Ms Marple is an accounting cadet for one of the big accounting firms.She is a bit confused as to which of the following Anss should be applied first in dealing with an accounting issue.
I.Industry Practice
II.Accounting Standards
III.Conceptual Framework
IV.International Financial Reporting Interpretations Committee (IFRIC)
Which ordering would you recommend?
A)I,II,III,IV.
B)II,IV,III,I.
C)II,I,IV,III.
D)III,II,I,IV.
E)IV,III,II,I.

Question

Quizplus · Accepted Answer

When dealing with an accounting issue, it is important to follow a structured approach to ensure that the treatment of the issue is consistent with the relevant accounting principles and regulations. The ordering of the sources to be applied can significantly affect the resolution of the issue. Here is the recommended ordering:
1. **Accounting Standards (II)**: These are the formal documents containing the rules and guidelines for accounting practices. They are established by authoritative bodies and provide the specific requirements for recognizing, measuring, reporting, and disclosing certain transactions and events. In most jurisdictions, these would be the International Financial Reporting Standards (IFRS) or local Generally Accepted Accounting Principles (GAAP).
2. **International Financial Reporting Interpretations Committee (IFRIC) (IV)**: IFRIC interpretations provide guidance on how to apply the Accounting Standards (IFRS) to specific situations that may be complex or uncommon. They are part of the IFRS framework and are authoritative, so they should be considered immediately after the Accounting Standards.
3. **Conceptual Framework (III)**: The Conceptual Framework underlies the Accounting Standards, providing the fundamental principles and objectives that guide the development of the standards. It is used when there is no specific standard or interpretation that applies to a particular issue. It helps to ensure that the accounting treatment is consistent with the underlying principles of financial reporting.
4. **Industry Practice (I)**: While industry practices can provide insight into how common issues are treated within a particular sector, they should not override the Accounting Standards, IFRIC interpretations, or the Conceptual Framework. Industry practices can be considered when the standards, interpretations, and framework do not specifically address an issue, or when they allow for some flexibility in application.
Therefore, the recommended ordering for Ms. Marple in dealing with an accounting issue would be:
**2. II, IV, III, I.**
This ordering ensures that the accounting treatment is first aligned with the formal requirements and guidance before considering industry-specific practices. It helps maintain consistency, comparability, and reliability of financial information across different entities and industries.

Ms Marple Is an Accounting Cadet for One of the Big