanced Financial Accounting Theory and Analysis: The Concept of Conservatism

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Advanced Financial Accounting Theory and Analysis: The Concept of Conservatism

Sample Paper

Abstract

Conventionally, conservatism has been exploited in accounting about financial reporting in organizations. Economists argue that the application of the principles of conservatism in financial reporting is beneficial to organizations as it allows them to acknowledge company losses, as opposed to profits (Schroeder et al., 2010). Conservatism prevents organizations from making financial decisions that are potentially detrimental owing to a lack of acknowledgment of the probable financial failures. In relation to capital maintenance concepts, conservatism seems more consistent with financial capital maintenance than physical capital maintenance owing to the different principles that characterize the two concepts.

Keywords: Conservatism, Financial Reporting, Physical capital Maintenance, Financial Capital Maintenance

Introduction

In accounting, conservatism is defined as the discrepancy verifiability mandatory for identifying profits against losses (Watts, 2002). In contrast, conservatism is a method of accounting that acknowledges the losses a firm has occurred before the firm’s profits. This method of accounting implies accurate authentication of accounting procedures before claiming any profit, especially incurred expenditures and losses (Schroeder et al., 2010). The principle behind this form of accounting is ‘anticipate no profit, but anticipate all losses’. This further implies that all financial statements created using this theory place more emphasis on losses than profits. This, in turn allows accountants to mitigate the downside risks associated with certain financial decisions as compared to others. Admittedly, conservatism has affected financial reporting because it implies strict revenue-detection, which fosters proper financial reporting by firms. Firstly, conservatism encourages accountants to defer revenue until full verification is acquired. This ensures that the financial reports presented are accurate and consistent with the organization’s financial activities over time. Additionally, conservatism encourages accountants to, accurately determine, the company’s risk on earning. It guides accountants in terms of recognizing and reporting financial transactions subject to risks and uncertainty hence increase the credibility of the financial reporting system (Schroeder et al., 2010).

This paper examines the concept of conservatism in accounting, illustrating how conservatism has affected financial reporting in firms. The paper explains why conservatism is more relevant, and consistent with financial capital maintenance concepts, as opposed to, physical capital maintenance concepts.

Conservatism and Financial Statements

Economists have long argued on the authenticity and relevance of financial statements developed through the application of principles of conservatism, with most arguing that such financial statements do not provide the necessary information required for proper financial reporting. The provision of financial statements that ignore financial gains and instead recognize fiscal losses provides relevant and authentic information. Financial statements created using the concept of conservatism tend to be cautious in nature, with most of them exhibiting a subjective overvaluation of debts and undervaluation of the company assets (Watts, 2002). Such statements only recognize profits after the realization of sales, as well as the losses incurred during a transaction. Primarily, conservatism implies reporting losses in a timely fashion, as opposed to the quick reporting of a company’s profits. Since all the partners to an organization contract on the financial statement to signify financial covenants, conservatism allows all the key players in the transaction to receive a timely warning concerning deteriorating financial performance. By observing the principles of conservatism in the creation of financial statements, accountants are discouraged from committing any financial violations as conservatism seeks to identify such violations straight away (Watts, 2002). Financial statements that have been created using the concept of accounting conservatism allow the organization, as well as, the stakeholders to take protective action, hence reducing the downside risks.

Conservatism and Physical Capital Maintenance

Physical capital maintenance is an accounting concept of capital maintenance stating that return on capital usually occurs when the end period of the physical productive capacity of an organization exceeds the period beginning (Schroeder et al., 2010). This is usually in exclusion of company transactions with its owners. Put, physical capital maintenance is a concept in accounting that recognizes income presented after making the necessary physical replacement of a company’s operating assets. The concept of conservatism is not consistent with this theory because it considers losses as returns of capital and for that reason, does not incorporate them in the income (Schroeder et al., 2010). The physical capital maintenance concept tends to exhibit a inclination towards the addition of asset value, which is the opposite of the underlying principles of conservatism.  

Conservatism and Financial Capital Maintenance

Financial capital maintenance is another concept of capital maintenance stating that a return on capital occurs when the end period of the financial capacity of an organization exceeds the beginning period (Schroeder et al., 2010). Financial capacity, in this case refers to the financial value of a company’s net assets, excluding company transactions with owners. The concept of conservatism in accounting is consistent with financial capital maintenance as it acknowledges losses as returns on capital, including them during financial reporting (Schroeder et al., 2010). Unlike the physical capital maintenance concepts, this concept has the tendency to undervalue company assets to prevent any overestimation of company profits, hence agreeing with the principles of conservatism.

References

Schroeder, R. G. et al. (2010). Financial Accounting Theory and Analysis: Text and Cases. New

York: John Wiley and Sons.

