Accounting Theory and Contemporary Issue

This report critically examines the financial reporting system, conceptual framework, and adaptation of IFRS. It discusses transitional issues, challenges, and benefits of adopting IFRS. It also compares the implementation of IFRS in Australia and other countries.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUE
Accounting Theory and Contemporary Issue
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING THEORY AND CONTEMPORARY ISSUE
Executive Summary
This current report has focused on the critically examining the financial reporting system
along with the conceptual framework and adaptation of IFRS. The study includes the
conceptual framework of financial reporting along with comparing and contrasting the
implementation of IFRS. Certain issues such as transitional issues and challenges that
have been faced is to be included in the study along with pointing out the benefits for
choosing the IFRS. It also includes the similarities as well as benefits of implementing
the IFRS along with providing successful adaptation and recommendation of the
financial reporting process.

2ACCOUNTING THEORY AND CONTEMPORARY ISSUE
Table of Contents
Introduction........................................................................................................................3
Relevant conceptual framework for financial reporting and its usefulness.......................3
Comparing and contrasting the implementation of IFRS in Australia and other country
that have adopted IFRS for last 5 years............................................................................3
Reason for adopting IFRS by national accounting bodies and its adaptation date.......4
Transitional issues that are faced..................................................................................5
Challenges faced by the reporting entities for adopting IFRS.......................................5
Benefits of adopting IFRS by the reporting entities.......................................................6
Similarities and differences in adopting IFRS by Australia and other country including
the affecting factors........................................................................................................6
Explaining the successful adoption of IFRS in the two countries..................................6
Providing two recommendation to the national accounting settling bodies on ensuring
the continuation of IFRS for users and economy..............................................................7
Conclusion.........................................................................................................................7
References.........................................................................................................................8

3ACCOUNTING THEORY AND CONTEMPORARY ISSUE
Introduction
Theory of accounting and the contemporary issue that are associated with an
organisation points out the logical reasoning from the set of certain principles. The
theory of accounting includes the accounting practices which evaluates the guidelines of
new practice and procedures. The conceptual framework for financial reporting mainly
points out the guidelines that are set by the accounting standard bodies and are
required to be followed by the companies. The criteria for including the funds is to be
pointed by the assets and liabilities which are presented in the financial statement.
Relevant conceptual framework for financial reporting and its usefulness
The relevant conceptual framework of financial reporting points out the information that
is required to be accessed by fulfilling of the objectives and helps the management for
making any kind of decisions. The user of financial report carries the decision for buying
and selling the products along with providing debt settlement and other form of credits
(Christensen et al. 2015). The information that is present by the business includes
faithful representation of the items that extent to maximum representation of
measurement. The information that are associated with the relevant ideas includes the
representation of data which supports the qualitative characteristics of the financial
report that are prepared by the managers of the company. The usefulness of the
conceptual framework measures the higher certainty and do not allows over allocation
of the assets and liabilities that are directly associated with the business (DeFond et al.
2014). The factors that considers the measurement basis are the relevance of the
information which mainly aims to provide combination of economics and relevant
resources that are help the business in their growth and development.
Recognition of appropriate assets provides the relevant information which mainly
represents the faithful representation of data to the company. It also provides
information which might be useful for the available lenders, inventors and creditors for
doing business with the company (Cascino and Gassen 2015). The derivative resources
that provides goods and services to the customers in an effective way points out the
representation of data. Variation in cash flow creates the sensitivity which evaluates the
market factors and relevant information of the business. On the other hand, the
presentation and disclosure of profit and loss statement which provides the primary
source of information to the company with in the fiscal year (Ramanna and Sletten
2014). Therefore, it also includes the other comprehensive income which provides
exceptional circumstances form the change of funds along with change of value of
assets and liabilities. For instance, profit and loss is represented in a single statement
which includes the total amount of profit and loss. It also help in enabling more relevant
information and representation of data that are faithful in nature. Other funds that are
included in the business mainly reported in different financial statement (Ball, Li and
Shivakumar 2015). This representation of financial data is more specific and effective
financial reporting.

