Accounting Theory and Current Issues

Accounting Theory and Current Issues
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Abstract
The report is developed for the purpose of developing an understanding of the significant
challenges faced by the countries such as Australia and the UK in compliance with IFRS. It has
been illustrated from the discussion held that Australia and the UK have adopted IFRS in their
financial reporting that has lead to improving the comparability of their financial information.
However, the challenges such as increased complexity of some IFRS standards and changes
caused in the accounting system are having a significant impact on their reporting process. Also,
the Australian board has completely converged with the IFRS standards while the UK listed
entities need to adopt both UKGAAP and IFRS for financial reporting.
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Contents
Introduction................................................................................................................ 4
Part 1: Relevance of the Conceptual Framework for Financial Reporting & its
Usefulness by Illustrating the Arguments...................................................................4
Part 2: Comparison and Contrast of Implementation of IFRSs in Australia and the UK
................................................................................................................................... 5
i. Reasons for the National Accounting Body to Adopt IFRSs and the time of its
Adoption.................................................................................................................. 5
ii. Transitional Issues faced in the Adoption of IFRS in Australia and the UK...........6
iii. Challenges faced by the Reporting Entities in the Adoption of IFRS...................7
iv. Benefits of Adopting IFRS in Reporting Entities of Australia and the UK.............8
v. Similarities and differences in the implementation of IFRS across the Australia
and the UK.............................................................................................................. 8
Part 3: Success Achieved by the Adoption of IFRS......................................................9
Part 4: Recommendations to the National Accounting Setting Bodies for Ensuring
IFRS Compliance with the Users Needs......................................................................9
Conclusion.................................................................................................................. 9
References............................................................................................................... 10
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Introduction
The conceptual accounting framework has been developed by the IASB (International
Accounting Standards Board) for the purpose of providing guidance to businesses for financial
reporting. IASB has directed all the business entities across the world applying IFRS to prepare
and disclose their financial reports in accordance with the conceptual accounting framework. In
this context, the present report is developed for conducting a critical examination of the
usefulness of the financial reporting regulations for Australian reporting entities and comparing it
with a selected country, that is, the UK. This is done by researching the relevant literature for
developing an insight into the key issues that has been faced in the adoption of IFRS. This
includes examination of the issues such as transitional issues, challenges and benefits and
providing future directions to the national accounting setting bodies for the adoption of IFRS.
Part 1: Relevance of the Conceptual Framework for
Financial Reporting & its Usefulness by Illustrating the
Arguments
The conceptual accounting framework developed by the IASB has stated the basic
concept that underlies presentation of financial statements to the end users. It has provided
guidance to the standard-setters in development of accounting standards and resolving the
accounting issues faced by developers during preparation of the financial statements. The CF of
accounting has presented the qualitative characteristics that need to be met by the preparers
during development of financial statements by a business entity. There are two fundamental and
four enhancing qualitative characteristics provided by the CF of accounting that guides the
preparation of financial statements (IFRS Foundation, 2015). The fundamental qualitative
characteristics are relevancy and faithful representation that need to be present in a financial
report for ensuring its usefulness. The relevancy in the financial reporting states that financial
information should be capable of supporting the decision-making process of end-users.
As such, it needs to have both a predictive and confirmatory value that is interrelated with
each other. The predictive value means that financial information should be able to predict the
future performance of a company while confirmatory value should state its current year financial
position. For example, the revenue information provided within the income statement by a
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