THE SEARCH FOR OBJECTIVES

KELOMPOK 1:
DEYANIRA SAFITRI 041914253002
IMANG INDAH AYUNINGRUM 041914253003
RIF’ATUL FITRIYAH 041914253012
IMANG INTRODUCTION

Title Published by Year

A Statement of Basic Accounting Theory (ASOBAT) AAA 1966
Basic Concepts and Accounting Principles Underlying
Financial Statements of Business Enterprises (APB APB 1970
Statement 4)
Objectives of Financial Statements (Trueblood
AICPA 1973
Committee Report)
Statement of Accounting Theory and Theory
AAA 1977
Acceptance (SATTA)
IMANG
ASOBAT

A Statement of Basic Accounting Theory (ASOBAT)

represeted zn important change in the work of the AAA. It
made a relatively sharp break from the four previous
statements and numerous supplements published
between 1936 and 1964. however, the Executive
Committee of the AAA in 1964 diverged from the previous
approach by giving the committee a charge of developing
“an integrated statement of basic accounting theory which
will serve as a guide to educators, practitioners and others
interested in accounting …. The committee may want to
consider … the role, nature and limitations of accounting.”
 Development of the User Approach
Accountiing as a Process

The process of identifying, measuring and communicating

economic information to permit informed judgments and
decisions by users of the information.
Accounting as a Art
Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of money,
transactions and even which are in part at least of a
financial character and interpreting the results thereof.
Accounting as a Skill
It is more important to emphasize the creative skill and ability
with which the accountant applies his knowledge to a given
problem …. The complexities of modern business have brought
to management some problems, which only accounting can
IMANG
solve an on which accounting throws necessary and helpful light.
IMANG Orientation to Theory

To identify the field of

accounting so that
useful generalization
about the field can be
made and a theory 01 02 To point out possible
improvements in
developed. accounting practice.
To present a useful
frmaework for
To establish standards accounting researchers
by which accounting
information
judged.
can be 03 04 seeking to extend the
uses of accounting and
the scope of accounting
subject matter as the
needs of society
expand.
IMANG Objectives of Accounting

80% 60% 40% 50%

To make decisions
concerning the use of To effectively direct
limited resources To maintain and
and control an To facilitate social
(including the report on the
identification of crucial
organization’s functions and
custodianship of
decisions areas) and human and controls.
resources.
to determine material resources.
objectives and goals.
IMANG
Making Decisions Concerning Limited
Resources
Decision making involves an evaluation of what is expected to h
appen in the future. In the user-oriented approach, the most imp
ortant objective of accounting is to provide information useful for
making decisions.

Predictive Decision
Ability Making
Whether user diversity leads to heterogeneous
information needs in the different user group has
become absolutely crucial to the future development of
accounting.
 Directing and Controlling Resources

This objective is directed

toward managerial uses of

A accounting data.

Managerial needs and uses of

accounting data are beyond
B C
the scope of this text, so we
are not concerned with this
objective.
However, we note that some
individuals do not perceive
any differences between
internal (managerial) and
external (financial) uses of
accounting data.

IMANG
Maintaining Custodianship of Resources
The third objective is commonly called stewardship.
A proper accounting for the use by the one party
(management) of funds that have been entrusted to
Your Picture Here it by another party (management) is a relationship
extending, in one guise or another, back to the
Middle Ages. In modern times, this objective has
broadened under conditions of absentee ownership
and easy acquisition and disposition of ownership
shares throygh the medium of securities
exchanges.

IMANG
IMANG
FACILITATING SOCIAL FUNCTIONS AN
D CONTROLS

The last objective appears to be an extension of the

stewardship function to society as a whole. Thus,
accounting is concerned with such areas as taxation, fraud
deterrence and prevention, governmental regulation and
collection of statistics for purposes of measuring economic
activity. An issue not addressed by ASOBAT concerns
which entity should bear the cost of producing this
additional data. Although objectives stand at the summit of
a metatheory, it is clear that they were not the main
concern of ASOBAT.
Standards for Accounting Information

Freedom from
Relevance Verifiability Quantifiability
Bias

IMANG
IMANG Guidelines for Communicating Accounting Information

Appropriateness to expected
1 use.

Disclosure of significant
2 relationships.

Inclusion of environmental
3 information.

Uniformity of practice within and

4 among entities.

