...Australian Accounting Standards Board and Harmonization with IFRS Nicholas Gainsbrugh Unit 6 Assignment for Prof. Gates Assignment: An Overview of the Australian Accounting Standards Board and Harmonization with IFRS Abstract: The accounting profession in Australia is thriving. The number of accountants employed at the professional level has risen strongly over the past decade, from around one hundred thousand in 1997to over one hundred fifty thousand in 2006 and it has really skyrocketed from there for the last 6 years. This paper will discuss what actions that Australia should take with regard to the adoption or (Harmonization) of IFRS. Many dissenters have complained - pointing attention to the political dimensions of the decision. While it might be politically unattractive for Australia to surrender some of its power to set its own standards, it would also be unattractive for Australia to remain on the outside while important international agreements are being made. This paper will also look developments in the adoption and implementation of IFRS around the globe, with particular interests in certain countries that are … within scope – similar to Australia - countries such as Canada, China and India. And if harmonization is not really a sensible reality, then would compatibility be a close second? Something to hope for if you fall short? Accountants are in short supply in the Australian labor market. How short is the supply – you ask? Well, so short that in September...
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...IFRS in the United States: If, When and How Donna L. Street s described by Erchinger (2012), for decades various United States (US) Securities and Exchange Commission (SEC) Chairs and Chief Accountants have expressed support for the development of one set of globally accepted accounting standards. Since the formation of the International Accounting Standards Board (IASB) in 2001, SEC leaders have repeatedly indicated that the logical choice for globally accepted standards is the International Financial Reporting Standards (IFRS) issued by the IASB. However, in line with other large economies, such as Japan, India and China, as of June 2012 the US had not adopted IFRS.1 This paper explores when and how, and indeed if, IFRS will become the basis for the financial reporting of domestic SEC registrants in the US. Readers are encouraged to first review Erchinger’s (2012) history of the SEC’s consideration of IFRS in the US included in this forum and especially Table 1 of this article, which provides a chronology of SEC releases regarding incorporation of IFRS into the US financial reporting model. This paper complements Erchinger’s by assessing approaches recently explored by the SEC for incorporating IFRS into the US financial reporting model. A decision can lead to correct or incorrect action. However, as articulated by many SEC constituents, uncertainty associated with repeated delays and hence ‘no decision’ by the SEC is clearly not in the best interest of investors and other financial...
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...IFRS adoption and analysts’ earnings forecasts: Australian evidence Julie Cottera University of Southern Queensland Ann Tarcab University of Western Australia Marvin Weeb University of Western Australia a b University of Southern Queensland. University of Western Australia. Address for correspondence: Ann Tarca, UWA Business School, M250, 35 Stirling Highway, Crawley, Western Australia 6009. Email: Ann.Tarca@uwa.edu.au Tel: +61 8 6488 3868. Version 24 August 2009 ____________________________________________________________ _____________ We thank Wendy Hsu, Tasha Grieve, Dessalegn Mihret, Lalith Seelanatha and Anthony Vu for data collection assistance. We also acknowledge the financial support of the Accounting and Finance Association of Australia and New Zealand (AFAANZ), UWA Business School and the University of Southern Queensland. We thank Millicent Chang, John Holland, Izan and seminar participants at Monash University and the University of Queensland for their helpful comments. We particularly acknowledge the assistance of Philip Brown and John Preiato in the preparation of this paper. IFRS adoption and analysts’ earnings forecasts: Australian evidence Abstract We study 145 large listed Australian firms to explore the impact of IFRS adoption on the properties of analysts’ forecasts and the role of firm disclosure about IFRS impact. We find that analyst forecast accuracy improves and there is no significant change in dispersion in the adoption year, suggesting...
