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Assignment Task1 (Contemporary Issues of Accounting Theory Essay
1. Overview of the Current Discussion
After World War there were lot many international convergence are made over the accounting standards in order to support the trade and flow of capital across the borders and enhance the benefits to the economy. The motive behind convergence is to develop the level of quality related to their accounting standards. FASB or Financial Accounting Standards Board rendered effective standards that benefited the investors as well as other stakeholders with the use of them and these standards also termed as GAAP that stands for "Generally Accepted Principles" (Carmona & Trombetta, 2010).
IAS (International Accounting Standards) committed is an international body of preparing accounting standards which is acceptable at global level by the companies for preparing their financial statements and recording their set of information. With the help of following these standards there is effective uniformity is maintained at the global level (Carmona & Trombetta, 2010).
From last couple of years IASB (International Accounting Standard Board) and US financial Standard Board perform together with an motive to establish and develop such effective accounting standards that easily followed by the organisations (Pelger, 2016).
During convergence program there is effective discussion is made over the topic related to the post employment benefits and with the end of the discussion there are significant modifications made among the accounting standards related to the post employment benefits. These amendments get recorded within the IAS 19 or International Accounting Standard 19. While discussion they majorly emphasised over the development of the post employment benefits as it is identified that the accounting procedure of the post employment benefits is improvised. With the immediate effect it is consulted to review all the related issues and identify the reasons. It is identified that the accounting procedure is not practiced adequately and there is effective requirement of revising the pattern and all these aspects need to be recorded within accounting standards of IAS 19 (Pelger, 2016).
After identifying the reason adequate modifications made within the IAS 19. There are various other discussions are also made in context to the post employment benefits such as specification of different components of cost associated with the defined benefit plan, associated risk along with the defined benefit plan and in the end there are new classification introduced in context to the benefits and contribution (Pelger, 2016).
In the convergence program effective discussions are made over the financial statement preparation that results into various amendments within standards mentioned by IAS. Joint International Group (appointed body) November 2014 render their assistance in establishing standards for the purpose of financial statement preparation along with the assessment of the fair information related to the financial position of organisation. Within the convergence there is new project termed as "Financial Statement Presentation" come into existence (Pelger, 2016).
During the convergence program there are lot many discussion were made and these discussion results into major amendments within the IAS standards such as amendments in the IAS 19 related to the post employment benefits. There were some different issues also there that get discussed such as cash flow statement, reconciliation statement and many more (Pelger, 2016).
2. Rational for Current discussion - Why is the project being undertaken?
If there is merger takes place among the accounting standards results into various benefits. By merging different accounting standards there will be effective and single set of accounting standards get prepared that has higher level of quality along with enhanced effectiveness. It rendered diverse benefits to the capital flow within nations. Convergence was conducted over the IASB and US Financial Accounting Standard Board . With the implementation of single set of accounting standards there are various benefits are rendered such as comparison among two different companies become easy and with this effect global investors get benefited as they made their decision by comparing different companies by their own. It removes the role of analyst for the investors as with the help of single set of standards they easily analyse, compare and interpret the financial accounts. Single set of accounting standards helps in maintaining uniformity within the global market and it results into making financial statement more clear, concise and transparent. There is effective improvement is noted down with the effect of the changes made within the accounting standards as recording as well as analysing process become easier (Cohn, 2015).
IASB and US FASB convergence program conducted over the post employment benefits rendered various benefits and this whole project is divided into two sections such as: -
First section: -There are amendments made into IAS 19 IASB in order to represent the define benefits plans as well as their associated disclosures.
Second section: -Under this section issues of post employment benefits scheme is included that focused over making adequate improvements in the promise plan with the help of measurement contribution. There are various plans get included such as defined benefits characteristics along with defined contribution plans (Cohn, 2015).
As per the discussion in convergence it was identified that accounting procedure of pensions get improvised under IAS 19 and there are effective amendments are made within it that helps in converting it into more helpful in context to the accounting procedure of pensions.
The convergence project over the FASB and IASB is conducted in context to the representation of the financial statements. The main motive of organising joint project is to get an adequate standard for the purpose of effective recording of financial information within their financial statements. Within the joint program there are effective and universal set of accounting standards are prepared that helps in recording the financial information in effective manner. They render universally accepted set of accounting standards for preparing the financial statements as it helps in maintaining transparency by recording fair and true value of their transactions. With the implementation of these accounting standards different stakeholders get benefited as they become able to understand and analyse the information recorded within their financial statements. Organisations need to disclose detailed set of information in order to maintain transparency within their statements (Cohn, 2015).
