Impact of IFRS on Financial Reporting

This assignment examines the effects of implementing International Financial Reporting Standards (IFRS) on financial reporting. It delves into how IFRS has shaped accounting policies, influenced the quality of financial information provided, and impacted corporate transparency. The analysis considers various perspectives, including those of analysts, preparers, and users of financial statements.

RUNNING HEAD: Accounting policies and estimates used by firm
1
Name of the Student-
Title- Accounting and reporting frameworks
University Name-

Accounting policies and estimates used by firm 2
Table of Contents
Introduction.................................................................................................................................................3
Accounting policies and GAAP rules followed by Atlassian Software company...........................................4
Estimates used by Atlassian Software Company.....................................................................................5
Estimates used by rivals...........................................................................................................................6
Comparison of accounting policies and estimates used by Atlassian Software Company and Morrison
plc............................................................................................................................................................7
Assesse accounting flexibility..................................................................................................................9
Evaluation of accounting strategies and policies.........................................................................................9
Changes in accounting estimates by the Atlassian Software Company.................................................10
Suggestion for accounting policies and estimates prepared by Atlassian Software Company..............11
Red flag in accounting report of Atlassian Software Company..................................................................12
Conclusion.................................................................................................................................................15
References.................................................................................................................................................16
Appendix...................................................................................................................................................19

Accounting policies and estimates used by firm 3
Introduction
With the increasing ramification of economic changes and complex business structure,
each and every company in Australia has to report their financial statement by following proper
level of GAAP rules, regulations and international financial accounting standard. There are
several normative and positive theories of financial accounting which could be undertaken by
company to prepare their financial statements in determined approach. In this report, accounting
standards and policies followed by Australian listed company has been followed in determined
approach. There are several Australian companies which have been following IFRS standards
and GAAP rules while reporting their financial statements with reporting authorities on
international level. However, due to increasing complexity and different legal compliance, these
companies have been facing problem in establishment of harmonization in their accounting and
reporting frameworks. In this report, estimation of the financial data has been reflected. After
that, red flags and problems have been identified which reflects company’s reporting formats.
Ideally, in case of conflict between IFRS standards and GAAP rules, company override GAAP
rules with IFRS standards while following accounting and reporting frameworks. Accounting
policies could be defined as set of rules, accounting standards and policies which are used by
organization to prepare accounting and reporting frameworks. It is evaluated that accounting
policies adopted by company depends upon the management and accounts discretion. In this
report, Atlassian Software Company has been taken into consideration and after evaluating the
accounting and financial frameworks, various red flags and estimation has been found.

Accounting policies and estimates used by firm 4
Present description of organization
In this report, Atlassian Software company has been taken into consideration to identify
the estimates in accounting reporting and red flags which company has faced in its reporting
frameworks. It is an Australian supermarket company trading as supermarket chain and selling
goods and service to clients through its off line and online supermarket channel. The CEO of
company is John Durkan and having more than 1, 17,000 employees. This company has
followed proper IFRS standards and GAAP rules to establish harmonization in GAAP rules and
International accounting standards in its reporting frameworks (Kieso, Weygandt and Warfield,
2010)
Accounting policies and GAAP rules followed by Atlassian Software
company
With the increasing international business of Atlassian Software company, it has followed
various accounting policies and GAAP rules in its accounting and reporting frameworks (Irvine
and Moerman, 2017).
 Atlassian Software company, in its depreciation charging method has followed straight
line method to identify present value of assets. However, this method has shown
inefficiency in showing the true value of assets and will result charging less amount of
depreciation as compared to overall assets value. (Hussey and Ong, 2017).
 Company has recorded all of its lease transactions as per AASB16 rules and standards.
Atlassian Software Company has implemented provision of right of use assets in
reporting of its underlying leased assets. However, the leased expenses charged by
company have been treated as capital expenditure.