Watts, R. L. (2002). Conservatism in Accounting. Retrieved from:

http://www.ekonomiportalen.se/Ross%20L%20Watts.pdf

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Accounting Conservatism And Managerial Risk

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Accounting Conservatism And Managerial Risk.

Question:

Discuss about the Accounting conservatism and managerial risk.

 

 

Answer:

The items of equity of Ramsay Health Care limited are listed in the consolidated statement of financial position. Constituent of equity of Ramsay comprise of issued capital, treasury shares, convertible adjusted rate equities securities, retained earnings and other reserves. It also involves parent interest and non controlling interest.

Issues share capital is the face value of shares and amount of nominal value of shares that is held by shareholders. It is the amount that shareholders invest in the company. Such shares might comprise of equity shares and preference shares.

Treasury shares are the shares that the issuing company buys back from shareholders that have the impact of reducing outstanding shares in open market. Convertible adjustable rate equity securities are types of preferred stock where payment of dividend is set a base rate and a benchmark interest rate (Balakrishnan et al., 2016). Reserves are the amount that is created out of profits of company. Revenue reserves and capital reserves are the two types of reserves that a company has.

Retained earnings are the cumulative earning earned by corporation that is not intended for distributing to shareholders (Chaibi et al., 2014). Such earnings are reinvested in the business and are not distributed as profits to shareholders.

Total value of equity for Ramsay Health Care limited is recorded at $ 2046061 million in year 2016 compared to $ 1837794 in year 2015. This increase in value of equity is mainly because of increase in value of treasury shares, other reserves and retained earnings.

Total amount of income tax paid by Ramsay Health Care Limited is depicted in consolidated statement of comprehensive income.

The income tax expense for year 2015 is recorded at $ 221216 million and in year 2016, company reduced income tax expense by amount $ 23542 million. Income tax in year 2016 stood at $ 187674 million (ramsayhealth.com, 2018). In the current year that is 2017, income tax expense is recorded at $ 198669 million. Therefore, income tax expense reduced initially and increased thereafter.

Income tax rate that is applicable to Ramsay Health Care Limited is the rate of corporate tax is 30%. Accounting income of company for year 2016 is reported at $ 445298 and for year 2015, amount stood at $ 432073 (ramsayhealth.com, 2018). There was increase in value of accounting income of company. Now, computation of accounting income of firm times the corporate tax rate for both the years is computed at ($ 445298 * 30%) is 311708.6 for 2016 and ($ 432073 * 30%) is $ 302451.1 for year 2015. Computation of above figures is indicative of the fact that the percentage of accounting income to corporate tax has increased. When comparing the above figures with that of tax expenses recorded for particular years, it can be inferred that tax expense for both the years is less than accounting income as income tax percentage. Therefore, figures of income tax expense are considerably different from that of above figures. Factors responsible for causing this difference are that income tax expense has reduced considerably through the years of analysis (ramsayhealth.com, 2018).

Deferred tax assets are recorded under the heading noncurrent assets of consolidated statement of financial position. The amount of deferred tax assets for year 2016 is recorded at $ 199726 compared to $ 204977 in year 2015. It indicated that amount of deferred tax reduced in year 2016. On other hand, deferred tax liabilities are recorded under the heading noncurrent liabilities of the statement. Deferred tax liabilities mount for year 2016 is recorded at $ 296130 compared to $ 310204 in year 2015indicating that there was reduction in deferred tax liabilities in year 2016 (ramsayhealth.com, 2018). Recording of deferred income tax is provided for all temporary difference between carrying amount and reporting date between tax base for liabilities and assets for the rationale of financial reporting. Recognition of deferred income tax liabilities is done for temporary differences that are taxable (Agrawal & Cooper, 2017). Deferred income liabilities identification is done for deductible temporary differences, tax losses that are not used and carry forwarding of tax assets that are not used.

The amount of income tax payable recorded by Ramsay Health Care limited in its annual report is reported at $ 49560 for year 2016 compared to $ 42021 for year 2015. Higher figure indicates that total amount of income tax payable has increased in year 2016. On other hand, income tax expense was recorded at $ 197674 for year 2016 and $ 221216 for year 2015 respectively. Comparing these mentioned figures, it is depicted that income tax expenses for both the period is significantly higher than income tax that are payable.  Expense related to income taxexceeds income tax payable by amount $ 148114 in year 2016 and $ 179195 respectively (ramsayhealth.com, 2018). This difference in value between income tax payable and income tax expense is attributable to difference in accounting treatment of both the values.

The amount that is payable by company by way of income tax is based on net profit reported by company.  However, this does not form the sole basis of devising the total amount of tax that is to be paid by company. There can be alterations in the total amount of net profit or accounting profits reported by company resulting from various adjustments as per the taxation law that the government imposes (Warren & Jones, 2018). Such adjustments can lead to differences in timing between the accounting profits or profit recognition and tax reporting for the purpose of accounting. As a consequence o this, there would be differences in total amount of income tax payable and income tax expenses reported in the income statement of company. 

