Current Development in Accounting Thought

Running head: CURRENT DEVELOPMENT IN ACCOUNTING THOUGHT
Current development in accounting thought
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Authors’ Note

2CURRENT DEVELOPMENT IN ACCOUNTING THOUGHT
Table of Contents
Task 1:........................................................................................................................................2
Task 2.........................................................................................................................................6
References................................................................................................................................13
Appendix..................................................................................................................................16

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Task 1:
The report at hand elucidates in detail about at the article published on 29th June of
the year 2018 declaring about alterations made by the Australian Accounting Standards
Board on the standard AASB 16. The accounting standard AASB 16 is said to affect
franchisees along with franchisors and talks about presentation of leases in the balance sheet.
The article presented by Andrew Grima talks about the modifications carried out in the
standard AASB 16 that essentially influences both franchisees as well as franchisors. In
essence, alteration in the standard has directed towards transformation in the overall structure
of the balance sheet assertion (Rutherford, 2017). In this connection, it can be said that
innovation leads to presentation of leases in the balance sheet assertions of the firms.
The article selected has presented analytical evaluation of diverse advantages of the
novel trends of the accounting regulation. In this article, the author has indicated the fact that
the alterations are supposed to bring about alterations in the process business is undertaken
between franchisors with franchisees. Schneider (2015) suggests that the franchisee refers to
the independent industrialists who acquire franchise stores of different well-known subsisting
brands and invest in their own funds and utilize the brand name along with technical
expertise and competence of the franchiser to carry out the business. For instance, there are
franchise business is commonly found in companies such as Coffee club, Gelatissimo,
Poolwerx and many others. These companies carry out franchise business and permit
conduction of business and use of their brand names by various franchisee segments.
Essentially, it can be said to be obligatory for both franchisers as well as franchisees to
adhere to the prescribed standards of accounting system of the land as these businesses might
possibly become extremely complicated and difficult otherwise. The franchisers have the
need to undertake numerous accounting exercises for the franchisees and no matter what

4CURRENT DEVELOPMENT IN ACCOUNTING THOUGHT
goods are marketed. The government is for all time attentive about any business actions that
are taking place are beyond the authorization. Thus, the Australian government has created
the (AASB) that is essentially an agency and bureau of the government that generates and
presents principles and values of budgetary reporting that are essentials in private as well as
open businesses of the Australia. Each nation possesses their own out-and-out committed
agencies to be careful that the regulations of financial activities within the nation are well-
regulated and at the same time standardized. Essentially, the AASB is expected to establish
the novel standard of leasing (referring to the standards of AASB 16) that requires Australian
companies to introduce operating leases in firm’s balance sheets. The novel standards refer to
the fact that leases particularly the ones that were held off balance sheet in the past is now
accepted to be accounted. It is therefore termed as authority of using asset as well as lease
liability.
In this current article, the author has mentioned that the new activity might perhaps
affect majority of the businessmen in Australia to certain extent. For that reason it is
compulsory for industrialists and everyone involved to correctly reviewing the novel standard
of leasing that is the “AASB 16” prescribed by the Australian Accounting Standards Board.
In addition to this, writer of the current piece has also mentioned that the risks involved the
financial reporting may well increase due to the implementation of the leasing standards.
Particularly, Shi et al. (2017) suggests that it is crucial for business entities to make certain
that there remains no indiscretion occurring within the system of financial reporting of the
firm.
As mentioned in this current piece of writing, AASB 16 is necessarily the lone model
of lessee that takes account of a lessee for identifying both assets as well as liabilities for
diverse leases that is within a time period of over 12 months, if not the underlying asset
possesses a lower value. Particularly, lessee is necessary to identify an authority-to-use asset

5CURRENT DEVELOPMENT IN ACCOUNTING THOUGHT
reflecting its authority to make use of basic leased asset (Lawyers et al., 2018). Also, it is
important to identify a lease liability reflecting requirement to disburse lease payments.
Conversely, the AASB 16 to a large extent takes account of the lessor for different
accounting necessities. According to the standard the lessor keeps on making a distinction of
its leases (that is categorisation of finance leases and operating leases). Also the lessor takes
account of different measures of the leases in a different way (Atkinson et al., 2014).
According to the current article under deliberation, Australia firms have the need to
consult accounting professionals as regards the novel standards of AASB 16 in a bid to
comprehend the new standard of AASB 16 (Lawyers et al., 2018). This can help in acquiring
knowledge and awareness regarding the level of impact the firms might face with specific
qualified knowledge regarding efficiently executing the alterations in accounting procedures
that in turn can lead to alterations in the structure of the balance sheet. Management of the
businesses, as recommended by the author, needs to carry out detailed observation of systems
of accounting for confirming that the firm can capture and at the same time carry out
documentation of financial data (Hao & Liu, 2017).
Furthermore, the article also emphasizes the significance of recording alterations that
may perhaps direct towards development of framework of balance sheet assertions of the
firm. Also, the article under deliberation explicitly argues that financial announcement may
perhaps be presented in a “less healthy manner than what the same looked like beforehand
before the adjustment in the standard (Islam, 2015). In addition to this, the businesses might
also have the necessity to think about the way this can influence covenants along with
financial key performance indicators (KPI) presented by the bank. Moreover, it is important
to take into consideration the influence of standards on different sponsors of the firm with
whom corporations are involved.

6CURRENT DEVELOPMENT IN ACCOUNTING THOUGHT
The current article under consideration can be considered to be a perfect directive for
business owners that can assist them in adapting new financial modification of accounting
standard of Australia. In this case, the author of the article has also elucidated in detail about
the technique that the businesses that need to consideration for development of rental
payment frameworks as per directives stipulated under AASB 16 (Paulsson & Rosati, 2017).
This can be prove to be of great importance for different owners of businesses since this can
assist in questioning accountants concerning the novel standards in an effectual way.
Also, drop in turnover rent that is within the purview of the novel requirements is a
matter of concern that need to be taken into account in this regard. The current article also
talks about implementation of the standard of AASB 16.b. in the form of accounting standard
of Australia as of the period January 1, 2019. The article mentions that as of the period
January 1, 2019, the AASB is scheduled to introduce a novel standard of accounting that is
essentially the AASB 16 that can facilitate businesses in reflecting operating leases in the
balance sheet assertions of the firm (Trottier & Gordon, 2017). As per the authors of the
article, the modification would indicate that the leases that were previously detected off the
statement of the balance sheet now need to be accounted in as right to utilize assets as well as
lease liability. In essence, the alteration in the novel idea would essentially assist in making
certain that there exists higher level of transparency and thus might provide a more
appropriate presentation pertaining to financial commitments of the business enterprise
including lease liabilities.
Then again as mentioned in the current article under consideration, this novel
agreement can direct the way towards proper way of presentation of liability. As stated by the
author, the alteration might probably influence majority of Australian firms to certain extent.
Therefore, Private interest theory can be referred to in this case. This can be said to be related
to the main regulatory theme which stresses the requirement for standard setters to interfere