Accounting policies and estimates used by firm 5
 Consolidation of financial statements and reporting of same have been done by following
proper AASB-5 IFRS set rules and given standards (Cairns, et al. 2011).
 As per the IAS-136 Atlassian Software Company has implemented impairment test and
charged all of its impairment loss from goodwill and other cash generating units (de
Ricquebourg and Jonathan, 2013).
 Atlassian Software Company has prepared its consolidated financial statement as per
AASB 101.
 These all AASB standards and GAAP rules has also allowed company to prepare its
financial statements as per the IFRS rules and standards.
 AASB-117 is the accounting standard which has been followed by Atlassian Software
Company to record its financial lease transaction.
Estimates used by Atlassian Software Company
Atlassian Software Company has followed IFRS and AASB standards while recording of
its financial transaction in its books of accounts. There are several future estimates which
have been used by Atlassian Software Company in its financial reporting frameworks such as
income tax payment, valuation of inventories management, joint venture transactions,
commitment of company and evaluating the recording frameworks of organization (Clinton,
Pinello and Skaife, 2014). Atlassian Software Company has taken all the estimates collected
from subsidiaries companies and on the basis of collected information it has prepared its
consolidated financial statement. In addition to this, lease agreement and differed tax
payment are the estimation used by company in its annual report. (Nobes and Stadler, 2015).
However, there are several outcomes which could be observed by Atlassian Software
Company in its reporting framework.

Accounting policies and estimates used by firm 6
 If company follows proper level IFRS rules and accounting standards then it will make
easy for investors to interpret the data.
 As per the AASB-5 Atlassian Software Company has made proper level of consolidated
of its financial statement and made disclosure of its estimations in its financial notes of
accounts (Steman, 2016).
 Atlassian Software Company has established harmonization in its IFRS rules and GAAP
standards.
 Atlassian Software Company has implemented IAS-136 to implement impairment test to
identify the true and fair view of its assets in the books of account.
 It has maintained estimation for liabilities for wages and salary including all the non-
monetary transactions and set off within 12 months from the reporting period.
Estimates used by rivals
In Australian super market business, there are several rivals who are following IFRS rules
and estimation in their reporting frameworks. Nonetheless, the estimation used by all of these
companies is different from each other’s. These estimations are used to set off the
unbalanced reporting structure and reporting of consolidated financial statement with the
reporting authorities. There are several rivals such as Woolworth, Wesfarmers and Morrison
plc who have made these compliance in easy and determined approach. Morrison plc has
made estimation for recording of its debt assets and deferred payment in its books of account
(Mardini, Crawford and Power, 2015). All the contingent liabilities and other expenses
which are not charged by these companies in their books of accounts are shown under the
footnotes and notes to account. There are other estimations which are used by these rivals in

Accounting policies and estimates used by firm 7
their reporting frameworks such as determining the present value factors, flow of cash in
business and financial leverage estimation.
Comparison of accounting policies and estimates used by Atlassian Software
Company and Morrison plc
Accounting rules Atlassian Software Company Morrison plc
AS per IFRS-5
( Rehabilitation and injecting
of funds
Atlassian Software Company
has followed IFRS-5
provisions and rehabilitation
for injecting money and
capital in the business
operation of company.
Nonetheless, these
transactions have been
recorded as capital nature
transactions (Cline, Garner
and Yore, 2014).
Company has made proper
level of bifurcation in its
revenue and capital nature
transactions. However,
expenses incurred for the
benefits of more than one
year are booked as capital
nature transaction.
IAS-136 As per the IAS-136,
company as implemented
proper level of impairment
test to identify the true and
faire view of assets on
periodic basis. This
Morrison plc implements its
impairment test on random
basis. It is evaluated that
whenever company estimates
that there is changes in its
assets value as per the value

Accounting policies and estimates used by firm 8
impairment test is
implemented on the basis of
annual basis in its accounting
and reporting frameworks
shown in market value.
Income tax payment and
tariffs paid for one year
charged as revenue
expenditure and expenses for
more than one years are
treated as capital
expenditure.
Atlassian Software Company
takes estimation from
subsidiary company and
prepare its consolidated
financial statements as per
the AASB-5
Company has prepared its
financial statement as per the
AASB-5. However, all the
estimation taken from the
subsidiaries company is done
by taking management
representation letter from all
of subsidiaries companies.
IFRS-23 (treatment of
income tax payment
All the tariffs and income tax
payment is considered as
operating expenses.
However, company has
charged deferred tax as
capital expenditure (Chen,
Cumming, Hou, and Lee,
2016).

