Financial Accounting Theory Oz Assignment

Financial Accounting Theory Oz Assignment

Financial Accounting Theory Oz Assignment

Solution to Task 1

The present discussion considers the published report on 29 June, 2018 on “Changes to the Australian Accounting Standard AASB 16 affecting franchisees & franchisors: Bringing leases onto your balance sheet” by Andrew Grima. The article deals with the changes in the Australian standard of AASB 16 those impacts the franchisees and franchisors (Nobes, 2014). The change in the standard has led to change in the organization structure of balance sheet. The innovation has added enables the heading of leases in the balance sheet of the companies.

The article has clearly evaluated the benefits of the new trends of the accounting standard. The author has pointed out that the changes will bring significant changes in the way business is conducted between the franchisee and the franchiser (Jin, Shan & Taylor, 2015). The franchisee is the independent entrepreneurs who take franchise stores of known existing brands and then in their own place, using their own money and utilizing the brand name and technical knowhow of the franchiser they conduct business. Common example can be given like Gelatissimo, Gutter-Vac, Mad Mex, Poolwerx, Roll’d, Coffee club, and Battery world. All these are the names of the Franchisers who allow the business and brand to be used by the Franchisee units (Sutherland, 2017). It is very important for both the franchisee and franchiser to follow standard accounting practices of the land because the business may become very complicated, especially for the franchiser. The franchiser is to have calculations about plenty of franchisees and whatever goods are sold to them. The government is always vigilant about whether any business activities that are going on are beyond the permission (Bodle, Cybinski & Monem, 2016).

Therefore the Australian government has formed the Australian Board of Accounting Standards which is a direct agency of the government that creates and keeps up budgetary reporting principles material to elements in the private and open businesses of the Australian economy. Every country has their own dedicated agencies to take care that the standards of financial practice within the country is regulated and standardized (Bond, Govendir and Wells, 2016). The said agency the Australian Accounting Standards Board (AASB) is expected to start the new “a new leasing standard (AASB 16) requiring Australian businesses to bring operating leases onto their balance sheets.” (Grima 2018). The new standards means that the leases especially the ones that were kept off the balance sheet previously is now is expected to be accounted for which it is usually known in the following term “right of use asset and lease liability.”

The author has stated the new action may affect all or at least most of the Australian businessmen to some extent. Therefore it is necessary for all the entrepreneurs, business men and everyone else to be properly reviewing the New Leasing Standards or the AASB 16 by the Australian Accounting Standards Board (AASB) ( Joubert, Garvie & Parle 2017). The author has also stated that the risks in the financial reporting may increase because of the introduction of the said leasing standards. It is the imperative of the business entities to ensure that there are no irregularities happening within the financial reporting of the company.

As per the author in his news article, AASB 16 is the single lessee model of accounting that includes a lessee for recognising of the liabilities and assets and for all the leases with a time span of more than 12 months, untill the asset underlying has a low value (Xu, Davidson & Cheong, 2017). The lessee is needed to recognise a right-of-use asset showing its right to use the underlying leased asset and liability showing its obligations to make lease payments. On the other hand the AASB 16 substantially includes the lessor for the accounting requirements. As per the standard the lessor continues to distinguish its leases as finance leases or operating leases and account for those two measures the leases differently (Lowe & Campbell, 2017).

In the article Grima Firstly mentions the best thing to do for the Australian companies in order to understand the new standard of AASB 16 at the current stage is to consult the accounting professionals regarding the new standards, as they will have the best knowledge of the extent of impact the business would have, along with the specialized professional know-how for effectively implementing the changes in the accounting process that would result in the changes in the balance sheet structure (Morris, 2017).  However the business administration, as advised by the author must make a detailed observation of the accounting systems for the confirmation that the business is being able to capture and record more financial data.
In addition to that the author
Grima in this article has also highlighted
the importance of noting down changes that may well result in the structure of balance sheet. The article specifically argues that the financial statement may be represented as much “less healthy” than it looked like previously before the amendment (Dakis, 2016).  The businesses may also need to consider how this will effect on the covenants and financial KPI's set by the bank, as well as any other financiers with whom the business organisation are involved.

