Share:


Professional judgement in accounting: contents and conditions of application

    Olena Fomina   Affiliation
    ; Oleksandr Zadniprovsky   Affiliation
    ; Svitlana Korol   Affiliation
    ; Olha Romashko Affiliation

Abstract

The article considers the theoretical prerequisites and regulatory requirements that determine the practical approaches to the application of professional judgment in defining the best way to present reporting information. In the course of the research, the authors took as a basis the regulatory documents on the preparation of financial and integrated reporting, which take a principles-based approach and provide for the use of professional judgment. The authors assumed that the objects of a professional accountant are the facts of economic activity in order to identify, evaluate, recognize and reflect in the accounting and reporting of the company objects of accounting that are significant and of interest to users. The author investigated theoretical bases and practical aspects of application of professional judgment with the purpose of recognition of object and definition of its cost in the course of data collection, their analysis, and formation on their basis of professional judgment. The author has proved the need to adhere to the principle of additionality in finding the maximum complete description of the object and formulating a professional judgement about it. The author proposed a matrix model, which established the correspondence of risk levels and principles of application of professional judgment in accounting valuation and conducted an analysis of the conditions for the use of professional judgment in defining the fair value of financial instruments and inventories. The author considered the influence of uncertainties and corresponding risks in the application of professional judgment on the value of financial instruments and its adjustment in the conditions of unstable markets of countries with economies in transition. The author noted peculiarities of implementation of professional judgment in the process of preparation of financial and integrated reporting and the factors that determine them.



 

Keyword : professional judgement, financial reporting, integrated reporting, valuation of objects of accounting, recognition of objects of accounting, financial instruments, inventories, risk of subjectivity, risk of uncertainty

How to Cite
Fomina, O., Zadniprovsky, O., Korol, S., & Romashko, O. (2022). Professional judgement in accounting: contents and conditions of application. Business: Theory and Practice, 23(1), 26–38. https://doi.org/10.3846/btp.2022.13330
Published in Issue
Feb 4, 2022
Abstract Views
253
PDF Downloads
204
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Baker, C. R. (2017). The influence of accounting theory on the FASB conceptual framework. Accounting Historians Journal, 44(2), 109–124. https://doi.org/10.2308/aahj-10555

Baxter, S. (2016). Can you measure the unmeasurable? https://integratedreporting.org/wp-content/uploads/2016/04/Salter-BaxterMeasuringtheUnmeasurable.pdf

Belyaeva, N. (2017). Ozenka po spravedlivoy stoimosti: kogda eto vygodno. In MSFO na praktike, 1. https://msfo-practice.ru/524064 (in Russian).

Bikienė, J. (2011). Problems of public sector accounting and financial reporting standards implementation into practice. Business: Theory and Practice, 12(2), 131–140. https://doi.org/10.3846/btp.2011.14

Bonner, S. E. (1999). Judgment and decision‐making research. Accounting Horizons, 13(4), 385–398. https://doi.org/10.2308/acch.1999.13.4.385

Born, M. (1963). Physica v zhizni moyego pokolenia. Izdatelstvo Inostrannoy literature (in Russian).

Brown-Liburd, H., Issa, H., & Lombardi, D. (2015). Behavioral implications of big data’s impact on audit judgment and decision making and future research directions. Accounting Horizons, 29(2), 451–468. https://doi.org/10.2308/acch-51023

Derun, I. (2017). Improvement of the essence of professional judgment in accounting of Ukraine. Technology Audit and Production Reserves, 2(4(34), 25–29. https://doi.org/10.15587/2312-8372.2017.98277

Docekalova, M., Kocmanova, A., & Koleňak, J. (2015). Determination of economic indicators in the context of corporate sustainability performance. Business: Theory and Practice, 16(1), 15–24. https://doi.org/10.3846/btp.2015.450

Durkin, M., Rose, J., & Thibodeau, J. (2020) Can simple metaphors be used as decision aids to promote professional skepticism? Journal of Information Systems, 34(1), 47–60. https://doi.org/10.2308/isys-52380

European Parliament & Council of the European Union. (2013). Directive 2013/34/EU of The European Parliament and of The Council on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32013L0034

Gao, P., & Zhang, G. (2019). Auditing standards, professional judgment, and audit quality. The Accounting Review, 94(6), 201–225. https://doi.org/10.2308/accr-52389

Giorgino, M. C., Supino, E., & Barnabe, F. (2017). Corporate disclosure, materiality, and integrated report: An event study analysis. Sustainability, 9(12), 2182. https://doi.org/10.3390/su9122182

Golov, S. (2011). Kreatyvnyi oblik: zagroza profesii ta suspilstvu. Accounting and Auditing, 1, 31–42. (in Ukrainian).