Accounting policies and estimates used by firm 9
Assesse accounting flexibility
Atlassian Software Company has recorded all of its assets at its cost value after
implementation of impairment test as per the IAS-136. Company has charged all of its
impairment loss from goodwill and other cash generating units. In addition to this, classification
of assets has been made in Atlassian Software Company as per the AASB-105 (Christensen, et
al. 2015). In addition to this, inventory management is done by following inventory
management techniques and determining the economic order quantity. This process will
strengthen the reporting of company and passing entries for self- insured liabilities of the
Atlassian Software Company. These assets is based on the set number of estimates in different
value of Atlassian Software Company and management practice implemented in the books of
accounts such as future inflation, application of accounting standards, charging depreciation
amount and deferred revenue and taxes and return on investment (Ball, Li and Shivakumar,
2015).
Evaluation of accounting strategies and policies
Atlassian Software Company has recorded several estimates in its financial books such as
future inflation, application of accounting standards, charging depreciation amount and
deferred revenue and taxes and return on investment. These estimations set in financial
statements will increase the accounting strategies and policies implemented by Atlassian
Software Company in its reporting frameworks. However, if proper level of estimations is
not used then it may result to discrepancies in the reporting frameworks. Atlassian Software
Company has adopted FIFO method to maintain effective level of inventory management in

Accounting policies and estimates used by firm 10
organization. This level of inventory management method has been followed by Atlassian
Software Company after following all the rules and regulations of Atlassian Software
Company (Sytnik, 2014). In addition to this, depreciation method followed by company is
straight line method in which all the depreciation charged is not equal to the assets value in
organization. This could be understood with the help of given example that Atlassian
Software Company has recorded all of its assets and liabilities at their cost value after
implementing SLM depreciation method as per IFRS rules. Nonetheless, Company has
overridden the GAAP rules for depreciation charging on assets. If company has followed
GAAP rules then it would have followed For instance, plants and machinery in Atlassian
Software Company has been recorded at cost value as per the IFRS rules and standards. On
the other hand, a GAAP rule provides that Atlassian Software Company should record its
assets at the cost value and market value whichever is lower. However, Company disclosed
all of its required details and assumptions in its notes to account. (Brochet, Naranjo and Yu,
2016).
Changes in accounting estimates by the Atlassian Software Company
After evaluating the annual report of Atlassian Software Company, it is observed that
company has various estimations and assumptions such as impairment test implication loss,
market value present factors, deferred tax payment, contingent liabilities. These estimations
have several impacts on the profit and loss accounts. For instance, amount of tax paid by
company has been charged as operating expenses in business and resulted to decrease in
overall profit of company. It has shown that expenses and investment made by company for
more than 1 year should be charged as capital expenditure in organizations. This level of
business functioning will increase the overall future value of organization and sustainability

Accounting policies and estimates used by firm 11
of business throughout the time. However, if company changes its set estimates then it will
result to destruction of its reporting frameworks and making calculations with retrospective
efforts. Atlassian Software Company used straight line method in calculating the depreciation
amount on the assets of company. However, changing the SLM method to written down
value method have also resulted to charging depreciation and all the assets from retrospective
efforts. This will increase the depreciation amount charged on the assets of company by 12%
throughout the time (Bischof, Brüggemann and Daske, 2014).
Suggestion for accounting policies and estimates prepared by Atlassian
Software Company
With the increasing ramification of economic changes, Atlassian Software Company has
implemented various accounting policies, such as using FIFO method in inventory
management, tax implication, accounting and recording of deferred tax and implementing
proper estimation and reporting frameworks (Barth, 2013). It is evaluated that company has
problem in complying with IFRS rules and standards and GAAP Rules. As per the GAAP
rules, company should have estimation of proper accounting values. For instance, contingent
liabilities and bifurcation of capital and revenue expenses should be disclosed in the notes to
accounts of company. In addition to this, depreciation methods and changes for the same
should also be disclosed in the annual report. There are several estimations such as
impairment test implication loss, market value present factors, deferred tax payment,
contingent liabilities which should be based on the proper facts and accounting principles of
company (Aobdia, Lin and Petacchi, 2015). However, there are several red flags and
problem which is faced by company while establishment of reporting and accounting
compliance such as recording tax payment and bifurcating revenue and capital expenditure.

