Advance Financial Accounting & Reporting

Advance financial accounting

Table of Contents
Task A..............................................................................................................................................3
Task B..............................................................................................................................................4
TASK C...........................................................................................................................................5
Task D..............................................................................................................................................7
Part A...........................................................................................................................................7
Part B...........................................................................................................................................7
Part C...........................................................................................................................................8
References......................................................................................................................................10

TASK A
In accordance with IASB (2010), there are two key qualitative characteristics in financial
statement which are; relevance and faithful representation. Financial statement information is
said to be relevant when it is able to make a difference in user’s decisions in the financial
statement. Further, relevant information possess expected value or confirmatory. While faithful
representation is referred as the information that states real-world phenomena of the economy
that it assumes to represent. Both these characteristics integrate usefulness and meaningfulness in
the financial statement to users (Chan and Vasarhelyi, 2018). In addition, there are some
improving qualitative characteristics, acting as a compliment to these primary characteristics are
understandability, comparability, timeliness and verifiability. These enhancing qualitative
characteristics differentiate between beneficial information from non-beneficial information,
while they enhance the usefulness in decisions of financial reporting information which is
faithfully represented and relevant.
Fair value is considered to ensure a higher level of transparency in the financial reporting,
leading to a higher relevance value of accounting data and better ability of the financial market to
represent the true value of the firm. On the other hand, it is argued by critics that fair value of
accounting is based on models which are non-reliable, thereby its causes confusion regarding the
usefulness to the users.
The value based on the relevance of financial reporting as per the IAS/IFRS in Europe at the
time of economic crises and its particular connection to fair value accounting is the main issue,
particularly in regards with the banking sector, investigation on which is still not done
completely. By considering this aspect, IASB has operation closely with the standard setters of
US for a long period, to cover the requirements of IAS/IFRS and US GAAP. Consequently,
currently, two accounting standard sets are extremely aligned than they were ever before (Zhang
and Andrew, 2014). With this rations, the US Security Exchange Commission (SEC) has
permitted non-US organizations listed on the US market to make use of IFRS. Conversely, while
it is indicated by the research that accounting quality as per the IAS/IFRS usually surpasses that
of domestic accounting amounts based on standards.

There is criticism based on measurements of historical costs which are; recognition of
impairment losses and recovery on the same seems to lag behind capacity changes. In case the
cash flow capacity of asset highly exceeds than its carrying amount, by this capacity can reduce
materially prior to the non-recoverability of carrying amount and the recognition of impairment
loss. Along with this, there is the accessibility of alternative depreciation methods; some of them
trace reduction in the capacity to produce cash flows in a close manner as compared to others
(Tayeh, Al-Jarrah and Tarhini, 2015). Recognition of impairment losses, but non-recognition of
gains that take place from the assets capability to produce increases in cash flows. Measurements
based on costs neglect the fact that enterprises might make a decision on selling of an asset that
has value appreciation.
The reliability of measures is based on the faithfulness with its represents that it assumes to
represent, integrated with a promise for the user that it represented quality information, which
will be useful, reliable and relevant for the users (Ioannou and Serafeim, 2017). By this, level of
reliability is also recognized. The overall concept of financial accounting is to form and integrate
beneficial information for the accounting information, and they must include these qualities to be
used for external financial users.
TASK B
Public theory of regulation retains that regulation is supplied in regards to public demand for
driving efficiency within market practices. Further, regulation is expected to benefit society as a
large, instead of a specified interest based on the vest. The regulatory body is assessed to show
the society interest wherein the regulatory regulate instead of the regulators’ private or own
interest. It is assumed by the public theory that the economic markets are extremely fragile
having a tendency to work in an ineffective manner and own concern while neglecting the
significance if society. Thus, in order to monitor and control the economic markets the
intervention of government is needed(Grunig, 2017). According to theory, the government
regulates banking authorities making them work for the benefit and interest of society, making
them eligible to deliver social interest while allocating resources in an effective manner. Public
interest theory is a reason to establish the legislation which regulates and oblige for the company

to reveal the impact and consequences of their regulation on society while also revealing the
measures them by them to
Capture theory is an element of economic regulation. It aims to depict the reasons and reality of
current government economic regulations. Particularly, it strives to consider and identify the
identity and aims of the support of the establishment of new or developed regulation. This theory
assumes that regulation of government is impacted to satisfy the needs for industry regulation,
that is capturing of legislators are done by industry, the regulation firm would be monitored
ultimately by the industry (Black, 2017). On the basis of capture theory of regulation, the
construction market regulation is predominantly market by these aspects; the goal of regulatory
policy should be explicit, the formation of strong forms in support of customers and the
constitution of equally offset means and so on.
The economic interest theory group of regulation emphasizes that individuals create groups in
order to safeguard interests within regulation through lobbying. Certain group of interest is
considered regulation demanders and the legislature is stated as the regulation supplier. The work
and motives of work are appropriated represented under this theory. The interest group theory
appropriately showcases the situation of the real-time world in relation to regulation and will act
as the best estimator of the workings of regulations (Battiston and et al., 2016). It is because it
showcases the insights that regulators seek to increase their personal welfare while offsetting the
various public demands simultaneously. The economic theory of regulation assumes that group
is based on protecting the particular economic interest, a different group open and be in conflict
will lobby the government to enact legislation to economy benefits them. The theory suggests
that industry designs to the regulation for the benefits of members while the government allows
allow stakeholders to make decisions. The industry concerned is allowed to make rules and
regulations to achieve national economic goals.
TASK C
The FASB US does not enable upward revaluation related with fixed assets to reveal fair market
value. However, it is mandatory to account impairment tests and costing of fixed assets
according to as per FASB Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Upward revaluation is predominantly conducted for fixed assets like land

