Advance Financial Accounting: Report
18 Pages4129 Words43 Views
Added on 2020-03-23
Advance Financial Accounting: Report
Added on 2020-03-23
ShareRelated Documents
Advance Financial Accounting: IFRS implementation in Malaysia
Executive SummaryThis report has been prepared for illustrating the accounting issues that are arisingsince the adoption of IASB approach for IFRS harmonisation. The most important issue facedby the IASB in this context is the use of fair value accounting indifferent countries. Thedifferent accounting-standard setting bodes have not completely adopted the use of fair valueapproach as it doe not fulfil the legal and tax obligations of a specific country. As such, thereport has examined the issues faced by Malaysia and other Asia-Pacific countries in relationto the adoption of fair value accounting approach. It has been inferred from the report that itimpacts the tax paid by a business entity and therefore is not yet approved by the regulatorybodies of Malaysia. Similarly, the presence of country-specific issues are impacting the large-scale adoption of fair value accounting in other Asia-Pacific countries such as Australia,Singapore, New Zealand and others.
IntroductionThis report has analysed and examined the issues related with the use of fair valueaccounting approach by the countries across the word after the harmonisation of InternationalFinancial Reporting Standards (IFRS). The harmonisation of IFRS is presently aimed byInternational Accounting Standard (IASB) so that the financial statements of differentbusiness corporations around the world can be easily compared and evaluated. However,there are numerous issues that are faced by IASB for attaining congruence between the IFRSand other accenting standards such as the use of fair value accounting approach. This isbecause the use of this approach has resulted in creating some issues for the business entitiesas the results obtained through its use are not aligned with the requirements of differentregulatory bodies in some countries (Caprio, 2013). As such, the report has illustrated theproblems faced by Malaysia and other Asia-Pacific countries in adoption of fair valueaccounting due to the presence of contextual issues. Concept and the underlying assumptions of fair value accounting according to IFRS 13Fair value measurementThe IASB has developed the accounting standards for fair value measurement forimproving the quality of financial disclosure. The IFRS 13 standard has developed by theIASB in relation to the Fair Value Measurement in the year 2011. The standard provides adefinition of the fair value, provides a framework for the measurement of fair value anddisclosures that are required to be done in relation to the fair value measurement. The mainobjective behind the development of the standard is to enable the use of fair value accountingapproach in business entities easily (Caprio, 2013). The standard has provided a commonframework for measuring the fair value through removing all the inconsistencies that existpreviously in relation to the use of fair value. As per the standard, the fair value can bedefined as the price realised or given by selling or transferring an asset or a liability in astructured accounting transaction involving the participation between the market members.As such, the fair value measures the value of an asset or liability on the basis of the marketcondition and is not dependent upon the entity condition and therefore reflects the riskassociated with them. The fair value measurement provides the value of assets or liabilities inrelation to the market risk through including all the conditions related to an asset location atthe time of its sale or usage (Chorafas, 2006).
The fair value assesses of an entity through the use of the standard cannot be regardedby a business entity to be either high or low as compared to their own valuation. The orderedtransaction assumed during measuring the value of an asset or liability that has taken intoaccount all the market exposure before the date of measurement and ensure that there is noforced transaction. As such, it is essential that transaction carried out is ordered so that all themarket factors such as competition are taken into account while assessing the market value ofan asset or a liability. However, the standard has not specified the measurement unit thatshould be used for measuring an asset value. The fair value measurement approach assumesthat the accounting translations related to an asset sale has occurred in the principal market orin the most advantageous market in relation to an asset or a liability. The principal marketrefers to market that carries out largest number of transactions in relation to an asset or aliability to be easily recognised by an entity (Mirza and Ankarath, 2012). The following therelevels are identified and provided by the IFRS 13 standard in relation to the measurement ofan asset or a liability:The business entities are required to use the quoted prices of the asset or liabilitywithout nay modification on the date of measurement that are present in the activemarket. The active market is where large volume of transactions takes place inrelation to a specific asset or a liability.The quoted price of assets and liabilities present in the similar active market should besupported by the market dataThe business entity should incorporate the use of observable inputs and should restrictthe use of inputs that are not observed during assessing the price of assets andliabilitiesThe fair value for a non-financial asset is assessed through its best usage as depicted bythe market conditions. Thus, the value depends on the use of the non-financial asset by themarket participants for maximising the value. The market participants can realised the bestvalue of a non-financial asset through using it in combination with financial assets. As per thestandard, the best usage of a non-financial asset should be permitted under law and is as perits physical capacity. Therefore, the process of determination of the fair value of a non-financial asset involves examining its physical conditions or any type of legal rules relatingwith its usage. Therefore, the IFRS 13 standard adopted for improving the consistency andcomparability in the fair value measurements through the development of a hierarchicalsystem related to the determination of fair value of an asset and liability. The hierarchy
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
The Harmonisation of Accounting Standardslg...
|16
|3014
|72
IFRS implementation in Malaysialg...
|14
|4239
|132
Harmonization in IFRS rules and regulations - Amara Holdings case studylg...
|25
|4830
|435
International Accounting: Harmonisation, Issues, and Case Studylg...
|11
|3350
|400
Advance Financial Accounting Reportslg...
|9
|2140
|18
Management Accounting - Doc - ACC203lg...
|10
|2828
|205