Accounting policies and estimates used by firm 12
Red flag in accounting report of Atlassian Software Company
Atlassian Software Company has several Red flags in its accounting and reporting
frameworks. However, with the increasing ramification and GAAP rules standards. Red
flags in accounting report of Atlassian Software Company are defined as problems and
threats faced by company in its reporting and accounting frameworks. It is evaluated that if
these red flags are not mitigated by company then it may result to destruction of company’s
value and accounting frameworks (Atkins and Maroun, 2015). Ideally, Atlassian Software
Company has identified these problems while reporting its financial statements. In addition
to this, remarks given by auditors while auditing the books of accounts will also result
increase the overall red flags in several part of the reporting.
Monitor revenue and capital expenditure of company
Atlassian Software Company has faced red flag in reporting of its expenditure. It
becomes very cumbersome to record expenditure of company as revenue and capital
expenditure. It is evaluated that Atlassian Software Company has charged all of investment
as capital expenditure and expenses relate to operating functions has been charged as capital
expenditure. It has shown that company has made bifurcation in its expense to reduce its tax
burden and used all the revenue expenses to reduce the overall profit and loss of the year.
However, as per the IFRS rules and standards Atlassian Software Company needs to charge
all of deferred income tax as capital expenditure and tax expenses related to one year should
be charged as revenue expenditure. Nonetheless, bifurcation of these expenses is the major
red flag which Atlassian Software Company has been facing in its reporting frameworks.

Accounting policies and estimates used by firm 13
Method of charging depreciation on the assets of company
After evaluating the IFRS rules and standards, it is considered that charging depreciation
on the assets of company is completely based on the discretion of the management
department. Atlassian Software Company has charge straight line method which has resulted
to charging depreciation on the assets of company. Nonetheless, charging depreciation
through SLM method would result to leaving some of the value of assets uncharged from the
profit and loss account. Therefore, company should decide which method of depreciation
should be used to disclose the true and fair view of assets (Jaggi, et al. 2016).
Inventory valuation method
Inventory valuation in Atlassian Software Company is based on the IAS-3. There are
several inventory valuation methods such as FIFO, LIFO and other inventory management
method. Atlassian Software Company has adopted FIFO method to manage inventory in
organization. It has observed that FIFO method has helped Atlassian Software Company to
manage the inventories in warehouse of company. This method has allowed company to
maintain effective inventory management to reduce the overall cost of production of
company. It is observed that if company changes its FIFO inventory management method to
LIFO inventory method then it will change the estimations used by company. These
inventory methods reduce the overall cost of production of company in determined approach.
Changes in net income, cash flow and related party transactions impact
As per the IAS24, Atlassian Software Company has to take care of its all related party
transactions in its accounting and reporting frameworks. . It is evaluated that if company is

Accounting policies and estimates used by firm 14
having pecuniary relation with other companies then it should not enter into business
transactions with those companies. .However, Atlassian Software Company could enter into
related party transactions by passing special resolutions in its meeting. . After evaluating the
annual report of company, it is evaluated that company has made all of its business
transactions with other organizations by passing resolution. Moreover, company has shown
its entire contingent liabilities in the notes to account. These are the expenses which may or
may not arise in the organization. As per the IFRS rules, company could showcase these
information in the notes to accounts. Atlassian Software Company has also followed foreign
exchange management policies to make legal compliance for all the foreign transactions. In
addition to this, remittance of money from one country to another country has been made by
company by following proper level of rules and regulation of FEMA act 2001. Atlassian
Software Company have to face red flag arise in accounting and reporting of in various cases
such as related party transactions. Therefore, it is inferred that if company follow proper level
of rule and IFRS standards in its accounting and reporting frameworks then it will strengthen
company’s sustainability in determined approach.