There are effective amendments are made within the post employment benefit plans in order to enhance the accounting procedures related to benefits. As well as they introduce universal set of accounting standards for preparing financial statement that helps in creating uniformity among the global market (Cohn, 2015).
Assignment 2: Task 2 (Case study)
3. Do you agree with this view? Why or Why not? Justify your answer with suitable explanations
IFRS get elaborate as "International Financial Reporting Standards" There are some set of accounting standards that get followed by the companies of different nations for preparing their financial statements. It is termed as the global accounting language that get utilised for the purpose of recording all the business related financial information in the systematic manner within their financial statement which is easily understandable as well as comparable with other companies financial statement. Comparison is made in order to compare the effectiveness as well as efficiency, overall performance and lastly their financial position in their respective market (Liu & O'Farrell, 2011).
Stewardship termed as managing others property or become responsible for managing the things in behalf of others or for management of state of affairs or else. Stewardship can be supervision or conducting or management of something or becoming responsible in order to manage the entrusted or care one's such as entrusted public funds (Liu & O'Farrell, 2011).
Accountability is that responsibility of giving answers to others for the action made. But there is accountability and responsibility are not one same term because responsibility can be shared with others but in case of accountability it can't get shared with others because accountable is not termed as responsible but they have to give answers for the actions made by them (Morley, 2016).
Implication of IFRS over local authorities
IFRS rendered global accounting language that get followed by the different nations in order to support the uniformity. There are three areas such as derivative treatment accounting, PFI scheme accounting and lease accounting within the public sector where IFRS get followed. IFRS provide standards in the interest of public in order to render them effective level of benefits as they provide various measures for maintaining adequate record of the daily transactions made by the organisation in an systematic manner. IFRS standards put compulsion over disclosing detailed information related to their activities as a results it create transparency (Morley, 2016).
There is no specific code is given within IFRS in context to the stewardship of entrusted public funds due to which there is effective chances of increasing fraudulent activities related to the public funds. There is a lack of monitoring over the organisations that increases the chances of miss-utilisation of the funds for personal benefits by the organisational authority. In the absence of proper codes and lack of controlling power it results into improper management as authority utilise the power for their personal benefits. In context to the public interest there is effective need of proper control over organisation so that they maintain adequate transparency within their financial statements (Morley, 2016).
No I am not agreed with the statement that IFRS will not require for stewardship of public funds entrusted or for the supply of services or both of which are core to the management of local authorities. With the effect of the implementation of the IFRS accounting standards there will be effective reduction is noted down in the fraudulent activities as organisation need to maintain their financial statements by following set standards. It also helps in implementing monitoring over the organisational activities that helps in reducing frauds and miss-utilisation of funds and improve the overall functionality of the business organisation (Morley, 2016).
4. Critically examine the validity of the statement. What are the implications for accounting in different countries if the above allegation is true.
IASB expands as International Accounting Standard Board. It is the authorised body that become responsible for rendering accounting policies & principles or accounting standards to the companies so that they follow them while preparing their financial statements. The set of standards get termed as IFRS or International Financial Reporting Standards as these standards are followed by company to report their financial statements. As per the statements these standards are not prepared in the public interest it is only for big companies only but it is not true or this statement is completely wrong because with the implementation of these IFRS standards public get benefited in effective manner. With the implementation of the IFRS standards there is uniformity get created within the worldwide companies and all of them prepare their financial statements by following these standards. With this effect they become on same page and eliminate the chances of fraudulent activities. There is adequate level of transparency get maintained within the financial statements of the companies that helps in knowing the overall position and performance of the business organisation within their respective market. Users or interested stakeholders easily make use of the financial statements for their purpose in order to analyse or compare them with other companies financial statements (Hoogervorst, 2012).
With the implementation of the IASB standards the respective economy also get benefited as it made adequate level of contribution among their economy. Investors make use of the financial statements because it got analysed easily by them only and reduces the cost incurred over the analyst to analyse the financial statement. Public get benefited with the introduction of the IASB as nation get adequate and effective opportunities in order to enter within international capital markets and eliminate the trade barriers of cross border trade that results into increase in the capital inflow share within their respective country. There is adequate increase in the level of investment activities as investors, lenders and other stakeholders get benefited with the IASB as they easily analyse and understand the performance of the organisation and on that basis they make their investments (Hoogervorst, 2012).