Expenses related to income tax of Ramsay Health Care limited is recorded in the income statement while the total amount of income tax paid is recorded in the consolidated statement of comprehensive income.

The allocation of income tax expense is done on the basis of tax sharing arrangement on a tailored standalone basis that is according to the principles of income tax of AASB 112. Recognition of tax allocation is done considering decrease or increase in intercompany accounts of subsidiary with the tax consolidated group head company. Expense related to income tax for year 2016 is recorded at $ 197674 while the total amount of income tax paid is $ 13505 million. On other hand, income tax expense for year 2015 is recorded at $ 221216 and amount of income tax is received of amount $ 1041 million. At differences analysis of figures is indicative of the fact that there is significant difference between amount of income tax paid and income tax expenses. Hence, income tax paid is less than total amount of income tax paid in both the years (Lee, 2014).

Income tax is the amount of income tax liability of organization and it is calculated using the effective income tax rate. On other hand, accounting profit reported by company forms the basis of calculation of income tax expense. Amount of income tax paid required calculation of taxation determined by taxation rules and income tax expenses is imbibed in determination of net loss and net profit for any particular period. Therefore, income tax expense is calculated using net accounting profit and the concept of financial accounting is involved in total amount of income tax paid. Moreover, general accounting principle and practices is also involved in calculations that lead to differences. Classification of taxable and accounting income is done in form of permanent and timing differences. Timing differences arises because of difference in period in which some items of revenue and expenses are recorded (Warren & Jones, 2018). This is because period in which recording of such items in taxable income does not coincide with period in which recording of such items are done for arriving at accounting income. This explanation demonstrates the reasons for difference between income tax expense and income tax paid.

Analysis of annual report of Ramsay Health Care limited depicts that treatment of tax in the financial statement has been done by proper segmentation. Detailed explanation has been provided in the financial statements notes as there each and every particulars and component of taxation has been discussed. Explanation of difference income tax expense and income tax payable has been explained in the context of temporary and permanent differences. Components of income tax expenses have been shown in separate section. Annual report has also demonstrated numerical reconciliation between calculation of tax expense as per income tax rate and aggregate tax expense that is recognized in the income statement. Moreover, recognition of tax liabilities and tax assets has been done disclosing figures of respective components of tax assets and tax liabilities. Detailed explanation of tax effect accounting has been done in the annual report. Measurement and recognition of income tax and the accounting treatment of taxation has been discussed in the notes to financial statement. Therefore, analysis of annual report depicts that understanding of treatment of taxation was interesting and information has been gained about accounting for income tax.

References list:

Agrawal, A., & Cooper, T. (2017). Corporate governance consequences of accounting scandals: Evidence from top management, CFO and auditor turnover. Quarterly Journal of Finance, 7(01), 1650014.

Atanasov, V., & Black, B. (2016). Shock-based causal inference in corporate finance and accounting research.

Balakrishnan, K., Watts, R., & Zuo, L. (2016). The effect of accounting conservatism on corporate investment during the global financial crisis. Journal of Business Finance & Accounting, 43(5-6), 513-542.

Chaibi, H., Trabelsi, S., & Omri, A. (2014). Investment opportunity set, corporate accounting policy and discretionary accruals. Journal of Economic and Financial Modelling, 1(1), 1-12.

Cipriano, M. (2016). Bad Will: Why the FASB’s Proposed Fix of Goodwill Accounting Will Not Fix the Goodwill Problem. Journal of Corporate Accounting & Finance, 27(6), 89-92.

Kravet, T. D. (2014). Accounting conservatism and managerial risk-taking: Corporate acquisitions. Journal of Accounting and Economics, 57(2), 218-240.

Lee, T. A. (2014). Evolution of Corporate Financial Reporting (RLE Accounting). Routledge.

Ramsayhealth.com. (2018).  Retrieved 4 January 2018, from https://www.ramsayhealth.com/common/emag/rhc/annualreport2017/pubData/source/RHCAR2017.pdf

Sierra?García, L., Zorio?Grima, A., & García?Benau, M. A. (2015). Stakeholder engagement, corporate social responsibility and integrated reporting: an exploratory study. Corporate Social Responsibility and Environmental Management, 22(5), 286-304.

Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.

Watts, R. L., & Zuo, L. (2016). Understanding practice and institutions: A historical perspective. Accounting Horizons, 30(3), 409-423.

Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.

Accounting Conservatism And Managerial Risk

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Accounting Conservatism And Cost Of Capital

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Accounting Conservatism And Cost Of Capital.

Question:

Discuss about the Accounting conservatism and cost of capital.

