Current Development in Accounting Thoughts

Question: Discuss about the Current Development in Accounting Thoughts. Answer: Introduction: In the present situation the accounting concepts are affecting the business. The same accounting concepts are not accepted by most of the companies. The companies are concerned about the debts as it plays a major role. The companies are becoming engaged with the public a debts and private debts (Reisel, 2014). The public debt contracts have comparatively lower number of accounting than the private debt contracts. Debt capital providers always face difficulty to recover the given loans. They are worried about the future and so they want to provide the loan on contract basis. The accounting which is done in the present days is more practical and secured. The loan contracts are very proper and shows good situation. Debt is the borrowing funds from other resources. The innovation of tools to discover the signs of credit problems that may arise in future is very important. The business man requires some tools that can predict the future. Covenants help a lot in this respect as they give the creditors some facilities that have the right to ask for early payment. It is a set of clauses that is set by the business and restricts business policy (Horngren et al., 2012). The debt market practitioners can understand the consequences in a better way. The covenant structure in debt contracts is beneficial for the performance of the borrowing firms. The financial regulators can also be benefitted for this structure. The lenders want to apply more covenants to make the lending contract more strict and accurate. The covenants are useful for the integral part of controlling debt holder and share holder conflicts (Kiefer Pulvermller, 2012). The government borrows fund from the public or from foreign agencies to meet the deficiency in the revenue and public expenditure. It is process is done by the government when he expenditure exceed the revenue. The individuals can take loans from other persons and individuals. Public debt and private debt differs a lot and the covenants prepared for it also differs. Financial covenants in public debt contract are much different from the private debt contract. The government can hold the power to force the people of the country to lend money. In any emergency situation the government can take loans from the public and if the public denies paying the amount to the government then they can take immediate actions. An individual cannot forcefully ask money from another person. The government can take loans or borrow fund from other sources and can also utilize its own reserve. The government takes the amount from itself by printing paper notes and can easily make up the deficit amount. The other sources include foreign investors, public, etc. (Mather Peirson, 2006).The individuals take private debt and then cannot arrange the amount of money from them. The individuals can never arrange money from the foreign investors and they should borrow from other persons or national investors. Public debt contracts are generally for a long duration than the private debt. The government can increase the tax amount to get the loan repayment amount. The ind ividuals cannot do this due to lack of authority. The public loans are always related with the growth of the country but the private loans may be used for productive purpose and may not be used for productive purpose. The public debt certificates can be bought or sold to other persons at any time within the time of contract. Private debt contracts can only be sold to the debtors ( Fields, Fraser Subrahmanyam, 2012). Covenants restrict business policy and the creditors put particular actions into early requirement if the covenants got violated. The lenders will include covenants to the contracts and he can get the benefit of the cost constraints. The public debts are generally the bonds and the private debts are bank loans and this is the coordination among the debt holders. The innovative aspects are to emphasize on the violation cost and formalization of a market equilibrium approach. The recognition cost should be finalized and the coordination should be good between the two parties. There is an equilibrium market model for two types of debt contract depending on covenant. The firm maybe considered to issue a bond with covenant in the primary market. Another firm may be considered to borrow a syndicated bank loan including covenant. The models may find a coordination level that can guarantee the covenant efficiency (Gray Laughlin, 2012). The financial covenants are not much restrictive. The types of covenant used are very heterogeneous. In the present days the contracts are much confined with more data and numbers. The variety, collectivity is much more restrictive in the private debt contracts than the public debt contracts. The public debt contract requires more data on surveys .The covenant is not very much restrictive and depends on theories and suggestions. The contracts are more suitable to the lenders as I is a flexible contract. The private debt markets have financial intermediaries and make the contract easier for the borrowers (Lipinskey, 2012). The debt and equity concept is developing in a new way in the recent time. The managers want to show high profit with higher debt equity level that will increase the performance level. The managers may take up effective steps and can adopt accounting methods to increase the profit of the business (Denis Wang, 2014). To conclude the matter, the accounting practice is a continuing process. The financial aspects in the life is developing in each and every day. The recent financial concepts states that it is good it invest with proper documents. The covenant state the clauses to make a proper contract. Both the parties who are engaged in the contract should follow all the rules and regulations stated within the contract. The covenant plays a major role and helps he creditors to get the loan amount. The parties who are engaged in he contract are equally treated. The contract is beneficial for every situation that may arise in future or any breach of contract happens in future. References Kiefer, M., Pulvermller, F. (2012). Conceptual representations in mind and brain: theoretical developments, current evidence and future directions.Cortex,48(7), 805-825. Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R. (2012).Financial Accounting. Pearson Higher Education AU. Lipinski, C. A., Lombardo, F., Dominy, B. W., Feeney, P. J. (2012). Experimental and computational approaches to estimate solubility and permeability in drug discovery and development settings.Advanced drug delivery reviews,64, 4-17. 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