The Prudence Principle in Accounting
Consequently, the question arises whether the existing standards of reporting intangible assets are efficient enough for financial information users and whether they are consistent with the two major accounting principles: objectiveness and prudence.
It should be further noted, that when it comes to reporting financial information one can hardly equate information reporting purely to mechanistic processes. In cases when there is a certain degree of uncertainty, like in intangible assets valuation, reporting always involves human judgment. The IASC Framework defines prudence as "the inclusion of a degree of caution in the exercise of the judgments needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated".
Prudence is one the major qualitative characteristics of accounting information that makes financial information important for financial statements users as well as relevant in the decision-making process. Thus, the present methods of intangible assets valuation and reporting contradict the principle of prudent reporting, as a company’s financial situation can be both overstated and understated when the notion of intangible assets such as company’s reputation are ignored. Going even further then this, since the present techniques of reporting value mainly tangible assets thus revealing purely the book value of the company, needs of information users regarding verifiable estimation of a company’s market value are unsatisfied.
It should be further noted, that the present techniques of reporting intangible assets contradict the prudence principle and, going even further then this, undermine the fundamental qualities of financial information. The notion of relevancy is questioned as the book value reporting vastly ignores the market value of the company, thus, information is not relevant in the decision making process. The notion of comparability is another clash point, as intangible assets become identifiable, and, thus, can be reported if they can be separated. In such way, a company that is selling its trademark or is issuing a franchising agreement would have more assets reported on its’ Balance Sheet then a company that is facing a similar financial situation, however, did not sell its’ trademark, thus, the intangible asset cannot be identified. In such way, information can hardly be referred to as being objective and comparable. Given the basic clash points between intangible assets reporting and basic accounting principles, let us take a closer look at the major value drivers of intangible assets in order to estimate the relevancy of the notion in the current market situation.
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Researching the Rationality of Solar Energy Use
Use of solar energy as an alternative to fossil fuels has been widely discussed in recent years. Heavy reliance on fossil fuels, and, as a consequence, dependency on scarce resources usage of which has a negative impact on environment led to search of alternative sources of energy. Passive solar design has a number of advantages when it comes to alternative energy solutions due to low cost and high level of efficiency.
Integration of passive solar design reduces the need for mechanical heating, cooling, and artificial lightning during the daytime which is cost efficient in the long run, minimizes energy consumption and, as a consequence, dependency on non-renewable sources of energy, is environmentally clean, and can be easily implemented independent of the geographic location. The debates on the issue are ongoing. And even though there is some rationality to claims of opponents of solar design solutions, their perspective on the issue is short sighted, since aside from purely economic benefits, opponents fail to consider dependency on non-renewable sources of energy such as fossil fuels which will gradually become an economic burden for the vast majority of countries throughout the world.
Passive solar design of buildings does involve more initial spending, since it includes such passive solar features as thermal mass, increased glazing and overhangs. However, due to the fact that buildings with solar design require substantially less mechanical heating and cooling, annual reduced maintenance costs will be realized over the whole life time of the building. Going even further then this, since individual design of buildings is not required, but largely it will vary depending on the climate zone; cost per building will reduce, as the number of building with integrated passive solar design increases.
The experiment proved to be very effective in China. Country was subdivided into five major climate zones and comfort zones based on the climate zones have been developed. Further, bioclimatic building design charts have been developed, and finally, the system was implemented. The results were astonishing: in Guangzhou due to integrated natural ventilation mechanical air-conditioning would have to function only 17% of its initial work load, while Kunming initially required mechanical heating 80% of the time in a year, now supplementary heating is required only 10% of the year, in Beijing required mechanical heating would can be limited to 30% through with the passive solar design used during the construction process. This is a perfect solution for China, where fossil fuels are especially scarce as compared with other countries. A similar experiment took place in North Cyprus and implementation of passive solar design also proved to be efficient on practice.
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Analyzing the Experiment With the Consumers
In the research, we will concentrate on the practical importance of high level of awareness among consumers. Since high level of awareness of the risks associated with consumption of certain products is required for informative decisions, the data received from the responds will be evaluated against the real level of risks associated with consumption of a certain product. While there is a large number of public programs that aim at rising of the level of awareness among population regarding food safety issues and tools that can be used to make informative decisions, little is known about the real level of awareness. Are consumers aware of the risks associated with consumption of a certain product and are they able to react adequately producing rational informative decisions?
The participants have been assessed in order to evaluate their attitudes toward agricultural chemicals that raise concerns about food safety issues. Questioners were used to gain an insight into the issue. Questions covered three major fields: awareness, attitudes, and behaviors of the participants intending to evaluate the degree of risk assessment related to pesticide use, attitude toward it, and the resulting behaviors. Several instruments were developed to characterize and classify those participating in the research. A background questionnaire was used to gather socio demographic information. The questionnaire addressed perceptions related to pesticide use and participants were to evaluate the level of awareness, general attitude, perception, and behaviors on 7.0 scale. The six item form included three attitude and three concern statements. Urban and rural consumers participated in the research. Participants were offered to fill out a questionnaire and state own opinion on the pesticide use. The total number of participants was 50.
Consumers that participated in the research come mainly from urban areas and only 22 per cent is directly related to agricultural sector. The vast majority has at least a high school degree and 54 per cent has at least a Bachelor and above. Most respondents have an income of $20,000 - $50,000, a total of 68 per cent fall under this criterion. 44 percent of respondents are between 19 and 24 years old.
Overall, participants tend to agree that pesticides are overused in the US agriculture. The level of agreement was higher among urban consumers (6.3 on a 7 point scale) then among those directly involved in farming (4.8). Urban consumers also were more likely to agree that there is a need in more efforts centered on reduction of the use of pesticide in farming (5.0) then the farm families (4.0). When reporting the level of personal control over own exposure to pesticide use, the respondents’ ratings were on the stage of “some agreement”.
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