 

 

Answer:

Detecting the financial viability of old and new loader truck with relevant calculations conducted for Flying Airline Company:

Situation 1 (Not replacing Old loader)

Particulars

Amount

Depreciation for old loader

$ 25,000.00

Write off for old loader

$ 0.00

Proceeds from sale of old loader

$ 0.00

Depreciation for new loader

$ 0.00

Operating costs involved for old loader

$ 80,000.00

Total Operating cost

$ 105,000.00

The calculation that is conducted in the above table mainly helps in identifying the overall operating cost incurred by Flying Airline Compony, when old loader truck is used in its operations. The total operating cost mainly amounts to $105,000, which includes depreciation and operating cost involved for the old loader. This relevant calculation of cost incurred from equipment allows the management to take adequate decision for cutting its cost and increase their profitability. Cannon (2014) mentioned that with the evaluation of cost analysis management can detect actual cost incurred by its operations, which helps in making adequate management decision.

Situation 1 (Replacing Old loader)

Particulars

Amount

Depreciation for old loader

$ 0.00

Write off for old loader

$ 25,000.00

Proceeds from sale of old loader

$ (5,000.00)

Depreciation for new loader

$ 20,000.00

Operating costs involved for old loader

$ 50,000.00

Total Operating cost

$ 90,000.00

The table mainly represent the overall cost if the old loader is replaced with the new loader truck. Relevant reduction in operating cost is detected from operations, which could eventually help the management of Flying Airline Company to take adequate cost decision. The decline operation cost mainly declined from the value of $105,000 to $90,000, which is relevantly a profit of $15,000 identified from the implementation of new loader truck. The company with the help of cost analysis can detect financial enhancement, which is attained from the implementation of the new loader. On the other hand, Collier (2015) argued that viability of cost analysis mainly reduces when adequate research is not conducted by the management on cost. The relevant reduction of cost is detected from the sale proceeds of the old loader, which cannot continue in next year. Hence, from second year the overall operation cost will be at the level of $95,000, which is relatively lower from the current expenses incurred by the company.

Situation 1 (Differential cost)

Particulars

Amount

Depreciation for old loader

$ 0.00

Write off for old loader

$ 0.00

Proceeds from sale of old loader

$ 5,000.00

Depreciation for new loader

$ (20,000.00)

Operating costs involved for old loader

$ 30,000.00

Total Operating cost

$ 15,000.00

The differential calculation conducted in the above table mainly helps in understanding the overall cost savings, which could be conducted by Flying Airline Company after implementing the new loader truck in its operations. The overall differential cost analysis mainly indicates total difference in operating cost by $15,000, which is obtained by the company if new loader is implemented. The difference in actual operation cost between old and new loader can be detected from the above calculation, which amounts to $30,000. Hence, the implementation of new loader truck could eventually allow the company to attain higher profits, due to reduction in its operating cost. In this context, D’Onza, Greco and Allegrini (2016) mentioned that management with the evaluation of differential cost can detect financial improvement, which could improve their cash inflow and reduce cash outflow. Therefore, Flying Airline Company could adequately use the new loader truck, as it helps in reducing operating cost, which in turn improves its profit generation capacity. 

Detecting non-stop route and one-stop route financial viability by conducting adequate calculation:

Situation 2 (Non-Stop Route)

Particulars

Amount

Revenue from passenger

 $       240,000.00

Revenue from Cargo

 $          80,000.00

San Francisco (landing fees)

$ 0.00 

Cost (Flight crew)

 $          (2,000.00)

Cost (Fuel)

 $       (21,000.00)

Cost (Meal)

 $          (4,000.00)

Cost (Aircraft maintenance)

 $          (1,000.00)

Net revenue from operations

 $       292,000.00

The calculation conducted in the above table mainly represents the revenue that will be generated from nonstop route, which is currently conducted by Flying Airline Company. In addition, the company is mainly able to generate profit of $292,0000 from its operation in nonstop route. The operations conducted by the company Flying Airline Company is mainly helps in generating higher profits. The total revenue of $320,000 is mainly identified from the non-stop route, which could help in improving its profitability. On the other hand, the total cost of $28,000 is conducted by Flying Airline Company in non-stop route. Evaluation of overall cost and revenue incurred from operations could eventually help in detecting financial viability of the operations (Evans and Popova 2016).

Situation 2 (With stop route)

Particulars

Amount

Revenue from passenger

 $        251,000.00

Revenue from Cargo

 $          80,000.00

San Francisco (landing fees)

 $          (5,000.00)

Cost (Flight crew)

 $          (3,400.00)

Cost (Fuel)

 $        (26,000.00)

Cost (Meal)

 $          (4,900.00)

Cost (Aircraft maintenance)

 $          (1,000.00)

Net revenue from operations

 $        290,700.00

The financial viability of with stop route can be identified from above calculations conducted in above table. The relevant profit of the company will mainly amount to $290,700, when implementing the with stop route mentioned in situation 2. The evaluation also indicates the increment in passenger revenue, which is achieved by the company when one route stop is adopted. However, the increment in revenue was mainly supported by rising expenses incurred from the new operations. This could eventually lead to rising total cost from operations, which reducing actual profit incurred from the process. The extra cost incurred from lading fees of San Francisco is relatively reducing the profits that is obtained from the new one route operation. Fleischman and Parker (2017) stated that evaluation of financial cost could eventually help the management in identifying the excess expenses conducted on operations, which could help in improving their profitability.