Accounting policies and estimates used by firm 15
Conclusion
In this report, accounting standards and accounting policies followed by Atlassian
Software Company in its reporting frameworks has been done. It is considered that
accounting policies are the rules and regulations which needs to be complied by accountant
and management department while reporting its financial statement. After evaluating the
annual report of Atlassian Software Company, it could be inferred that company has
established proper level of harmonization in its IFRS accounting standards and GAAP rules
while reporting its financial statements with reporting authorities. After evaluating the annual
report of company, it is observed that company has established proper level of harmonization
in IFRS standard and GAAP standards. However, these all red flags which are identified in
this report may be mitigated by Atlassian Software Company if it follows proper level of
IFRS rules and GAAP standards.

Accounting policies and estimates used by firm 16
References
Aobdia, D., Lin, C.J. and Petacchi, R., 2015. Capital market consequences of audit partner
quality. The Accounting Review, 90(6), pp.2143-2176.
Atkins, J. and Maroun, W., 2015. Integrated reporting in South Africa in 2012: Perspectives from
South African institutional investors. Meditari Accountancy Research, 23(2), pp.197-221.
Ball, R., Li, X. and Shivakumar, L., 2015. Contractibility and transparency of financial statement
information prepared under IFRS: Evidence from debt contracts around IFRS adoption. Journal
of Accounting Research, 53(5), pp.915-963.
Barth, M.E., 2013. Global comparability in financial reporting: What, why, how, and
when?. China Journal of Accounting Studies, 1(1), pp.2-12.
Bischof, J., Brüggemann, U. and Daske, H., 2014. Fair value reclassifications of financial assets
during the financial crisis.
Cairns, D., Massoudi, D., Taplin, R. and Tarca, A., 2011. IFRS fair value measurement and
accounting policy choice in the United Kingdom and Australia. The British Accounting
Review, 43(1), pp.1-21.
Chen, J., Cumming, D., Hou, W. and Lee, E., 2016. Does the external monitoring effect of
financial analysts deter corporate fraud in China?. Journal of Business Ethics, 134(4), pp.727-
742.

Accounting policies and estimates used by firm 17
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.
Cline, B.N., Garner, J.L. and Yore, A.S., 2014. Exploitation of the internal capital market and the
avoidance of outside monitoring. Journal of Corporate Finance, 25, pp.234-250.
Clinton, S.B., Pinello, A.S. and Skaife, H.A., 2014. The implications of ineffective internal
control and SOX 404 reporting for financial analysts. Journal of Accounting and Public
Policy, 33(4), pp.303-327.
de Ricquebourg, D. and Jonathan, A., 2013. The usefulness of direct cash flow statements under
IFRS. University of Leeds.
Hussey, R. and Ong, A., 2017. Corporate Financial Reporting. Springer.
Irvine, H. and Moerman, L., 2017. Gambling with the public sphere: Accounting’s contribution
to debate on social issues. Critical Perspectives on Accounting.
Jaggi, B., Allini, A., Rossi, F.M. and Caldarelli, A., 2016. Impact of accounting traditions,
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Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2010. Intermediate accounting: IFRS
edition (Vol. 2). John Wiley & Sons.

Accounting policies and estimates used by firm 18
Mardini, G.H., Crawford, L. and Power, D.M., 2015. Perceptions of external auditors, preparers
and users of financial statements about the adoption of IFRS 8: Evidence from Jordan. Journal of
Applied Accounting Research, 16(1), pp.2-27.
Nobes, C.W. and Stadler, C., 2015. The qualitative characteristics of financial information, and
managers’ accounting decisions: evidence from IFRS policy changes. Accounting and Business
Research, 45(5), pp.572-601.
Steman, J., 2016. The post adoption impact of IFRS 8 on segment disclosure quality: evidence
from European and Australian listed firms (Master's thesis, University of Twente).
Sytnik, O.E., 2014. Comparative analysis of the guidelines for the preparation of financial
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трудов Sworld, 27(2), pp.27-31.

Accounting policies and estimates used by firm 19
Appendix

Accounting policies and estimates used by firm 20