Goroshko, A., Narchynska, T., Ozymok, I., & Tarnay, V. (2016). Glossariy terminiv z monitoring ta ozinyuvannya (2nd ed.). Kyiv (in Ukrainian). http://www.ukreval.org/images/publikacii/glossary.pdf

Gurina, N., & Doyonko, A. (2019). Zastosuvannya profesiynogo sudzhennya bukhaltera v umovah rynkovoi ekonomiku: vitchiznyanuy ta mizhnarodniy dosvid. Economic Herald. Series: Finance, Accounting, Taxation, 3, 40–47 (in Ukrainian). https://doi.org/10.33244/2617-5932.3.2019.40-47

Heidhues, E., & Patel, C. (2009). IFRS and exercise of accountants’ professional judgments. In A. Cheng (Eds.), Insights and concerns from a German perspective (pp. 1–47). Macquarie University, NSW. http://hdl.handle.net/1959.14/1145862

Institute of Chartered Accountants of Scotland. (2012). Professional judgement framework for financial reporting. An international guide for preparers, auditors, regulators and standard setters. https://www.ifac.org/system/files/uploads/PAODC/A-Professional-Judgement-Framework-for-Financial-Reporting.pdf

Knight, F. H. (1921). Risk, uncertainty, and profit. https://oll.libertyfund.org/titles/knight-risk-uncertainty-and-profit

Kovalev, V. V., & Kovalev, Vit. V. (2012). Korporativniye finansi I uchet. Prospekt (in Russian).

Kulikova, L. I., & Gubaidulina, A. R. (2017). Professionalnoye suzhdeniye bukhgaltera kak instrument formirovaniya finansovoi otchetnosti. Prospect (in Russian).

Kelly, K., Dinovitzer, R., Gunz, H., & Gunz, S. (2019). The interaction of perceived subjectivity and pay transparency on professional judgment in a profit pool setting: The case of large law firms. The Accounting Review, 95(5), 227–246. https://doi.org/10.2308/accr-52612

Len, V., & Nekhai, V. (2016). Profesiyne sudzhennya bukhgaltera: vyznachennya ponyattya ta zmisty. Accounting and Finance, 3, 21–30 (in Ukrainian).

Madsen, P. (2011). How standardized is accounting? The Accounting Review, 86(5), 1679–1708. https://doi.org/10.2308/accr-10102

Mathews, M. R., & Perera, M. H. B. (1996). Accounting theory & development (3th ed.). Nelson.

Pankova, S. V., & Satalkina, Y. V. (2011). Professionalnoye suzhdeniye bukhgaltera i auditora: shodstva i razlichiya. Mezhdunarodniy bukhgalterskiy uchet, 21(171) (in Ukrainian).

Simon, H. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99–118. https://doi.org/10.2307/1884852

Sokolov, Y. V., & Terentyeva, T. O. (2001). Professionalnoye suzhdeniye bukhgaltera: itogi minuvshego veka. Bukhgalterskiy uchet, 12 (in Russian).

Tarasova, T. O. (2017). Accounting judgement as basis of innovative development of accounting and analytical management [Profesiyne sudzhennya bukhgaltera yak osnova innovatsiynogo rozvitku systemy oblikovo-analitichnogo zabezpechennya upravlinnya]. Problems of Theory and Methodology of Accounting, Control and Analysis, 1(36), 260–280 (in Ukrainian). https://doi.org/10.26642/pbo-2017-1(36)-260-280

The Chinese Institute of Certified Public Accountants. (2016, May 31). Guidance on Professional Judgment for CPAs in China. https://professionaljudgmentmatters.blogspot.com/2016/05/guidance-on-professional-judgment-for.html

The Institute of Chartered Accountants of Scotland. (2016). Professional judgement framework for financial reporting. In An international guide for preparers, auditors, regulators and standard setters (2nd ed.). https://www.icas.com/__data/assets/pdf_file/0018/256104/Professional-judgementframework.pdf

Tintner, G. (1941). The Theory of choice under subjunctive risk and uncertainty. Econometric, 9, 298–304. https://doi.org/10.2307/1907198

Vyzhletsov, G. P. (2005). Filosofiya ekonomicheskih tsennostey. Problema tsennosti v sovremennoi aksiologii i ekonomike. Problems of Modern Economics, 3/4(15/16). http://www.meconomy.ru/art.php?nArtId=780 (in Russian).

Yukhimenko-Nazaruk, I. A. (2016). Instituziyni zasady zduysnennya profesiynogo sudzhennya v bukhalterskomy obliku. Economic Sciences. Scientific Bulletin of Kherson State University. Series, 21(1), 185–188 (in Ukrainian).

Yildiz, T., & Yercan, F. (2011). Environmental reporting of industrial and supply chain business processes within the context of sustainable development. Business: Theory and Practice, 12(1), 5–14. https://doi.org/10.3846/btp.2011.01