The article by Grima is an ideal guideline for the can be business owners that would help them to adapt the new financial amendment of the Australian accounting standard. The author has advised the businesses who should consider taking a notable observation at the technique in which the rental payment structures are negotiated in AASB 16 (Bohusova & Svoboda 2017).  This would be of great importance for the business owners as this would help them question the accountants regarding the new standard in an effective manner. The question may also include whether turnover rent falls within the new requirements or not.

In this article the author has talked about implementation of the AASB 16b in the Australian accounting standard from 1st of January 2019. As of 1 January 2019, the Australian Accounting Standards Board (AASB) will start a new leasing standard that is AASB 16 that would enable the Australian businesses to represent the operating leases in their balance sheets.  According to him the benefit of the Change would means that the certain leases that had been recognised off a balance sheet of the business previously will now have to be accounted for, in what is known as a right of use asset and lease liability (Dunbar, and Laing, 2017).  The change in this new idea would help in ensuring that there is greater transparency and therefore would give a more accurate representation with respect to financial commitments of the enterprise that includes the lease liabilities.  

However, as pointed out by Grim, this new arrangement can lead to become a significant liability, The author has said that the change is likely to impact almost all the Australian businesses to some extent(Bond, Govendir and Wells, 2016).  Sadly, considering the complexities and issues that are likely to arise following the implementation of the AASB 16, the 2019 changes are set to increase the potential risks associated with financial and commercial reporting.

Lastly, the author overall mentions in this article that the main motive of writing this article was not to give a definitive accounting advice to the business owners, he has put more stress on the importance and process of consulting to the accountants for the incoming changes that are to be faced by this Australian Accounting Standard of AASB 16 for leases (Bohusova & Svoboda 2017).  

Solution to Task 2

A brief overview

The present proposal is dealing with the segment that involves in the regulations in accounting as per the standards and updates on invoice compensation in the topic number 718. The accounting standard includes improvements in the share based payments of the non-employees (Beatty & Liao, 2014). In this context, the improvement guidelines is compulsory for the reduction of the complexity and the overall cost of development and maintenance of the data efficiencies  as mentioned in the financial statements(Proposed Accounting Standards Updated on stock Compensation (refereeing no 718):  The advancement  of  Share-Based Payment of Nonemployee Accounting, 2017). In the discussion four residents are there to give the feedback for the proposals. The collections of the responses are taken from the accounting board’s official websites. The analytical review of the responses from the several respondents would help in understanding the issues of the proposal and effectiveness of its implementation (Brown, Preiato & Tarca, 2014). In addition to that the objective of the whole process is to systematically comprehend the implementation of this accounting standard improvement (Proposed Accounting Standards Updated on stock Compensation (refereeing no 718):  The advancement  of  Share-Based Payment of Nonemployee Accounting, 2017).

The components of the proposal

The current segment elaborates the aspect of the process of accounting of payments of the non-employee share. In this context, the mentioned proposal is vital for the emotions, opinions and sentiments of the various non-employees of the organisations. As stated by (), a sound organisation and a proper bond between workforces and its business can positively enhance the business environment.  Therefore, it can be stated that several types of payment procedure development is essential.

In essence the accounting standard shows several types of ideas with elaborated impacts and information of the businesses from several sections and industries (Christensen, Lee, Walker Zeng, 2015). This may affect the businesses to unite with the process of giving their responses. With the aid if this process, it can be identified that the needed feedback can be gotten on the proposed proposals for improvement of the accounting standards and regulations. In this manner, additionally the interests of the public can be satisfied in a process that is more efficient. In simpler terms, the questions on the matters of transformations are also said in the Standards Board for Financial Accounting. It can be identified as a accountability management of businesses to give response reply and give solutions to the queries in the forms of exposure draft and discuss about the various negative responses. The approval and disapproval therefore helps the users to understand the suitability and acceptance of the proposals that are given to the enforcers of regulations. This includes the (Suggested Standards of Accounting Updated on Stock Compensation (Topic 718) mentioning regarding the advancement of   Share-Based Payment arrangement for Nonemployee). Moreover, the various queries mentioned in the exposure draft along with the answers are shown since response of the several organisations can essentially help in serving public interest (Dumitru, Dyduch, Gu?e & Krasodomska, 2017). Therefore, it can be stated that undoubtedly the questions are needed to be answered in the context of public interest.


