Financial accouting report

Accounting issues in an organization

Accounting issues in an organization can be categorized into transparency, accountability, and globalization. A fact about the success of an organization is that it partially depends on the ability to deal with these accounting issues.
Transparency reduces uncertainty. To ensure transparency, it is also important to bring corporation and trust between the customer, an organization, and shareholders. There will be lack of transparency when the organization cannot be responsible for its financial instability.
In a situation where the organization is unable to meet and set up goals and objectives, a form of failure in accountability is seen and this can lead to a shortage of productivity. Finally, the rapid rise in globalization has made it hard for some organizations to have their operations aligned with the accounting standards.

The Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board (FASB), is a non-profit organization that aims at establishing and enhancing the Generally Accepted Accounting Principles (GAAP) and ensuring that accounting issues are appropriately handled. The FASB is aimed at enhancing corporate accounting practices by improving guidelines that are set for the accounting reports thus creating a uniform standard across the financial markets. The composition of the Emerging Issues Task Force (EITF) is designed in such a way that encompasses persons in the position to be aware of the emerging accounting issues before they become widespread. This paper focuses on the Emerging Issues Task Force and its impacts on the Financial Accounting Standard Board.

Missions of the Emerging Issues Task Force

The Emerging Issues Task Force has been instrumental in the enhancement of the performance of the Financial Accounting Standard Board. EITF was established in 1984, and its primary mission is to assist the FASB in the enhanced reporting through discussion, timely identification and resolution of the accounting issues with the framework of the Financial Accounting Standards Board (FASB) accounting standard codifications (Easton, 2016). Through the timely identification of the accounting issues, the FASB makes it easier for organizations to make accurate financial reporting and at the same time embrace reliability and prudence. The application of the EITF makes it easier for the Financial Accounting Standards Board (FASB) to establish, interpret and improve the standards of financial accounting and reporting among entities and these financial reports provide useful financial and non-financial information to both the financial users and investors.

Analysis of EITF efficiency

There are various accounting issues that the EITF addresses. Some of these accounting issues include accountability, transparency, and globalization. The implementation of the Emerging Issues Task Force has helped in addressing accounting issues through various measures. Some of these strategies include the identification of the accounting issues before their applicability. By identifying the accounting issues, it makes it easier for firms to come up with the necessary measures before their having costly effects (Easton, 2016). The Emerging Issues Task Force has also made it easier for accounting bodies such as the FASB and the IFRS to integrate transparency within the accounting frameworks. This implies that, with the efforts by the EITF, transparency within the accounting frameworks has been enhanced and that accounting transactions that are reported in the financial statements of firms are accurate and reliable. The EITF has also provided a platform through which there has been efficiency in the determination of the customers of the operating service in the service commission arrangements and at the same time eradicate the accounting issues that are experienced in the employee benefit plan and reduce costs associated with assets reported on the financial statement.

Recommendation

In the quest of enhancing the efficiency of the EITF, there are different strategies that can be embraced. One of these strategies is the inclusion of a strong research team that will be mandated with the role of identifying the emerging issues, conducting extensive research on them and coming up with solutions on how to deal with the issue. The research team can also track on the issues and provide support to the accounting entities on the implementation of the EITF and its efficiency in addressing accounting issues. The efficiency of the EITF can also be improved through basic training among the staff. Training of the employees on the emerging accounting issues equips them with the relevant knowledge on how to deal with the issues as well as help them prepare to handle the issues. Finally, bringing to board people in the position to be aware of the emerging accounting issues before they become divergent can be instrumental in the enhancement of the efficiency of the EITF.

Current issue addressed by the EITF

The current issue addressed by the page is accounting issues in the employee benefit plan financial statements (Employee Benefit Plan Simplifications, 2017). When coming up with an investment portfolio, it is vital to have a clue on the retirement needs of the affected population. Other areas that are being addressed by the EITF include restricted cash; recognition of breakage for the pre-paid stored value products and contingents put and call options in the debt instrument.

Impacts of the EITF on a company's financial reporting

In the past five years, financial reporting of companies has been enhanced in such a way that they are inclusive of various accounting issues faced by the company. Among these issues are accounting concerns in the employee benefit plan financial statements. The EITF advocates for transparency in the presentation of the employee benefit plan and at the same time ensure that before reporting on the employee remunerations and benefits, they consult the various company employees (Easton, 2016). The financial statements of companies have a section in which they focus on the employee remuneration and benefit plans, and this is in line with the FASB and the EITF.

