POSITIVE ACCOUNTING – AN
EFFECTIVE TREND FOR
VIETNAMESE ACCOUNTING IN
THE NEW ERA
Co - Author: Dr. TRAN NGOC TRANG
MA. PHAN HUONG THAO
Address: Accounting – Auditing
Department, VietNam Commercial University
ABSTRACT:
Accounting
Theory is a new concept in comparison with the theories developed in other
fields of natural science and social science. This stems from the
characteristics of accounting, in fact it is a tool belonging to human behavior
and it is structured, used for particular purposes or individuals preparing
information. An overview of researches showed that the accounting experts have
confirmed the existence of the different tendencies of accounting, in which
there are two main tendencies discussing about the nature and development of
accounting theory. The first one focuses on the development of accounting
principles and describes theory of accounting as follows: accounting theory can
be defined as a reasonable inference in a framework to provide guidelines level
general principles by which professional accountants can assess and guide the
development of procedures and accounting practices (Hendriksen1982). The second
one describes theory of accounting as activities to explain and forecast (Watts
and Zimmerman 1986).
Keyword: accounting, normative
accounting, positive accounting,
MAIN TEXT
The
overview of research in the world can be summarized into two stages of the
development of accounting in the world in the 1960s and early 1970s, and they
have an important influence on the development of management accounting theory
nowadays. The first stage is the movement of the normative accounting method to
positive accounting method, and the results is thatpositive accounting research
has become known as the mainstream accounting research and prevailing . The
second stage is to continue developing and gradually shift into useful theory
of accounting information.
1. The normative accounting
In
the late 1960s, based on the application of economics to accounting, the normativeaccounting research developed
strongly. This theory focuses on solving problem "how should accounting
be?" instead of " how is accounting carried out?". During this
period, normative accounting theory was considered as the golden period by
accounting researchers, they paid much attention to the policies proposals and
what to do than to analyze and explain the problem of accounting practices. On
the other hand, accounting theories in this decade were interested in how to
measure and determine the profitability indicators in the accounting period or
debating about the types of accounting information that were useful in making
business decisions. The basic content of accounting normative are explaining
accounting principles framework, publishing accounting standards and rules of
economic transactions appearing.The empirical study was criticized because its
approach might lead to excessive reliance on external relations that ignore the
different aspects. But after the 1970s, the normative approach was no longer
popular and one of the fundamental reasons that led to this wasthe normative
accounting theory recognition by the worldwide scholars. The normative
accounting was criticized because the assumption was not tested by experiment
and reasoning interpretation depends on the subjective judgments. The result of
the shift from normative research to positive research have shown that
accounting – the center of research has been shifted from the development of
accounting principles and what should be done to become a more scientific
method in predicting and explaining reality.
2. The positive accounting
The
positive accounting theory developed strongly in the years 1970 - 1980 and had
an important influence to the accounting research in academic field today.
Unlike normative theory, positive accounting wishedto explain the reality of
accounting by finding their causes. The positive accounting theory was
developed by two American professors Ross Watts and Jerold Zimmerman and the
other scholars, based on the assumptions about economic centers in which all
actions of individuals were from self-interest and all individuals would always
act in the opportunity way to increase their wealth. In the famous book
"Positive Accounting Theory" by two co -authored published in 1986,
Watts explained "The objective of
positive accounting theory is explained and predicted accounting
practiced…Explaination means giving the reasons of these observed practices.
For example, positive accounting theory find out why businesses continue to use
historical cost in their accounting system, while some businesses move from
this accounting techniques to other accounting techniques. Predicting
accounting practices means that the theory would predict the phenomenon has not
been observed. "
Therefore,
positive accounting theory not only explains and predicts the accounting
activities taking place in reality but also explains the reason for the
existence of such events, answers the question of what happens and why. For
example: the costs and benefits of different accounting methods, the rules and
the process of establishing rules? The impact of published financial statements
to share price…It can be seen that positive accounting theory woulddiscover and
explain things, phenomena thatnever appeared
before or was appeared, but we could not see in finance and accounting
regulations instead ofthe regulations
which should be implemented in normative accounting theory. Positive Accounting
theory is based on empirical studies with data and events happening in practice
to test the hypothesis that researchers observed and posed. Positive accounting
often used the application of statistical methods or advanced econometrics to
verify the hypothesis.