Situation 2 (Differential cost)

Particulars

Amount

Revenue from passenger

 $        (11,000.00)

Revenue from Cargo

 $ 0.00 

San Francisco (landing fees)

 $             5,000.00

Cost (Flight crew)

 $             1,400.00

Cost (Fuel)

 $             5,000.00

Cost (Meal)

 $                 900.00

Cost (Aircraft maintenance)

 $ 0.00 

Net revenue from operations

 $             1,300.00

The calculation conducted on differential cost analysis is understood from the operations, which might help in detecting financial viability of one stop route. From the evaluation relevant loss can be identified by Flying Airline Company if one stop route is adopted. This could eventually decline the actual profits obtained by $1,300, as expenses from operations has increased relatively. Therefore, total revenue from implementing the one stop route is could generate profit of $290,700, while the nonstop route could obtain $292,000. Hence, the Flying Airline Company needs to reject the one stop route, as it will reduce the actual revenue generated from operations. Gillion et al. (2016) mentioned that the use of operational cost analysis could eventually help the companies in detecting financial viability of each projects. 

Evaluating other factors, which needs to be evaluated before conducting any decision for Flying Airline Company:

The evaluation of overall condition presented in Situation II could help in detecting other factors before reaching any decision. The economic factor needs to be evaluated by Flying airline company, which could help in understating the purchasing power of consumers. This detection of purchasing power could eventually help in understanding ability of the consumer to pay relevant price for the services provided by Flying Airline Company. In addition, operational increment of the company after implementing one stop route could be identified, which might help in expanding its operations (Grant 2016). This expansion of the operations could eventually help in generating higher revenue in long term. Both economic and operational factor needs to be evaluated by Flying Airline Company before taking any kind of decision based on financial perspective.

Stating the calculations needed by Flying Airline Compony to accept the special tourist charter proposal when adequate spare capacity is present:

Situation 3

Particulars

Amount

Revenue from passenger

 $ 250,000.00

Revenue from Cargo

 $ 30,000.00

Total revenue from operations

 $ 280,000.00

Variable expenses

 $ 90,000.00

Fixed cost

 $  80,000.00

Total expenses from operations

 $ 170,000.00

Profit from operations

 $ 110,000.00

Profit under normal circumstance generated from the overall operation could be identified from the above calculation. The overall revenue of $280,000 is mainly identified from the operations, which comprises revenue from both passengers and cargo. On the other hand, the total expenses comprise with variable and fixed cost incurred from the operations, which amount of $170,000. Thus, both total expense and revenue mainly allows the organisation to generate the overall profit of $110,000 under normal circumstances. Isard et al. (2017) mentioned that with the evaluation of overall cost and revenue management can detect project viability and make adequate investment decision.

Situation 3

Particulars

Amount

Revenue from passenger

 $ 160,000.00

Revenue from Cargo

 $ 0.0  

Total revenue from operations

 $ 160,000.00

Variable expenses

 $ 85,000.00

Fixed cost

$ 0.0  

Total expenses from operations

 $ 85,000.00

Profit from operations

 $ 75,000.00

The valuation of the overall table helps in identifying the profits that will be generated from the proposed New Special Tourist Charter Flight. In addition, the total revenue is mainly generated from passengers, while no revenue is accumulated from cargo operations. On the other hand, the revenue generated from passengers is relatively low, as compared to revenue generated under normal circumstances. Furthermore, the overall expenses incurred from the New Special Tourist Charter Flight is variable expense on the assumption that space is available to Flying Airline Company to accommodate the charter plane. The accommodation of the charter plane is mainly declining the overall fixed cost incurred by the company. This relevant omission of the fixed cost is mainly reducing the overall total expenses incurred from operations. Moreover, profits from operations is detected to be at the levels of $75,000. The profit level is relatively lower than the profit generated under normal circumstances. Joda and Bragger (2015) mentioned that companies by evaluating different cost factors can detect viability of the proposal presented by customers. However, Lanen (2016) argued that management needs to evaluate all the cost factors or else the project would increase expenses and hamper financial stability of the organisation.

From the overall evaluation, Flying Airline Company could eventually help in generating higher revenue from its operations, as fixed income will be provided from the touristy company. Hence, accepting the proposal of New Special Tourist Charter Flight could eventually help Flying Airline Company to improves its profitability in long run. However, under normal circumstance the company would attain higher profit, but constant orders would not be provided. Therefore, accepting the proposal for New Special Tourist Charter Flight could help in improving its financial viability. Li (2015) cited that cost analysis allow the company to evaluate performance of its operations in different circumstance and detect the minimum revenue requirement for achieving breakeven. The detection of breakeven value and units allow the management to take operational decision for improving its current financial capability.