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...Abstract International Accounting Standards are not always implemented into companies around the globe. Most industrialized countries have their own organizations, such as the United States Financial Accounting Standards Board, that govern their accounting standards. This can cause major difficulties for multi-country corporations, as well as confusing for investors who are trying to compare company financials. To rectify this problem, the SEC has prepared a roadmap that proposes requiring all U. S. companies to implement an improved version of International Financial Reporting Standards as soon as 2014. What would be required to implement these changes? Are accountants today ready and able to implement these news standards or will continuing education be vital to prepare them? If the U. S. takes on these changes, are other countries willing and able to implement changes as well? What will be accomplished with the implementing of a more universal system? Implementing International Financial Reporting Standards As the countries of the world become increasingly interdependent, language barriers must be transcended in order to promote adequate communication. This is true not only of spoken language, but also of accounting, which is commonly known as the language of business (Spiceland, Sepe & Nelson, 2011, p. 4). Global commerce has sounded the call for financial entities worldwide to speak one common language. Historically, the standardization of accounting...
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...total liabilities owed to parties outside the economic entity. All liabilities owing to, and amounts receivable from, organisations within the group (that is, within the economic entity) will be eliminated in the consolidation process, and will not be shown in the consolidated statement of financial position. The reason for this is that the consolidated financial statements are produced so as to show the results and financial position of a group of organisations as if they are operating as a single economic entity. Within an economic entity it does not make sense to ‘owe itself’ funds; hence it would be illogical to include receivables and payables that are owed/receivable within the economic entity. Inter-entity receivables and payables are therefore eliminated. This is consistent with the definition of consolidated financial statements as provided within NZ IFRS 10 and its reference to a ‘single economic entity’. Appendix A of NZ IFRS 10 defines consolidated financial statements as: The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash...
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...What is the effect of mandatory IFRS adoption on earning management ABSTRACT: International Accounting Standard play a important role in the world. More and more countries trend to adopt international accounting standard. Beginning in 2005, public companies in the member states of the European Union (EU) are required to apply IFRS. Ten years have passed, what is the effect of mandatory IFRS adoption on these countries, and how IFRS affect on earning management. In the paper, I will discuss this question based on some previous finding. Next, I will use IFRS 9 as a specific case for my conclusion. Finally, I will give my opinion on the effect of mandatory IFRS adoption on earning management. Key Words: Accounting Standard, earning management, IFRS, Financial Instrument, bank, impairment of asset, IAS39, IFRS 9 I. The effect of mandatory IFRS adoption on earning management 1.1 In 2012, Yi Lin Chua, Chee Seng Cheong. And Graeme Gould publish a article named “The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence form Australis. This article examines the impact of IFRS on accounting quality by focusing on threes perspectives: (1) earning management, (2) timely loss recognition, and (3) value relevance. In my paper, I will focus on earning management. First, the author talk about the reason he choose Australia. Because Australia is one of the first countries located outside of the EU that has mandated IFRS and is also the first non-EU adopting...
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...of accounting and financial reports to consolidate such information and make comparisons of firms that are listed in different countries (Prather-Kinsey, 2006). The complication arises when the firm does business in multiple countries. How can corporations be compared based upon their financials, which one are accurate, and how can investors then deal with multiple standards, which ones are accurate? The answer to these questions lies within the adoption of the International Financial Reporting Standards, or IFRS. IFRS are currently required or accepted in over 100 countries worldwide, and it looks certain that the number of countries to embrace IFRS will continue to rise over the coming years (Daske, Hail, Leuz& Verdi, 2008). It was already noticed that, IFRS issued by the IASB have been extremely doing well in terms of their acceptance and application on a worldwide basis. IFRS is the standards which is being developed and supported by the IASB. IFRS give a meaning as a set of international accounting standards that states how certain transactions and events should be reported in financial statements. Contrast to U.S. GAAP, which is a rules-based accounting standard, IFRS is upon using principles based rather than hard set rules. As a result of this fundamental difference, IFRS allows management to use greater preference and...
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...could also be subjective and easily manipulated. This contrasts with the criteria of Australia’s basis for group consolidation, namely, “effective control” which is determined by control over the entity's board and the proportion of potential and current voting rights. The observations call for the principle-based accounting system instead of the insufficient and easily manipulated rules-based system. In sum, the abovementioned suggests that the financial reporting standard-setting process is largely uncertain and that the accounting standards may often be incomplete. More importantly, comparisons are made between the IFRS and Australia’s modified versions of IFRS and the results highlighted that Australia’s modified standards may sometimes be of superior quality and are more contextually relevant for Australian financial report users than the IFRS. Hence, from the above considerations, it is recommended...