and property who have fluctuating prices; it is considered that revaluating fixed assets by upward
revaluation theory like property have not been preferred by many corporate in the US, due to the
fear of higher tax on capital gains (Gordon and Hsu, 2017). Further, conservative valuation has
been ensured by the provision, not in favour of upward revaluation. In general terms, assets (or
disposal groups) held for sale are not depreciated, are measured at the lower of carrying amount
and fair value fewer costs to sell, and are presented separately in the statement of financial
position.
Revaluation not only means upward revaluation in the book values of assets, but it can also come
in downward revision also knows as impairment in the assets book value. On the other hand, any
downward revaluation in the assets’ book value is urgently written to the income statement.
According to the IFRS, an asset is stated to be impaired and thereby written-down, in case the
carrying amount is higher compared to the recoverable amount. Moreover, the recoverable
amount is the higher of the value in use of the asset that means the current value of future value,
or can also be stated as net realizable value.
Statement 144 needs that the long-lived assets be considered at the lower carrying amount or cost
to sell deducted from fair value, if or if not reported in continued and discontinued operations
(Banker, Basu and Byzalov, 2016). Further for the discontinued operations of reporting
requirements will enable an enterprise to effectively communicate in the financial reporting a
change in a firm that leads from a decision to do disposal of operations and thereby providing
financial statement users with better information to focus on continuing activities of the
enterprise.
The Statement changes make improvement in the financial statement by requiring that
accounting model can be used for the assets based on long-lived for sale disposal, if or if not held
and employed, and by widening the discontinued operation presentation to contain highly
disposable transactions (Fischer, 2016). Thus, the accounting for same events and situation will
be similar. In addition, the information of reported financial information will be enhanced,
thereby resolving considerable adoption issues while improving the compliance with new
requirements of the Statement. Ultimately, comparatively between enterprises and the faithful
representation of financial information will be enhanced.

TASK D
Part A
Asset revaluation is assessed unstable, as it disturbs the conventional standard of part cost
accounting. By considering this from income context, historical cost accounting has faithful
representation and show relevant property, plant, and equipment, as compared to annual asset
revaluations due to the past cost gaining, are less adhered to manipulation and are highly
objective(Warren Moffitt and Byrnes, 2015). The main drawback of asset revaluation is the
engaged costs within this method. These costs result in increased expenditures which ultimately
results in decreasing net profits and cash flows. For the purpose of accountability, holding
historical cost valuation is considered as highly effective. However, their concern is not
supposed to be conservative. By selecting not to consider the evaluations, there will be the
understatement of assets compared to their existing values. Consequently, depreciation
expenditure will be reduced thereby higher profits and a gain made on sale will be increased
(Collier, 2015). Thus, a potential motivation for the director might be that by choosing not to
undertake an asset revaluation, and there will be higher reported profits. Other indicators of
performance, for example, return on asset, will be enhanced.
Part B
The revaluation of long-term assets has an impact on all the financial reporting and statements in
these following ways:
 The increment in the book value of the asset leads to an increase in the net assets and
equity in exchange it makes a reduction in leverage
 The deduction in the asset’s book value, in turn, makes a reduction on net income.
 The reduction in the carrying amount leads to a fall in ROA and ROE in a specified year
 (Watts and Zuo, 2016).
 On the other hand, in the situation of downward revaluation, due to the lower net equity
and assets, the profitability seems to rise in upcoming years
 In the same way, any reversal held in downward asset revaluation has experienced a rise
in earnings.

Further, an asset revaluation is a significant decision in accounting for firms, as it can create
various impacts on the financial statement, although it is not permitted as per the U.S. GAAP, the
corporate following IFRS shall undertake the revaluation carefully.
Part C
IFRS enables corporations to show intangibles and tangibles with the current value in the
financial statement. Further, this permits the financial statement to be represented in true and fair
values in context with the items (Liu, 2018). By using this option, these can create a considerable
impact on the corporate financial statement. Fair value accounting is engaged with the frequent
revaluation of the assets of the organization. This enables better accounting to differentiate
between the current market value and reported the value of an asset recorded by the firm, either
because of the actual increase in the value of an asset or actual deprecation predicts were not
appropriate, these changed might affect the funds of shareholders.
The most general reported assets that need revaluation are those regarded as property or
investment. All assets in these related areas are supposed to have a possible change in value, at a
time in a dramatic change, and can create effect on shareholders.

REFERENCES
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