Mentioning the viability of the new proposal with adequate calculation when there is no space available to Flying Airline Company:

Situation 3

Particulars

Amount

Revenue from passenger

 $ 160,000.00

Total revenue from operations

 $ 160,000.00

Variable expenses

 $ 85,000.00

Fixed cost

 $ 80,000.00

Total expenses from operations

 $ 165,000.00

Loss from operations

 $ (5,000.00)

Relevant loss is calculated from the above table, if no spare space is available to Flying Airline Company. The loss of $5,000 can be detected if Flying Airline Company accept the offer for New Special Tourist Charter Flight. The company will incur an extra fixed cost of $80,000 for accommodating the new charter plane for supporting its activities. This could eventually increase loss from operations, which will incur by Flying Airline Company due to the increased total expenses (Marglin 2014). Hence, if no extra space is available then the company needs to reject the proposal for New Special Tourist Charter Flight, as it might hamper its future financial stability.

Reference

Cannon, J.N., 2014. Determinants of “sticky costs”: An analysis of cost behavior using United States air transportation industry data. The Accounting Review, 89(5), pp.1645-1672.

Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

D’Onza, G., Greco, G. and Allegrini, M., 2016. Full cost accounting in the analysis of separated waste collection efficiency: A methodological proposal. Journal of environmental management, 167, pp.59-65.

Evans, D.K. and Popova, A., 2016. Cost-effectiveness analysis in development: Accounting for local costs and noisy impacts. World Development, 77, pp.262-276.

Fleischman, R.K. and Parker, L.D., 2017. What is Past is Prologue: Cost Accounting in the British Industrial Revolution, 1760-1850 (Vol. 6). Routledge.

Gillion, J.F., Sanders, D., Miserez, M. and Muysoms, F., 2016. The economic burden of incisional ventral hernia repair: a multicentric cost analysis. Hernia, 20(6), pp.819-830.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Isard, W., Azis, I.J., Drennan, M.P., Miller, R.E., Saltzman, S. and Thorbecke, E., 2017. Methods of interregional and regional analysis. Taylor & Francis.

Joda, T. and Brägger, U., 2015. Digital vs. conventional implant prosthetic workflows: a cost/time analysis. Clinical oral implants research, 26(12), pp.1430-1435.

Lanen, W., 2016. Fundamentals of cost accounting. McGraw-Hill Higher Education.

Li, X., 2015. Accounting conservatism and the cost of capital: An international analysis. Journal of Business Finance & Accounting, 42(5-6), pp.555-582.

Marglin, S.A., 2014. Public Investment Criteria (Routledge Revivals): Benefit-Cost Analysis for Planned Economic Growth. Routledge.

Mishan, E.J., 2015. Elements of Cost-Benefit Analysis (Routledge Revivals). Routledge.

Othus, M., Bansal, A., Koepl, L., Wagner, S. and Ramsey, S., 2017. Accounting for Cured Patients in Cost-Effectiveness Analysis. Value in Health, 20(4), pp.705-709.

Patassini, D., 2017. Beyond benefit cost analysis: accounting for non-market values in planning evaluation. Routledge.

Zeff, S.A., 2016. Forging accounting principles in five countries: A history and an analysis of trends. Routledge.

Accounting Conservatism And Cost Of Capital

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Conservatism And Liberalism A Review Of Two Ideologies Politics Essay

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Conservatism And Liberalism A Review Of Two Ideologies Politics Essay.

Edmund Burke is a philosopher who lived between the years 1729 and 1797. He defended Ireland society when they had been resisting of British domination, criticized British East India Company for demolishing Indian traditions and their historical privileges, also supported to American independence against Britannia. As taking into consideration, it seemed that Edmund Burke’s thoughts are close to liberalism. However, he is known as a conservative thinker because of his opposite attitude to French Revolution. The reason of that attitude is his beliefs.

According to Edmund Burke, making plans with destroying the values that belong to past is a mistake and when political community is forming, the alteration should be effectuated without corrupting the harmony of the current system. Considering of all these information, it can be mentioned that Edmund Burke is a liberal conservative thinker.

The concept of Conservatism defends esteeming traditional experiences, rising against radical social changes and believing that innovations must be gradually. It is also defined that it protects free enterprising and Capitalism and stresses the importance of moral discipline and social system based on election.