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...Subject: Reduced Disclosure Regime (RDR) The purpose of this memorandum is to respond to the company request about a new initiative of the Australian Accounting Standards Board (AASB) known as the Reduced Disclosure Regime (RDR). The following clarifies what RDR is, its purpose, who it applies to, how it fits within the Corporations Act and any adoption issues which could be considered. In summary, the Reduced Disclosure Regime (RDR) has been created to allow for the preparation of less intricate and more useful general purpose financial reports for non-publicly accountable entities through the removal of unnecessary disclosures. It consists of two Australian Accounting Standards AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards. These standards indicate the framework for preparation of financial reports and disclosures which may be omitted. Although RDR is expected to be beneficial to preparation of financial reports there are adoption issues surrounding compliance with International Financial Reporting Standards (IFRS). RDR is a direction for reporting entities (not publicly accountable) to prepare general purpose financial reports that are less complex with exemptions of certain disclosures which are deemed unnecessary; without diminishing relevance and increasing the consistency and transparency of information. This is part of a movement to make reports more meaningful and useful to the user...
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...will address two key areas, firstly, a personal reflection on this course and why studying theory is essential for practicing accountants. The second part is a critical evaluation of the conceptual framework and why it is an essential part of accounting literature. Areas evaluated include the purpose and benefits of a conceptual framework, a brief history of it in Australia, principle based versus rules based standards and some criticisms of it are discussed. Personal reflection I must admit, when scrolling through the list of courses I have left to complete my degree Accounting Theory did not jump out as one I was eager to enrol in. This is in no small part due to my lack of appreciation of how knowledge of the development of theory can give context and power to understanding changes. Whereas before I was more about practice and ‘getting it done’, it has become apparent that theory generally is an intrinsic element in advancing our understanding of our environment, culminating in improvements in practice. It is not a means of simply explaining or predicting behaviour, nor is it there only to serve as a framework for further inquiry (although these are important benefits of theory). Theory has a much more significant and elegant role to play in accounting than simply to reason and articulate the current status quo. Theory’s importance, relevance and effects have been eloquently summarised by Jonathan Culler (1997) when he writes: Theory is often a pugnacious critique...
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...Solution Manual to accompany Accounting: Business Reporting for Decision Making 4e Jacqueline Birt, Keryn Chalmers, Suzanne Byrne, Albie Brooks & Judy Oliver Prepared by Jacqueline Birt John Wiley & Sons Australia, Ltd 2012 Chapter 1: Introduction to accounting Comprehension Questions 1.1 What is a business transaction and how does it relate to the accounting process? Illustrate the concept of a business transaction with five examples relating to a mobile phone distributor. A business transaction can be defined as external exchanges of resources between the entity and another entity or individual that affects the assets, liabilities and owners’ equity items in an entity. The accounting process is the identifying, measuring and communicating of economic information about an entity to a variety of users for decision-making purposes. The first component of the process is the identification of business transactions which are then measured and communicated to the different users of financial reports. Business transactions for a mobile phone distributor include the following: 1. The contribution of capital by the owner to commence the business. This transaction would increase cash (asset) and increase capital (equity). 2. The purchase of inventory (mobile phones) on credit. This transaction would increase inventory (asset) and increase creditor (liability). 3. The payment of office rent. This transaction would decrease cash (asset) and decrease...
