1. Current Development and accounting thought. 2. Answe

1
Current Development and accounting thought

2
Answer to Question 1
Introduction
This report is being developed for undertaking an analysis of a news article related to the
accounting news for developing a theoretical insight into the key issues discussed within the
article. The overall analysis has been conducted from the perspective of CEO for providing
assistance to understand the key issues discussed to be presented at an upcoming conference. In
this context, the article selected for analysis purpose is entitled as ‘AASB 15: New revenue
disclosures for half year accounts’ published by KPMG Australia. The analysis presented below
has primarily examined the key themes discussed within the article and thereby has applied
relevant theoretical frameworks for detailed evaluation of the issues identified.
Analysis of the Key Issues of the Article
The Accountings standards of IFRS 15, that is, for revenue recognition from contracts
with customers, has been developed by IASB for replacing previous IAS and USGAAP
standards in this respect and to introduce significant changes for accounting of revenues. The
implementation of the new accounting standard of IFRS 15 would have a significant impact on
the accounting and reporting methods used by companies for disclosures regarding revenue
recognition. The new standard has come into effect from January 2018 and has largely impacted
the disclosures patterns in the annual reports of the companies regarding the pattern of revenue
recognition. The Australian companies have to implement AASB 15 in compliance with IFRS 15
and the selected article has analyzed the transitional approaches and the disclosure requirements
of the new standard for the companies. The article has identified and stated three transition
approaches that could be implemented by companies for complying with AASB 15 standard
requirements (Heng & Rinarelli, 2019). These are stated as follows:
 Full retrospective: restating comparativeness on the basis of new standard application
 Modified retrospective: restating comparativeness using practical expedients
 Cumulative: Restating comparativeness
The companies are adopting the use of cumulative approach so that they do not have to re-
assess the impacts of the new standard on their previous financial periods. In this context, as
stated in the article there has also been the development of AASB 134 Interim Financial
Reporting that need to be applied within half year accounts. As per the standard, a reporting
entity needs to disclose explanations regarding the events that have caused changes in the
financial position and description of new accounting policies as per the standard. The transition
approach selected by the company in complying with the new standards need to be disclosed for
depicting the changes in revenue numbers that have been occurred in the balance sheet. The new
accounting policies need to be discussed in comparison with the previous ones for reflecting the
changes that have been introduced in the accounting standard as per the new accounting policies
(KPMG Australia, 2018).

3
The changes in the financial reporting that have been brought by the development of new
standard of AASB 15 are the key issue that is discussed within the given article. The
introduction of new accounting standards would have a huge impact on the financial statements.
In this context, ASIC (Australian Securities Investment Commission) in developing an
understanding of the accounting changes and providing disclosures as per the new accounting
standards to meet all its requirements. The business entities need to gain an understanding of the
changes in the financial reporting system related to recognition, measurement and presentation of
revenue in the financial statements (Heng & Rinarelli, 2019).
Examination of the Key Issues Discussed in the Article by the Application of Relevant
Theories
The key issue emphasized within the selected article is the transition approaches and
disclosure changes that are required by the companies to be followed for meeting the new
standard requirements (Heng & Rinarelli, 2019). The objective of the financial reporting as per
the conceptual accounting theoretical framework is to depict the financial position of a company
to its end-users for guiding them to take economic decisions. The information presented should
be highly useful for determining the capacity of a company to generate future cash flows and
providing returns to the investors. The conceptual accounting framework has provided the
qualitative principles of relevancy, comparability, faithfulness, verifiability, timeliness and
understandability that should be presented within the financial reports developed by companies
for meeting the objective of financial reporting. The theoretical principles provided by the
conceptual accounting framework mainly intend to improve the quality of financial reporting.
The IASB has developed and implemented the conceptual accounting framework within the
financial reporting system to ensure the protection of the interests of the end-users. In this
context, IASB has developed new IFRS 15 standard for improving the quality of financial
reporting as per the conceptual accounting framework theoretical model (Grosu & Socoliuc,
2012).
The new IFRS 15 standard mainly intends to adopt two new approaches of revue
recognition in the financial reporting systems. The first approach is recognition of revenue at a
point in time and the second approach is gradual recognition over time. The IFRS 15 accounting
standard has facilitated the application of a five-step model that will help in determining the
transitional approaches and the disclosures changes that the new companies are required to adopt
as per the IFRS 15 standard adoption. The five-step mold can be used for analysis of the
financial transactions and determining the amount of revenue to be recognized at the time when
they were derived and also at a subsequent time The model consist of the five steps, that is,
identifying the contract with a customer which is followed by identification of its performance
obligations. The next step is determining the transaction price and then allocating the
performance obligations in the contract and lastly recognizing revenue by meeting the
undertakings and provision specified in the contract (Hardidge & Subramanian, 2017).

4
The model will assist the companies to preparation of their financial statements as per the
new standard requirements of IFRS 15. It has stated that entities must recognize revenues at the
time when transfer of goods occurs and expressed by the amount considered or payment that the
entity is likely to receive. The adoption of five step model provided by the new IFRS 15 standard
will help in enhancing the quality of financial reports by improving the comparability of the
financial information disclosed. The optimization of the information in reference to revenue that
was previously not expressed will help in improving the quality of financial reporting. The new
standard has emphasized that the revenue must be recognized by an entity only when there is
probability of realizing future economic benefits by increasing the value of an asset or declining
the liability (Tadros, 2018). Also, the revenue measurement should be done reliably and with
adequate certainty for reflecting the economic reality and protecting the interests of the end-
users. The IASB is also assisting the companies in implementation of IFRS 15 for the first time
and has slowed the adoption of simplification techniques such as commutative effect approach as
discussed in the article for avoiding the re-exposure of the past financial years from the
application of the new standard. In addition to this, IASB and FASB have also lead to the
development of a Joint Transition Resource Group for Revenue Recognition for identification
and discussion of the potential issue that could impact its implementation (Grosu & Socoliuc,
2012).
Conclusion
It can be restated in the end that the article selected has emphasized on the problem of
transition approaches and disclosure requirements that the companies have to implement with the
adoption of IFRS 15 strand. In this context, IASB has developed and presented a five-step model
to guide the companies in the adoption process of IFRS 15 so that they are able to easily identify
and implement changes within their financial statements in compliance with the new standard
requirements.