4ACCOUNTING THEORY AND CONTEMPORARY ISSUE
Comparing and contrasting the implementation of IFRS in Australia and other
country that have adopted IFRS for last 5 years
Implementation of IFRS in Australia has been relatively smooth and the country has
adopted the IFRS in the year 2005 and in the month of January. The convergence with
the standard of the board is issued by its predecessor which is to be adopted by the
application of IFRS in their overall system (Florou and Kosi 2015). Adopting for the first
time of International Financial Reporting Standard reviews the ongoing relevance of
profit seeking entities which is to be implemented by the transition process. IFRS has
been implemented again in the year 2015 which assistance from AASB which is directly
associated with the entities that reports in a financial year. The identified part of the
review includes the transitional process which provides reasonable smooth for the
sectors along with certain basis of the reporting standard (Doukakis 2014). The
appropriate basis of NFP standard is mainly developed by the existing standard that is
implemented by the AASB which mainly requires further modification for regarding the
quality as well as the cost efficient process of reporting. Adopting the process on all
sectors includes the IFRS which is used by the all the sectors that enables the user
along with knowing the requirement of the accounting standard which move between
different countries and transferring the knowledge along with industrial skills.
The activities of the entities are recognised worldwide or internationally that have
already experienced the cost of savings in the overall process of financial reporting. The
entities that are small and medium sized in nature required by the NFP. The entities that
have concerns for the costs which are required to be included with the prices that
complies the requirement of disclosure (André, Filip and Paugam 2015). On the other
hand, South Africa has also adopted IFRS in the year 2005 which is more than five
years from the current financial year. South Africa have adopted the standard by IFRS
provides single set of reporting standards that assist in improving the overall quality of
the financial information. The domestic public company of South Africa has been based
on accounting standard of South Africa which has converged with IFRS after issuing by
the accounting board. Therefore, it provides benefits to the investors and other
shareholders of the company which are associated with the business (Capkun, Collins
and Jeanjean 2016). The international boundaries would get eliminated from their
reporting statement that is to be prepared in different basis of reporting standard.
Reason for adopting IFRS by national accounting bodies and its adaptation date
International Financial Reporting System is recognised as the global standard for
accounting as it includes the standard for reporting which is to be followed by every
country that deals with accounting techniques. Australia have adopted IFRS in the year
2005 in the month of January which points out the effective reporting standard for the
country (Barth et al. 2014). It mainly help both of the company in following the free flow
of international transactions as well as the international capitals. It has been seen that
more than half of the transactions mainly takes place in cross border which help in
gaining foreign funds. Modern economies have been relied on the cross border
transaction that mainly takes place with different countries and for this particular reason
different countries is required to adopt a single reporting standard. Diversification is
mainly seek by the investors that provides investment opportunities all over the world
and during the process of raising the capital of the company generally includes the

5ACCOUNTING THEORY AND CONTEMPORARY ISSUE
transactions (Cieslewicz 2014). These transactions mainly consist of international
operations which point out the subsidiaries in multiple countries.
On the other hand, South Africa have adopted the IFRS in the year 2005 along with
other accounting standard which also points out the cross border activities and certain
financial transactions. The format of financial reporting standard is to be maintained by
their own set of accounting standard that is implemented and designed by the nation
itself (Tsalavoutas and Dionysiou 2014). The companies that are based on the risk
mainly prepares the financial statement as per the reporting standard mentioned by the
IFRS for making any kind of economic decision. This particular patch of requirement of
accounting mainly adds the cost that is required to be initiated with the complexity of the
accounting standard and other risks. The application of the accounting standard is to be
reported in their financial statement which is to be calculated on different basis. The
complexity of involving the accounting standard is a part of global accounting standard.
This has to be included for every single time which might impact on the financial
reporting structure of the company (Li and Yang 2015). Therefore, these are the
reasons for which the national accounting bodies have adopted IFRS in their respective
nation.
Transitional issues that are faced
The transitional issues that are faced by the country after adopting the IFRS in the
accounting standard points out the effective challenges. These challenges are required
to be faced during preparation of any financial statements. IFRS have been developed
for improving that standard of financial reporting and accuracy along with maintaining
the transparency and comparability of the financial statement (Hong, Hung and Lobo
2014). Australia have adopted IFRS as they mainly trade a business with different
countries and through which foreign money come in the country. Avoiding any kind of
issues or losses in the trade between two countries are also supported by the IFRS as it
consist of same standard that are required to be followed by different countries who
adopts the IFRS.
On the other hand, South Africa also face some transitional issues which have affected
their overall reporting standard along with considering the accounting standard.
International accounting standard have been revised to form international financial
reporting standard which is mainly incorporated by the reporting committee for
mitigating the issues in the overall system of reporting (Crawford et al. 2014). Different
studies have been conducted which is to be used for highlighting the legal framework
along with requirement of the process of raising the awareness and training the
members of the board of authority. Moreover, the International Accounting Standard
Board (IASB) have been replaced by the governing authority. Certain challenges in
external environment includes the political challenges and cultural challenges which is
to be included with issues that have been faced by the board of members (Hamberg
and Beisland 2014). Difficulty in ascertaining the manner in the process of incorporating
the standard is to be included with the IFRS in the particular nation.
Challenges faced by the reporting entities for adopting IFRS
There are certain challenges that are faced by the reporting entities in the overall
process of adopting the IFRS. It have been analysed that Australia have faced certain