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...is a prime necessity to establish such a system that gives true and fair view of accounting reports. These consistencies in reports are intended to provide easier reports to stakeholders across the borders to measure and compare performance in international accounting reports standard. In earlier times UK accounting is providing useful information to shareholders, with a distinct from tax reporting. The implementation of IFRS has brought about significantly greater consistency in accounting recognition and measurement and far greater disclosure of information in financial statements. The implementation of IFRS in the UK brings better resource allocation decision. Because of all these reasons UK have adopted International Financial Reporting Standards. b) Apart from the global benefits of using similar accounting standards, convergence of UK GAAP with IFRS. The IFRS financial statements are significantly more complex than financial statements based on national accounting standards of UK. This complexity threatens to undermine the decision usefulness of IFRS financial statements. According to reports of Earnest & Young in 2006 UK businesses are upset as there are small number of technical experts have a good understanding of the more complex accounting standards to interpret and apply these accounting standards properly. Out of these fewer experts almost all are working with accounting firms or with regulators, rather than with preparers of users of financial statements. This...
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...é The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research October 2014 Information for Better Markets An initiative from the ICAEW Financial Reporting Faculty The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research forms part of the Information for Better Markets thought leadership programme of ICAEW’s Financial Reporting Faculty. ICAEW operates under a Royal Charter, working in the public interest. As a world leading professional accountancy body, ICAEW provides leadership and practical support to over 142,000 members in more than 160 countries, working with governments, regulators and industry to ensure the highest standards are maintained. The ICAEW Financial Reporting Faculty provides its members with practical assistance and support with IFRS, UK GAAP and other aspects of business reporting. It also comments on business reporting issues on behalf of ICAEW to standard setters and regulators. Its Information for Better Markets thought leadership programme subjects key questions in business reporting to careful and impartial analysis so as to help achieve practical solutions to complex problems. The programme focuses on three key themes: disclosure, measurement and regulation. We welcome comments and enquiries on this report and on the other aspects of the Information for Better Markets programme. To contact us, please email bettermarkets@icaew.com. © ICAEW 2014 All rights reserved. If you want...
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...IFRS Section 1 As a result to the 1988 policy statement that the Securities and Exchange Commission (SEC) issued, regarding the establishment of a common international accounting standards, there has been a growing acceptance of International Financial Reporting Standards (IFRS) for a basis of U.S. financial reporting. The number of countries adapting to this convergence has increased since its first suggestion. Within the United States, the SEC is taking its first steps as to whether or not the U.S. is to converge in to this universal approach to accounting. The international standard-setting process began a few decades ago as an effort by industrialized nations to create standards that could be used by developing and smaller nations unable to establish their own accounting standards, states the author of International Financial Reporting Standards. However, as the business world became more global, regulators, investors, large companies, and auditing firms began to realize the importance of having common standards in all areas of the financial reporting chain, continued the author. At this time, there are approximately 120 different nations that are required to, or have the option to report under IFRS. A few examples that already use IFRS include Australia, New Zealand, and Israel. It has been confirmed that the European Union has virtually adopted all international standards. Canada is said to adapt to IFRS in 2011, with Mexico following in 2012. The U.S. SEC has...
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...international financial reporting standards: does size matter? John Goodwin School of Accounting and Law, RMIT University, Melbourne, Australia, and 460 Kamran Ahmed School of Business, La Trobe University, Bundoora, Australia Abstract Purpose – This study seeks to examine the impact of Australian equivalents to international financial reporting standards (A-IFRS) on the accounts of small-, medium- and large-sized firms. Design/methodology/approach – For 135 listed Australian entities, the half-yearly accounts ended 30 June 2005 are examined to identify the effects of A-IFRS. Data are gathered on the change in major balance sheet and income statement elements, the major reconciling items and earnings variability. Findings – Findings show that more than half of small firms have no change in net income or equity from A-IFRS, and that there is an increase in the number of adjustments to net income and equity with firm size. The study also finds that A-IFRS has increased net income for small- and medium-sized firms. Equity has increased (decreased) under A-IFRS for small (large) firms. Small firms experience higher earnings variability than medium-sized or large firms under A-IFRS. Research limitations/implications – The sample is limited to 31 December reporting date firms and not all A-IFRS must be complied with when firms restate their comparatives. Practical implications – Analysts, auditors and other account users should be aware that the effects of A-IFRS are correlated with firm size. Originality/value...
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