ACCOUNTING STANDARDS ON THE TANGIBLE ASSETS

The Relevance of Accounting Standards on the Tangible Assets

Introduction

Intangible assets are best identified by their deficiency of physical substance. Since long back in the past, individuals have been interested above all in physical assets in the pattern of land, houses, apparel, nourishment and tools for fighting while the non-existent house was to be glimpsed only in attachment with personal matter. Later, it became clear that the enterprise is not just a straightforward addition of substantial seizable assets but it furthermore comprises a capacity of intangible assets in the pattern of patents, know-how, generosity, permits, copyrights, study and development outcome, programs etc., which is essential for its financial activity. In alignment to be encompassed in the worth of the business (in the account balance of the property) it was essential to work out the directions for its acknowledgement, evaluation, accounting and reporting. Intangible assets were conventionally to be glimpsed only in attachment with substantial assets and as a distinct assembly in the balance of enterprises they were segregated as recently as in the latest past. Intangible assets have their location in the class of non-monetary long-run assets. Investors, lenders and other stakeholders use financial information for predicting the prospect of their interested entities. Although tangible assets seems a suitable index for prediction of future cash flows, but some restrictions have negative effects on such Indexes. Therefore analysts try to use some indicators for assessment of earnings quality (EQ). As we know the importance of the tangible assets increases as much as the qualities (e.g. relevance, reliability comparability) enhance. So stakeholder such as investors and creditors can make better decisions based on qualified accounting information. As we know one of the philosophy of setting accounting standards is to improve the quality of financial statements information, because it seems that standardization of accounting items can lead to better comparable information (Abraham, 2008, 30-45). Earnings are one of accounting items that are used for performance evaluation and valuation. If an entity provides qualitative and quantitative indicators for evaluation of earnings quality, it would be provided good basis for evaluation of tangible assets and performance of an entity. Earnings Response coefficient (ERC) is one of indicators that is used for evaluation of earnings quality. We describe the concept of ERC in the next section. We chose tangible assets as a basis for evaluation of the impact of setting standards on accounting information (Arthur, 2002, 254).

Literature Review

Based on the literature we can divide two altitudes toward earnings quality; decision usefulness and Hicksian view to the earnings definition. Based on the first view different users should assess the tangible assets before making decisions. On the other hand "quality for whom" and the "quality for what" is the main subject in the first view. But in the second view earnings quality is assessed by comparing earnings (Barth, 2008, 149-198). It is assumed that quality of earnings is higher than before. On some authors concentrated on analytical view of earnings quality, the other hand, the ...