6ACCOUNTING THEORY AND CONTEMPORARY ISSUE
challenges during the process of adopting the IFRS which are listed as follows. During
early years, most of the countries used to follow GAAP which is Globally Accepted
Accounting Principles that consist of different accounting standard and reporting
measures but after adopting IFRS, Australia have faced drastic change in the process
of preparation of financial statement and reporting the accounting standard (Pelucio-
Grecco et al. 2014). The Australian companies requires to undergo a drastic change
which mainly impacts the uses of financial statements. It also points out the lack of
training facilities that consist of certain academic courses that might pose challenge to
the people of Australia. The requirement of reporting is being governed by different
bodies that is to be regulated by different accounting bodies.
On the other hand, South Africa have also face certain challenges during the process of
adopting IFRS in the country. IFRS generally do not consider or recognise the laws that
are overriding in nature along with providing the regulatory requirement for which South
Africa would pose certain challenges to their respective challenges (Gebhardt, Mora
and Wagenhofer 2014). The financial statement that is being prepared in South Africa
generally maintain the process of taxation law. The implementation process includes the
whole system of taxation which has been changed in their normal course of business.
The laws of taxation provides the treatment of taxation that would converge the GAAP
to IFRS which impacts the accounting system of South Africa. The effect of taxation is
considered as one of the major challenges that has been faced by the country during
the process of adopting the financial reporting system. Moreover, measurement of fair
value is the most effective way of implementing the accounting standard in the financial
statement of the firms. It brings lots of instability along with prejudice that mainly
involves lots of hard working for arriving the fair value measurement experts which is to
be used.
Benefits of adopting IFRS by the reporting entities
Certain benefits is to be implemented in the process of adopting IFRS for both of the
countries as it would help in creating a set of accounting standard that enables agencies
from different segment of accounting. On the other hand, cost of capital would also
increase as measurement of reporting entities have been increased with the preparation
of multiple reports in the entities (Bryce, Ali and Mather 2015). It help in increasing the
transparency that allows more accessible accounting bodies for better implementation
of accounting standard. Both time and effort would have reduced as multiple standard
are not present in different entities along with multiple standard and regulation to be
followed for doing the business. The cost of transition have decreased with adopting the
IFRS for both of the countries as it would also decrease the overall expenses that would
impact the income statement of the companies.
Similarities and differences in adopting IFRS by Australia and other country
including the affecting factors
The similarities in adopting IFRS by Australia and South Africa are both of the countries
have left their respective national accounting standard and considered this accounting
standard. Both of the countries can now trade their business without affecting the
monetary transaction as it consist of similar kind of accounting treatment (Hamberg and
Beisland 2014). Certain differences have been highlighted which includes the

7ACCOUNTING THEORY AND CONTEMPORARY ISSUE
considering of Australian accounting standard for Australia and South Africa have
considered their Accounting System for adopting IFRS. Therefore, these are the factors
which are to be included in the process of adopting the reporting standard by both of the
countries.
Explaining the successful adoption of IFRS in the two countries
Both of the countries have successfully adopted IFRS by considering the existing
accounting standard as well as reporting standard. Diversification is mainly seek by the
investors that provides investment opportunities all over the world and during the
process of raising the capital of the company generally includes the transactions. The
national accounting bodies of both of the countries have given preference to IFRS which
helps both of the countries in developing their reporting standard (Tsalavoutas and
Dionysiou 2014). Therefore, the successful adaptation of IFRS have been conducted by
both of the countries in the reporting standard.
Providing two recommendation to the national accounting settling bodies on
ensuring the continuation of IFRS for users and economy
The study mentioned in the above part consist of certain recommendation which is to be
provided to the national accounting settling bodies of both countries are easy in
accounting treatment that help the user easy understanding. Providing more flexibility in
the process of accounting practices is to be included as the recommendation. Adopting
of IFRS would help the accounting settling bodies for continuing with the reporting
standard which would also help in creating a higher return on equity.
Conclusion
The study mentioned in the above part can be concluded by analysing the
contemporary issue and accounting theory for adopting IFRS in place of existing
accounting bodies. The information that are associated with the relevant ideas includes
the faithful representation which supports the qualitative characteristics of the financial
report that are prepared by the managers of the company. IFRS generally do not
consider or recognise the laws that are overriding in nature along with providing the
regulatory requirement for which South Africa would pose certain challenges to their
respective challenges. The concept of accounting standard is to be implemented by the
company for efficient preparation of financial statement along with guiding the
presentation and disclosure of accounting information.

8ACCOUNTING THEORY AND CONTEMPORARY ISSUE
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