That conservatism consideration was occurred against liberalism born with French revolution and one of the first proponents was Edmund Burke. Burke’s analysis about The Age of Enlightenment and French Revolution has been found instructive for many conservative thinkers. With the Reflections on the French Revolution book, published at 1790, Burke criticized the thought of The Enlightenment and French Revolution which growth with The Age of Enlightenment and emphasized that events damage basic values such as religion, morality and family structure, which keep society together and precipitated terrorism and anarchy. Additionally Burke has described The Enlightenment as a movement that separates human mind. Another one of the important conservative philosopher is Joseph de Maistre who is the most brilliant and controversialist conservative thinker. Joseph de Maistre had always stayed in the service of the Church and Monarchy. Like Burke, he criticized The Enlightenment and The Revolution and defended the principle of hierarchical authority that Revolution wanted to destroy. Conservatism is considered as religiosity by many people in the world, but David Hume, one of the famous thinkers, is a model that represents difference between conservatism and religiosity. Although he believes Deism, for David Hume religion is one of the most important parts of human life and provides social integration. Current meaning of conservatism has made to reach with the arguments that these philosophers presents.

The Main Problems with Conservatism

Although Conservatives describe their ideology as perfect, in practice and idea conservatism has many problems. The most prominent one of these comes from the definition of Conservatism. In Conservatism, with giving importance of the traditional values, avoiding change obstructs adaptation to the developing world. Nonetheless using experiences for trying to live their lives, development in the community will be minimal even though they were opposed to radical changes. Developments in society having a minimum level create a thought that undermines theoretical description of the Conservatism.

Secondly, Conservatism defends the free market system and Conservatives do not want government to intervene in the market. With the free market system in economy, some individuals or companies become extremely rich because of government not regulating system. This situation impairs economic inequality in the society and causes the working class to become much worse and the enrichment for rich emperors. That system is the major reason of financial crisis that still happens all over the world.

Thirdly, Conservatism believes that the environment should be clean and protected, but practically the industrial system that is established by conservatives with the aim of minimum cost and maximum profit does not protect the environment indirectly. In case they believed that, the world that is polluted since its existance, is God’s creation and people do not have the massive power that effects that pollution. This situation contrasts with the clean environment that is wanted.

Lastly, individuals who have sexual preferences different from heterosexuality and live in the society where conservatism is dominant cannot live freely because only heterosexual marriage is allowed. Although conservatives call these sexual preferences as diseases, they have not found a solution for this “disease”. For this reason that problem have come out from existence of human being to today.

What is Liberalism?

The concept of Liberalism is discussed by philosophers since 18.century and took an important place in political ideologies. Although its magnitudes differ from community to community, there are basic components that are putative for every community. The common definition of Liberalism is an ideology that takes on liberty as a first political value, a tradition of politics and a belief in the importance of equality. John Locke is approved of the father of Liberalism. It is admitted by philosophers that the ideology of Liberalism was born with French Revolution and American Resistance for Independence. According to John Locke, there must be a central authority for punishing the people who are defeated their weaknesses and cause damage. Because of that, the community needs government for obstruct these people. For this reason Locke defends that there must be a liberal government. In addition, one of the most known liberalist philosopher is Montesquieu who was a French social commentator and political thinker. He propounded the theory of the separation of powers and he said, “When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty; because apprehensions may arise, lest the same monarch or senate should enact tyrannical laws, to execute them in a tyrannical manner.” So he emphasized that the importance of separating legislation, implementation and judgement in Liberalism. In later years John Stuart Mill, a liberalist and British political leader, had an opinion that freedom of expression is a basic requirement of social progress, because when freely declaration of ideas is not allowed, it is not possible to avoid from mistakes for humans. Nowadays it is been mostly argued that economic dimension of Liberalism.

According to Adam Smith, thought of invisible hand can provide the best balance at market. So he defended that government should be only an regulator and not be interfere in the market. Lastly, Hayek who works for many years in the field of economics and political theory is the main representative of contemporary liberalism. With respect to Hayek, government should not intervene in the market because the government does not equip with information to manage the market. Moreover, the laws should not have the quality that regards individuals and groups. Like traditional liberals, Hayek lines up with the negative liberty and disconnects liberalism and democracy. According to Hayek, Liberalism is a theory about the limits of political power and democracy is about who has the political power. Like Edmund Burke’s, at Hayek’s social philosophy there are both elements of Liberalism and Conservatism and Hayek insistently stressed the establishment of the separation of powers system. All of the ideas that these Liberalist philosophers emphasized especially generates the system of Liberalism.

The Main Problems with Liberalism

As in any ideology, Liberalism has its own problems in itself. Firstly in Liberalism the existence of individuals are superior and more real than the existence of the entire structure of society. Theoretically, individuals exist before the community, and therefore the individual’s rights come before the rights of community, but people live in the community and when they are making choice, they consider the existence of community. Hence, theoretical ideas are not in harmony with daily life.

Secondly, instead of traditional values, change has more important role, because it is necessary for living equal and independent in Liberalism.

 With the change’s placing more importance than these traditional values, they may be lost and unwanted changes in the cultural structure may occur. If these changes are especially radical, society may not be able to adapt quickly and this situation leads to divisions in society.