Consistency of practices through

5 time.
DEYANIRA
APB STATEMENT 4

The statement was published in October 1970, exactly a

half year prior to the formation of the Wheat and Trueblood
Committees. At that time, the APB was under heavy fire for
Opinions 16 and 17 on business combinations and
goodwill in addition to broader criticisms, such as
inadequacy of research, lack of independence of its
members and lacj of sufficient exposure of its work prior to
final publication. The purpose of APB Statement 4 was to
state fundamental concepts of financial reporting to srve
as foundation for the opinions of the APB.
DEYANIRA
Orientation to Definition
OTHER ASPECT OF APB STATEMENT 4

DEYANIRA
DEYANIRA
The Trueblood Committee Report

1. The basic objective of financial statements is to provide inform

ation useful for making economic decisions.
2. An objective of financial statements is to serve primarily those
users who have limited authority, ability or resources to obtain i
nformation and who rely on financial statements as their princip
al source of information about an enterprise’s economic activiti
es.
3. An objective of financial statements is to provide information u
seful to investors and creditors for predicting, comparing and e
valuating potential cash flows to them in terms of amount, timin
g and related uncertainty.
4. an objective of financial statements is to provide users with info
rmation for predicting, comparing and evaluating enterprise aea
rning power.
DEYANIRA The Trueblood Committee Report
(Cont.)
5. An objective of financial statements is to supply information useful in judging ma
nagement’s ability to utilize enterprise resources effectively in achieving the primar
y enterprise goal.
6. An objective of financial statements is to provide factual and interpretive inform
ation about transactions and other events, which is useful for predicting, comparin
g and evaluating enterprise earning power. Basic underlying assumptions with res
pect to matters subject to interpretation, evaluation, prediction or estimation shoul
d be disclosed.
7. An objective is to provide a statement of financial position useful for predicting,
comparing and evaluating enterprise earning power. This statement should provid
e information concerning enterprise transactions and other events that are part of i
ncomplete earning cycles. Current values should also be reported when they differ
significantly from historical costs. Assets and liabilities should be grouped or segre
gated by the relative uncertainty of the amount and timing of prospective realizatio
n or liquidation.
DEYANIRA The Trueblood Committee Report
(Cont.)
8. An objective is to provide a statement of periodic earnings useful for predi
cting, comparing and evaluating enterprise earning power. The net result of
completed earnings cycles and enterprise activities resulting in recognizabl
e progress toward completion of incomplete cycles should be reported. Cha
nge in the values reflected in succesive statements of financial position sho
uld be reported, but separately, since they differ in terms of their certainty of
realization.
9. Another objective is to provide a statement of financial activities useful fo
r predicting, comparing and evaluating enterprise earning power. This state
ment should report mainly on factual aspects of enterprise transactions havi
ng or expected to have significant cash consequences. This statement shoul
d report data that require minimal judgment and interpretation by the prepar
er.
10. An objective of financial statements is to provide information useful for t
he predictive process. Financial forecasts should be provided when they will
enhance the reliability of users’ predictions.
DEYANIRA The Trueblood Committee Report
(Cont.)

11. An objective of financial statements for governmental and not-for-pro

fit organizations is to provide information useful for evaluating the effecti
veness of the management of resources in achieving the organization’s
goals. Performances measures should be quantified in terms of identifie
d goals.
12. An objective of financial statements is to report on those activities of
the enterprise that affect society which can be determined and describe
d or measured and which are important to the role of the enterprise in its
social environment.
DEYANIRA HIERARCY OF OBJECTIVES

Prediction, comparison
and evaluation of
Accountability (Obj. 5)
enterprise earning
power
DEYANIRA
SATTA

The Executive Committee of the AAA

commissioned SATTA, A Statement on
Accounting Theory and Theory Acceptance,
in 1973. its overall purpose, similar to that
of ASOBAT a decade earlier, was to provide
a survey of the current financial accounting
literature and a statement of where the
profession stood relative to accounting
theory.
DEYANIRA
SATTA AND ASOBAT

SATTA ASOBAT
SATTA, on other hand, took into account ASOBAT attempted to develop
the many valuation systems of metatheoritical guidelines for the
accounting as well as other theoritical evaluation of accounting information and
considerations and enumerated the valuation systems.
reasons why it was impossible to develop
criteria that enabled the profession to
unequivocally accept a single valuation
system for accounting. In effect, them,
SATTA is a very cautionary document in
terms of the possibility for adopting any
one valuation theory.
THEORY APPROACHES IN ACCOUNTING

Classical Approaches

Decision-Usefulness Approach

Information Economics Approach

DEYANIRA
RIFA
Deficiencies of Present Approaches to Theory

Perhaps the principal problem brought up by SATTA is the diver

sity of users in terms of their decisions and their differing inform
ation needs. Heterogeneity of information preferences and need
s compounds an already difficult situation. Corporate financial re
ports and disclosure are a free good. Users do not pay the prep
arer for the information received and the information is available
to virtually anyone who really desires it. Given user heterogeneit
y and the public-good character of financial information, the form
ulation of accounting standards and prescribed methids necessa
rily reaches an impasse. SATTA attempted to describe the statu
s of financial accounting theory as of the late 1970s. The assum
ption that user information needs are heterogeneous is unprove
n.
RIFA USER OBJECTIVES

Predictive
Ability

User
Accountability
Objectives
Predictive
Ability
Secondary
Objectives
Adaptability
 RIFA
USER DIVERSITY

Financial
Shareholders Creditors analysts and Employees Labor unions
advisers

Industry trade Governmental Public-interest

Customers Suppliers
associations agencies groups

Communities
Researchers and
Auditors Management touched by the
standard setters
firm’s operations
THANK YOU 
ANY QUESTIONS?
Q & A SESSION
Cont…