If the allegation made within the statement is true then 4 big accountant companies get benefited in every sense because they effectively modulate their financial statements as per their needs and present in front of the public. In the absence of the set standards there are no other standards at global level that support in analysing or comparing the financial statements of the different organisation. There will be no such transparency is maintained by the organisation related to their business activities and interested stakeholders not able to access the foreign market along with this there is effective increase in the barriers in cross border trade. The flow of capital also get affected with this effect and all the benefits enjoyed by the 4 big accountant companies as they turn- around all accounting standards in their favour only (Baudot, 2014).
5. IFRS should be adopted by the Australian local authorities
IFRS or International Financial Reporting Standards and these standards are prepared so that whole world can follow the same accounting standards while preparing their financial statements in order to form uniformity. With the effect of uniformity it become easy to make comparison with the different companies and create new opportunities in order to make investments. It enhance the quality as well as reliability over the financial statements as they render fair as well as transparent level of information related to their financial position and their performance (McGregor, 2012). It eliminate the fraudulent activities and stakeholders of the organisations become beneficial with the effect of it. IASB introduces the standards of IFRS in order to create healthy competitive market all over the world. There are various stakeholders associated with the organisations and these are in the form of shareholders, investors, clients, regulators, government and many more as they make effective use of their financial information rendered in the form of financial statements (McGregor, 2012). As per the scenario provided the benefits enjoyed by the Australian Local authorities after following IFRS standards are as follows such as: -
1. With the implementation of the IFRS standards there is effective level of transparency and accuracy shown within the financial statements that helps the investors in getting beneficial information. There is cost get saved which is incurred over analyst in order to analyse the situation of the organisation as investors get the effective information that get understand easily.
2. The another benefits is in the form of easy comparability as the financial statement get compared with the other organisation in easy manner because all financial statements are prepared by following the set standards of IFRS (Pacter, 2013).
3. Various stakeholders utilise the information easily because financial statements shows adequate and understandable information. They utilise this information for their decision making process as they compare financial statement of different companies and took decisions accordingly.
4. It eliminate the trade barriers due to which there is effective increase in the cross border transactions. There is effective inflow of capital within the Australia after the implementation of the IFRS set standards.
5. Their local market or Australian local authorities also get access to the international capital market as they make investment in different companies because IFRS is implemented in different countries. With this effect the access of foreign capital market become easy for them (Pacter, 2013).
6. There is effective increase in the transparency among the financial statements and with this effect the future loss or profit is easily observed by analysing the financial statements. By evaluating the financial statements stakeholders get to know about the profitability of the business organisation and it helps in their decision making process.
As per above discussion it is clearly observed that implementation of IFRS rendered numerous benefits to the Australian Local Authorities as it create transparency among the prepared financial statements. Associated stakeholders get benefited as they easily compare financial statements of two different companies and their decision making process get enhanced in effective manner (Pacter, 2013).
Baudot, L. 2014, "GAAP convergence or convergence Gap: unfolding ten years of accounting change", Accounting, Auditing & Accountability Journal, vol. 27, no. 6, pp. 956-994.
Carmona, S. & Trombetta, M. 2010, "The IASB and FASB convergence process and the need for ‘concept-based’ accounting teaching", Advances in Accounting, incorporating Advances in International Accounting, vol. 26, no. 1, pp. 1-5.
Cohn, M. 2012, "FASB chair looks to new IASB relationship", Accounting Today, vol. 26, no. 12, pp. 1.
Cohn, M. 2015, "IASB, FASB look beyond convergence", Accounting Today, vol. 29, no. 1, pp. 23.
Hoogervorst, H. 2012, "The IASB's convergence program, the prospects for global standards, and the challenges for emerging economies", The CPA Journal, vol. 82, no. 3, pp. 6.
Liu, C. & O'Farrell, G. 2011, "Comparability and convergence between IASB-IFRS and regional-IFRS", International Journal of Business, Accounting and Finance (IJBAF), vol. 5, no. 1, pp. 27.
McGregor, W. 2012, "Personal Reflections on Ten Years of the IASB", Australian Accounting Review, vol. 22, no. 3, pp. 225-238.
Morley, J. 2016, "Internal lobbying at the IASB", Journal of Accounting and Public Policy,vol. 35, no. 3, pp. 224-255.
Pacter, P. 2013, What have IASB and FASB convergence efforts achieved?, American Institute of CPA's, New York.
Pelger, C. 2016;2015;, "Practices of standard-setting – An analysis of the IASB's and FASB's process of identifying the objective of financial reporting", Accounting, Organizations and Society, vol. 50, pp. 51-73.