Recommendations on EITF enhancement in accounting and financial reporting

There are various strategies that can be adopted by the Emerging Issues Task Force (EITF) in improving accounting and financial reporting of companies. One of these measures is a focus on the in-depth review of financial and accounting information during financial reporting. In so doing, this helps in ensuring that there is a total inclusivity in the financial information within the financial statements and at the same time ensures that financial statements are reliable to the users. Companies also have to ensure that they include the shareholders and experts in the financial field that have full knowledge on the emerging accounting issues (Bradshaw, Bens, Frost, Gordon, McVay & Miller et al. 2014). The inclusion of these persons will help in ensuring that there is prudence and reliability in the financial reporting. The EITF can also be instrumental in the enhancement of the financial reporting of companies by allowing for flexibility in the reporting. Flexibility in the financial reporting implies that a company is capable of adding information that may be non-financial but useful to the financial statements and at the same time make adjustments on the financial information. By ensuring that there is flexibility in financial reporting of organization, the Emerging Issues Task Force can help in enhancing the accountability of companies and the reliability of their financial reports.

Arguments in favor of the EITF recommendations

Some of the recommendations addressed by the EITF on the issue include ensuring that responsive investment contracts are fully-benefited, planning of investment disclosures and the measurement of the date practical expedient. The recommendations are designed in such a way that they can be useful in addressing the accounting issues that are attached to the employee benefit plan financial statements. The GAAP, for instance, requires that an organization in its quest for the implementation of a plan investment disclosure discloses all the individual investments that represent 5% of available employee benefits and that the net appreciations and depreciations of the investments are also disclosed (Employee Benefit Plan Simplifications, 2017). Organizations also have to ensure that they measure, present and disclose fully benefit-responsive investment contracts at the contract value. In so doing, this helps in the maintenance of the relevant financial and non-financial information while reducing the costs and complexities of reporting for the fully benefit-responsive investment contracts.

Different accounting treatment for the GAAP and IFRS on the issue

Both the GAAP and the IFRS requires that organizations disclose on the employee benefits and benefits plans in their financial statements. This is usually termed to as the employee remunerations, and it covers the salaries that are earned by different sections of employees within a company as well as the benefits that they enjoy. According to IAS 19 of IFRS on employee benefits, the cost of providing employee benefits has to be recognized in the period in which the benefit is earned by the employee instead of when its payable (IAS 19 - Employee Benefits, 2017). GAAP highlights on the short-term employment benefits and post-employment benefits. Based on the GAAP, when an employee offers service to an organization in a current or prior period, he or she has to be compensated.

Recommendations that would have a positive impact on the difference between treatments

Both the GAAP and IFRS have to come up with measures that fully benefit the employees. The GAAP, as an accounting standard, for instance, can fully define the benefits that each group of employees can earn and the type of service that generates the benefit. As for the IFRS, it is vital to include the defined benefit plans and defined contribution plans as a part of the employee benefits. Both the GAAP and IFRS also have to come up with measures on enhanced disclosures on the benefits plans and measures necessary in cutting down costs associated with employee benefits.

Prediction of the roles of FASB and EITF

Should the accounting professions adopt one global set of accounting standards, then both FASB and EITF will be mandated with the roles of ensuring that there is efficiency in the levels of companies accounting and financial reporting. The EITF will have to identify all the emerging accounting issues and come up with the relevant measures for dealing with the issues. As for the FASB, it will play a vital role in ensuring that there is accountability and transparency in the financial reporting of companies.

References

Bradshaw, M., Bens, D., Frost, C., Gordon, E., McVay, S., & Miller, G. et al. (2014). Financial Reporting Policy Committee of the American Accounting Association's Financial Accounting and Reporting Section: Accounting Standard Setting for Private Companies. Accounting Horizons, 28(1), 175-192. http://dx.doi.org/10.2308/acch-50656
Easton, P. (2016). Financial Reporting: An Enterprise Operations Perspective. Journal Of Financial Reporting, 1(1), 143-151. http://dx.doi.org/10.2308/jfir-51333
Employee Benefit Plan Simplifications (EITF 15-C). (2017). Fasb.org. Retrieved 11 July 2017, from http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProjectUpdatePage&cid=1176164785357
IAS 19 — Employee Benefits (2011). (2017). Iasplus.com. Retrieved 11 July 2017, from https://www.iasplus.com/en/standards/ias/ias19