Traditional accounting must seek the necessary tools to correct the structural flaws that it presents within its theoretical conception, since these can skew in some way the veracity of this in front of the financial analysis that the administrators of the company can carry out.
In many cases accounting is not used in the best way to support financial analysis and this is not only due to the methodology used in the application of financial tools, but also to some structural problems that accounting practice has within from inside. Listed below are some of the shortcomings that this profession may incur, among these are mainly the problems of measuring inflation, those inherent in generally accepted accounting principles, the nature of the accounts or items, the non-consideration of cost of own resources, the few changes in their nature and the growing demand to incorporate indicators that measure management and productivity.
Therefore, it is vitally important that these failures are explained and that in some way it seeks to find the necessary solutions to improve the alternatives that it can offer managers for financial analysis.
A new order
Accounting must change according to new trends in the economic, social and technological order
The problem in measuring inflation:
In this sense, the drawback arises in the measurement made by the accounting of its operations at "historical cost". This becomes evident if the following example is taken, in a depreciable adaptation work, in which a quota is taken to the expense and this quota is calculated from its initial value divided by its estimated useful life. If inflation does not exist and you have an amortizable expense with an initial value of $ 1,000,000 and that lasts 10 years. An item of $ 100,000 would be brought into spending each year. But with 30% annual inflation, what you really take is $ 100,000 / 1.30 the first year, $ 100,000 / (1.30) 2 and so on until you note that the 10th year deduction is only worth $ 7254. This means that profits are being incorrectly increased due to the existence of inflation,since the costs are decreasing in real terms and therefore the partners are spreading more than they should, just as the state also collects taxes that do not correspond to it, all for the decapitalization of the companies.
To solve this serious problem of accounting structure, entities and governments have quickly adopted comprehensive inflation adjustment schemes that allow updating the value of non-monetary assets, seeking to update items.
The generally accepted accounting principles:
Within the principles of general acceptance by accounting practice, Dr. Luis Fernando Gutiérrez says that these allow for balances and income statements to be applied. He also explains that the inventory account allows managing the cost of what is sold, given the physical impossibility of controlling this item in many fields of commercial, agricultural and even industrial activity. Another important point from which this idea is taken is based on the change that occurs from going from an inventory valuation method of UEPS (LIFO) to PEPS (FIFO) or WEIGHTED AVERAGE, which makes the results from one year to another vary according to criteria. of accounting. These factors are determining in the results and cause the accounting to present data that cannot be very reliable.
Nature of the accounts:
This topic is based on the enforceability of the rights and the obligations that the organization really has, these sometimes are not clearly differentiable and therefore can create confusion when consolidating accounting information. These may include items such as provisions for accounts receivable canceled in subsequent periods, provisions for social benefits and bonds convertible into shares.
Own resources costs:
In the accounting information as stated above, the assets are carried at the "historical cost", therefore "THE OWN DOESN'T COST" in financial terms, an example of this can be seen in the costs imputed to the fixed assets in which everything is assigned according to its historical basis.
This is based on the fact that if all the resources obtained by the company were obtained through direct indebtedness, the interest on the loans would affect the results of the year, but since they are obtained by own resources, no cost is assigned to them. in the Balance as opportunity cost.
Accounting cannot be a simple photograph of the present of the company, it must become an instrument to anticipate the future.
Up to date! accountant
Accounting professionals are under an obligation to continually update themselves to ensure that their work is being done in a truthful manner.
Value of money over time:
For accounting, the value of money is the same from one period to another, that is, a peso is the same at the beginning of the accounting year as at the end of it.
This can be verified in the sense that if an advance quarter rate of 36% is equivalent to a real cost of 45.83% per year, but within the registry of the accounting item it would be registered at the nominal value.
But it should be borne in mind that in the face of this deficiency, a series of tools have been created that seek in some way to minimize this impact, among the most used are the adjustment of the PAAG to investments and the adjustments with the DTF rate.
Future accounting relationship:
Traditional accounting does not clearly reveal the possible paths that the company may follow in the long term. This should be helped by complementary techniques to explain subsequent results, but in themselves they are extracted from the information in the financial statements that it provides.
Accounting reality:
The accelerated change that the world has presented, its new social order and new economic and technological perspectives mean that accounting sometimes falls short to efficiently measure all these changes.
This suggests that accounting professionals should look for ways that accounting does not lag behind and always keep pace with the economic reality.
Towards a new concept of accounting:
Many students and practitioners in the accounting area have worked tirelessly to adapt accounting to changes and to correct any type of deformation in the theoretical and functional structure of the profession.
The new accounting concept is based on its usefulness in decision-making, in the reasonable prediction of the future, in the correct valuation of resources, in the fidelity of the information contained within, in the formation of management indicators that facilitate the planning and measurement of productivity in the short term, as well as in the evaluation of projects and most importantly in a complete financial analysis system.
Bibliography:
Enrique Ballesteros. «Theory and structure of the new accounting»
Luis Fernando Gutiérrez. »Practical finance for developing countries».
American Association of Accountants. »Basic Theory of Financial Accounting»