Lastly, in general, the majority of individuals forming a society are related to any region and they are connected to the moral structures that are determined by their religion. These people live their lives by basing those moral values, but Liberalism does not include those values because of not being a moral doctrine. Thus, with Liberalism, the moral structure is not possible to be integrated with the ideas.

Conservatives vs. Liberalists

Conservatism and Liberalism often appears as two opposite poles and there are many differences between them to support this idea. Some of these differences in the past and present are religion, economy, culture, environment, same-sex marriage, death penalty, abortion and affirmative action.

Between liberals and conservatives when the moot point is religion, two sides have completely opposite opinions. Religious conservatives defend that their religion rules should be effective in state government and that government should not impede with religious freedom, but according to liberals, religious expressions have no place in government and religion should not interfere government. In addition, religious conservatives support that religious symbols can be in public and government spaces, but liberals are extremely opposite that idea.

With regard to the economy, conservatives want free market system, competitive capitalism, and private enterprise. Because on their thoughts free markets produce more opportunities and higher standards than economic system that government regulates, but liberals prefer a market system that government regulates restrictedly, because government can protect the community against large companies. Contrary to free market system, public interest motivates the government.

Another subject that conservatives and liberals differ from each other is culture. Conservatives are strongly connected with traditional and cultural values, so they oppose radical changes. Adversely, liberals do not attach much importance to traditional and cultural values than conservatives, so they are open to quick, intense and extensive social innovation based on rational and applicable grounds.

When environmental issues are discussed by conservatives and liberals, they are the same ideas about wishing a clean world, but their ideas are separated about what causes pollution. Conservatives claim that human being cannot affect lasting change to the earth’s nature and at the same time, they blame government for impairing the economy with environmental policies. On the other hand, liberals believe that human being damage to the environment and therefore believe that some changes should be made. In addition, liberals claim that conservatives do not protect the environment.

Another subject is same-sex marriage that liberals and conservatives come up against each other as the years have passed. Regardless of which religion they believe, conservatives defend that a marriage should be between one man and woman. It is believed that human nature does not belong each other when they have same sex and all religions require that kind of marriage by conservatives. Conservatives are related with perception of morality, so they always argue that subject with liberals. Â For liberals, marriage should be legal for bisexual, transgender, gay and lesbian couples, because marriage is one of the civil rights and should not be prohibited regardless of whatever circumstances.

The other issue that liberals and conservatives are been against each other is death penalty since lately years. It is been argued that whether death penalty should be forbidden or not all over the world. As conservatives considering that death penalty is usual and essential for fitting the crime, liberals think death penalty should be abolished because of being contrary to civil rights, not dissuading crime, and there can not be any situation that death penalty is solution. Also for liberals, an innocent person can be killed with any execution.

Like death penalty, abortion is the one of the most popular issue that is been argued at these years. Conservatives believe that human life begins when a female individual becomes pregnant, so they defend that abortion does not differ from killing an individual and the pregnant person cannot choose not having that baby. Unlike conservatives, liberals consider that a fetus is not a human yet, and the decision to have an abortion is a personal choice, also they defends government should not interfere that individual’s opinion.

It is believed that in all religion God creates people on equal terms by conservatives, so affirmative action is not needed and it is unfair. For conservatives, every people should get one’s desert but when liberals look at the past it seem that everyone do not have the equal opportunities especially about racism. They believe some innovations should be come out and affirmative action can be the solution.

The Superior One

Conservatism and Liberalism are compared with each other since they were formed. Conservatives and liberalists are both think and defend that their ideology is superior to the other one and struggle for showing that theirs are more reasonable to live. With all information, there are many issues that both sides are right, but it clearly seems to be missing a point from both sides. For this reason, there is no way to show one as superior.

Conservatism And Liberalism A Review Of Two Ideologies Politics Essay

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Distinguish conservatism, classical liberalism and socialism in terms of core underlying themes on which they differ

Posted on | by KN Simon
Distinguish conservatism, classical liberalism and socialism in terms of core underlying themes on which they differ.

1- Detail the major points for and against the view that there can be a science of politics, providing examples for each view. Explain which view is most persuasive, and why.

2- The “acid test” in the Compare in 1 (p. 8-9) seems to illuminate several different types of political values. Characterize the key types of values in the analysis. Explain your own decision process in weighing the different values and selecting either Gamma or Delta. Explain what additional indicators you would include if you developed your own acid test between countries.


3- Select a particular political phenomenon and describe your cognitive, affective, and evaluative orientations toward that phenomenon. Also explain the key sources of those orientations in terms of authority, personal experience and/or science-based information.

4-  Distinguish conservatism, classical liberalism and socialism in terms of core underlying themes on which they differ.

Distinguish conservatism, classical liberalism and socialism in terms of core underlying themes on which they differ

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