It can be delineated in insight with respect to the feedback obtained from the several responses. The feedbacks are considered in feature for obtaining the idea regarding approval and disapproval with regard to the proposed amedtments in the exposure draft. As a result, the proposed changes from the several respondents are hence illustratively clarified and are therefore said below:

Name of the organisation: Visa Inc

Visa is prestigious business that has an extensive variety of activities in the domain of advanced and modern online payment technology. This association has the motives to set up upgraded payment technique all through the world through steady innovative work towards a change of new, improved and trend-setting organisation developments. In this organisation, it very well may be distinguished that the management of the firm demonstrates their concerns as comments with repect to the recommendation by FASB and prescribe certain things for improvement (Fang, Maffett and Zhang, 2015). Examination of the remark presented by this venture reveals the reacts of the association to different inquiries said in thisexposure draft. Also, this association furthermore rightly says in regards to their agreement to the suggestions and proposition put forth by the FASB which is the regulation authority, contradicting different recommendations of supplementary purposes of tax premium and insufficiency of income statements. Examination of their remark reveals the manner in which that the organization of the association keeps full certainty, trust and confidence in the proposals shown by the FASB (Granof, Khumawala, Calabrese and Smith, 2016). Management of the association considers that this specific suggestion for improvement can help the operational procedure improvising of the business activities by method for diminishing of the obstacles that holds the organizations effective operations. Further, it is said that this proposition upgrade the improvement of augmentation of cost instability connected with the income tax (Henderson, Peirson, Herbohn and Howieson, 2015).

Name of the organisation: Heiskell and MacGillivray and Associates

The association has their business of accounting and auditing in Australia and reports to different inquiries for different bookkeeping directives. Their reaction investigation in the method for comments tells us that they approve the termination framework and closing PIC pool for the accounting purpose. In particular, they diminish the enterprises expenditure alongside complexities that are identified with accounting framework. Furthermore, this undertaking additionally favors to different costs for the specific pay system and adaptation of the same in the earnings declaration of the company. This would benefit the tax systems of as the insufficiency can be taken as essential and have the need to be executed effectively (Hodder and Hopkins, 2014). Moreover, the business is aware that there is a need to limit the total delays in the technique of identification of the advantages of tax surplus.

Name of the organisation: Raytheon Company

Raytheon is a notable organisation in USA that endeavours its capacities in the locale of improvement, advanced utilizations of innovation and mechanical contributions like the security supplies, resistance and devices, common market programming worldwide(Llena and Talalweh, 2015). From the observation of the remarks the organization responds to questions are numbered second, third and fifth contained in the exposure draft. The association has exhibited perspective that is inverse with regards to the frameworks and procedures proposed for the standard of the tax benefits in terms of tax inadequacy stated in the statement of income (Martin and Roychowdhury, 2015).On the other hand, the organisations management highlights that the FASB needs to follow a particular framework. In this way, the several advantages and disadvantages in the context of supplementary taxation are shown especially in firms equity.

Name of the organisation: American Bankers Association

The operations of this organisation deals in the banking section in USA. The firm has given a positive approval of the amendments that the FASB body has projected in the context of share based payment arrangement (Wang, 2014). Additionally, the organisation responses to several questions positively but responses contradictally to only to a particular question present in the exposure draft.

The significance of the proposal

The current proposal as reflected in the exposure draft can be said to be a essential in the context of the accounting standard, since the subject area of share based system payment to the employees are covered. Moreover, this accounting scheme is a process that can aid in augmentation of remuneration of executives based on shares (Bassett, Chosak, Driscoll and Zakrajšek 2014). On top of that proposal has a primary motive of improvising the various financial standards and reduces the work pressure of the accountants. Due to this the theme of “Public interest” can be considered in the current discussion and it can provide overall theoretical validation for the defined guidelines and can be considered as an efficient premise in this perspective.


In the proposal analysis by the FASB in the context of accounting scheme of share based payment of employee enables the accounting users to understand the responses of the chosen respondents who are in favour of the new amendment of the recognition of surplus advantages as well as deficiencies of tax in the financial reports. The report also gets the negative feedbacks of te chosen companies in order to analyse critically of the new change in the standards. From the responses of the companies from the exposure draft is can be concluded that this current proposal is not considered as may generate fluctuations in cost in the income statement. Hence it can be advised that this development of standard can augment state of affairs related to development of accounting system of stock based payment


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