3. The difference between normative
accounting and positive accounting.
We
can notice the difference between positive and normative accounting as follows:
4. Positive accounting – An effective
trend for VietNamese accounting in the new era.
According
to Paul F.Williams "The Possibility
and utility of positive accounting theory, 1989" has confirmed that
the positive accounting method is the effective and valued research methods
that can be applied in accounting research or some other scholars such as Baker
and Bettner (1997), Inanga and Schneider (2005) recognized that positive
accounting research is the main line of research in accounting and give
specific reasons to explain the failure of accounting research to improve
accounting practices.
Over
the years, after the impact of the economy to accounting activities, showed
that positive accounting theory was necessary when accounting world frustrated
with normative accounting theory - the theory which aimed to the regulations in
order to answer the question, " what do accountants have to do with financial statement?" but did not
explain "why do they do that?" or "how do accountants do in
practice?". Professor Christenson (Harvard, 1983) said that "
normative accounting is far from the evolution of the market". He also
said that the accounting regulations
did not care about the reaction of the market and the economy did not need to
know when making the application of new accounting rules.
In
my opinion, Isuggest that positive accounting theory is an effective theory,
high-valued because it searches for the explanation, prediction accounting
practice, the choice of accounting policies and does not establish accounting
principles.
For
Vietnamese accounting, the research and implementation of positive accounting
is new and complicated to apply. Our
accounting is still maintaining normative accounting. Reality has shown that
standard accounting principles was suitable only in the last century. Today,
with the strong development of science, technology, economy, social and
complexity of economic transactions, the normative accounting has become less
effective, because it focuses on describing the regulations instead considering
the accounting rules which can or can not beapplied effectivelyin practice to make
necessary adjustments.
Such
as in the amended and supplemented 244/2009/ TT-BTC Circular about business
accounting, Circular 244 allows accountants to record the increasing gap in
asset revaluation when contributing the capital to income in the period. This
may not be consistent with accounting standards, especially with the
precautionary principles allowingto record unrealized income from revaluation
of assets. Or the process of accounting estimates in VietNam nowadays, the
aspect of completing policies, standards and accounting regulations require
more specific guidance on how to determine and record the accounting estimates.
At
present, a number of provisions relating to accounting estimates primarily as:
Depreciation and amortization (Circular 203/2009 / TT-BTC dated 20/10/2009,
establishment of reserves (Circular 228/2009/TT-BTC dated 07/12/2009 ...), are
mainly serving for the financial management of state company and aiming to
evaluate corporate income tax. These regulations are currently appreciated
quite rigidly and difficult to implement.
I
argue that if our accounting researchers apply positive accounting theory, there might be more appropriate adjustments
through the identification and recognition of accounting estimation bases on
the specific conditions of the market and enterprises to choose to apply the
appropriate estimation method, no specific limits. Or if Vietnamese accounting
applies the positive accounting, may be we can find a clear, trustful
explanation for many accounting frauds and risk problems that seem to be very popular with Vietnam stock
market. A series of "willfully" actions concealed profit / loss of
the listed companies are adjusted by auditors of Vinashin Corp,QuocCuongGia Lai
Corp, Vietnam Electricity Corp...
Studying
accounting theories plays an important role
in constructing the models and manipulate each type of accounting in different economies and enterprises. The
theory used in accounting research is the important foundation and starting
point to identify practical accounting method. On the other hands, the
accounting theories also indicate that accounting system is only really
effective when it is built and developed in accordance with the practical
conditions of each particular economy.
References:
Journals:
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Phan Lê Thành Long (2010), “ Lý thuyết kế
toán thực chứng – Một quá trình
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Ánh (2013), “ Đóng góp của các
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và nghiên cứu kế toán
đương đại trong việc xây dựng
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phát triển (số 194)
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Regulation of Accounting”, Standford
Lecture in Accounting 1976.
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Book
7.
Watts R.L & Zimmerman J.L (1986), “Positive Accounting Theory”, Englewood
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