National Accounting Setting Bodies

Running Head: ACCOUNTING THEORY & CONTEMPORARY ISSUES
ACCOUNTING THEORY & CONTEMPORARY ISSUES
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1ACCOUNTING THEORY & CONTEMPORARY ISSUES
Abstract
IFRS adoption and plans for the harmonization or convergence widely differs by
jurisdiction. IFRS has the goal for providing globalized framework for the way public
entities discloses and prepares their financial statements. It helps in providing
general guidance for financial statement preparation in comparison to setting rules
for industry-specific reporting. Hence, this report will include the discussion on PAT
relevance, IFRS implementation in Australia and India, success of the IFRS adoption
in these particular countries and recommendations will be given based on findings to
national accounting setting bodies on the ways for ensuring IFRS continues to be
relevant to the needs of users and to all the economy sectors. Further, this report
concludes that both the countries Australia and India have adopted IFRS standards
and both the countries are successful in its implementation, but the rate of success
in adoption of IFRS standards is more in Australia.

2ACCOUNTING THEORY & CONTEMPORARY ISSUES
Table of Contents
Introduction...................................................................................................................3
Discussion.....................................................................................................................3
Relevance of “Positive Accounting Theory”..............................................................3
Implementation of IFRS............................................................................................4
IFRS adoption by National Accounting Body........................................................4
Facing of Transitional Issues.................................................................................5
Challenges faced by Reporting Entities upon IFRS Adoption..............................5
Benefits of IFRS Adoption by Reporting Entities..................................................6
Similarities and Differences in IFRS adoption by Australia and India...................7
Success of IFRS Adoption........................................................................................8
Recommendations to National Accounting Setting Bodies......................................8
Conclusion....................................................................................................................8
Reference...................................................................................................................10

3ACCOUNTING THEORY & CONTEMPORARY ISSUES
Introduction
Financial reporting is consisting of financial information disclosures to various
stakeholders about financial position and the financial performance of organization
over specified time-period. The stakeholders include creditors, investors, public,
government agencies, government and creditors. The financial reporting frequency
in case of the listed entities is annual and quarterly. Usually, financial reporting is
considered as the end product of accounting. Reporting are vital and integral part of
the organizational Accounting and reporting system. However, considering various
involved stakeholders and other requirements of regulatory, financial reporting is vital
and critical task of the organization. This is vital part of the corporate governance.
According to IASB, financial reporting has objective to provide the information
regarding financial performance, position and the changes in enterprises financial
position, which are useful to the wider ranges of users in making the economic
decisions (Chen, Ding and Xu 2014).
Hence, this report aims to discuss Positive accounting theory and comparison
of IFRS implementation in Australia and India. Further, discussion will be on how
much successful is IFRS adoption in both of the countries. Lastly, recommendations
will be given to national accounting setting bodies on the ways for ensuring that IFRS
continue to be relevant to the needs of users and all economy sectors.
Discussion
1)
Relevance of “Positive Accounting Theory”
PAT is described as predicting actions as choices of the policies of accounting
by entity and the way entities responds to new proposed accounting standards. The
positive accounting theory came into practice for referring to developed accounting
theory and it was named by the Watt and Zimmerman. It is concerned with
explanation of accounting practices, the designing of which is for explaining and
predicting that entity will not be using particular method (Sharma, Joshi and Kansal
2017). It focusses on relationship in between various involved individuals for
providing the resources to the entity and the way accounting is used for assisting in
the functioning of these particular relationship. It is based on the central economic-
based assumption, which all the actions of individual are driven by the self-interest
and that the individuals acts always in the opportunistic manner to the extent that
actions will be increasing their wealth. This theory helps in reconciling efficient theory
of market with the economic consequences. This asserts that contracts entered by
the companies for driving the concerns of management about the policies of
accounting. The three hypotheses on which PAT is based is consists of “bonus plan
hypothesis”, “debt covenant hypothesis” and “political cost hypothesis” (Moser 2014).
Following are the two perspective of PAT and the example of each perspective:
 Efficiency Perspective: It has been argued from efficiency perspective of the
PAT that practices of accounting, which is adopted by entity are explained
often based on fact that these methods reflect best underlying entity’s
financial performance. Further, various features of organizations are used for
explaining that why entities adopt methods of accounting such as goodwill.
The entities adopt particular method of the accounting because it best reflects
entity’s underlying performance. This is argued that financial accounting
regulation imposes the unwarranted costs on the reporting companies such