Advanced Financial Accounting

This article discusses the International Financial Reporting Standards adoption, Corporations Act, non-current assets revaluation, and their impact on financial statements. It covers the benefits and limitations of IFRS adoption, the regulations of the Corporations Act, theories of public interest, capture, and economic interest group, the impact of FASB Statement No. 144 on financial reports, and the directors' options of not valuing assets at fair value.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author Note

1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Answer to Part A........................................................................................................................2
Answer to Part B........................................................................................................................3
Answer to Part C........................................................................................................................5
Answer to Part D........................................................................................................................6
References..................................................................................................................................7

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Answer to Part A
The discussion deals with the issue that has been presented in given question states
the fact that International Financial reporting Standards adoption by the companies that are
listed enables them to enjoy certain advantages that have resulted in the quality improvement
of the financial report. In other terms it can be said that the accounting standards had been
instituted with the objective of establishment of the point that the business organizations have
made the preparation of the statements of accounting for the ease of the third party investors
and the other business stakeholders (Ghani and Muhammad 2016). The quality improvement
of the statements of accounting and the sense of a clarified image or information in regards to
the particular business has helped the stakeholders in taking the prospective economic
decisions. However, there have been certain opinions regarding the fact that the effects
International Financial Reporting Standards adoption is having a negative influence. In other
terms according to the experts the financial report which has been structured according to the
International Financial Reporting Standards, has caused a large sum of amounts of money
requirement especially in the preparation of the reports accounting statements as per the
norms established by the regulatory body of accounting (Kleven, Kreiner . and Saez 2016).
On top of that individuals engaged in the financial reports preparation have also been of the
opinion that the adoption of the International Financial Reporting Standards have also led to
the many annual report disclosures of the business organizations that are not required (Gilens
and Page 2014). This has also increased the report volume and the financial information that
has been reflected has become more complex.
The financial reports qualitative characteristics that can be recognized in order to
comply with the International Financial Reporting Standards are the qualitative
characteristics of understandability, relevance, faithful representation and timeliness. A point
must be noted in this context is that the standards of reporting that have been further
exploited or have led to the ruination of the financial report quality. For this the evidence is
from the point that the faithful representation’s qualitative characteristics has replicated in the
disclosures overload in corporate entity’s annual report (Horton 2018). This has also led to
the increase of the accounting statements complexity and has given rise in the difficulty of
the stakeholders or the third party investors of the business during the interpretation of the
financial information from the annual report. One of the qualitative characteristic of
relevance has also let to the enhancement of the chances materiality or misstatement accounts
books. Consequently, relevance is a qualitative characteristic that have spoilt the accounting

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statements quality of the business organization (Pappadà and Zylberberg 2015). The other
qualitative characteristic that is the quality of understandability has also resulted in the
increase in the disclosures volume and declarations in the company’s financial report. This
has unreasonably lengthened the financial report, enhanced the complexity and further
resulted in the disclosure of the unnecessary information by the third party investors and the
business stakeholders. In addition to it the reporting standards compliance have contributed in
investment of a huge sum of money. In other terms the International Financial Reporting
Standard compliance has led to the increase in the business entity’s operating cost. Finally,
there comes the qualitative characteristic of timeliness have also further increased the
difficulty of the accounting statements of the corporate entity (Keynes 2016). Hence, the
International Financial Reporting Standards essentiality have been pointed out in this
particular answer and it can be concluded that there have been various benefits of this
standard of reporting, however there have pointed out several limitations that are needed to
be overcome by the business entities.
Answer to Part B
In the current question the issue that has been represented highlights the fact that the
statements of accounting or the financial reports that are prepared by the corporate entities
have been carried out in compliance with the Corporations Act. The major criteria that the
business entities must be followed with is the Corporations Act.
In other terms the Corporations Act points out the vital necessities that must be
followed by the business entities based on the fact that the annual financial report of the
companies that have been prepared reflect the major qualitative characteristics like
comparability, timeliness and other vital qualities of Corporate Reporting (Mansbridge 2018).
Also the Corporations Act points out the regulations according to which the corporate social
responsibilities should be carried out by an entity. In the discussion the focus is on the point
that the investigation of the Corporations Act that had been conducted did not result in the
addition of any further legislation to the Act and the judgment that had been passed was that
the regulation regarding the corporate social responsibilities of the business organization’s
would be reliant on the characteristic of the forces of the market (Chaffee 2015).
The explanation can further be extended on the basis of the theories that have been
mentioned in the question, the theories are as follows:

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 Public Interest Theory – The theory of public interest includes the specific theory
that represents the point that the operations of the business organization must carry
out in regards to the public welfare. In other words it can be said that the theory of
public interest has been prepared supporting the public and represents the element that
the business organizations should carry out the vital operations with the motive of the
public welfare. The Business organization’s identify and analyze the environment of
the business surroundings where the company is engaged. Hence, public interest
theory adaptation will contribute in corporate social responsibilities automatic
regulation of the corporate entity who have adopted. This is due to the workings of the
organization that will be headed towards with the motive of public social welfare
(Miller and Shawver 2016).
 Capture Theory – The capture theory implies the theory that the business
organizations have been dealing in a specific industry will contribute in the operation
regulation of the industry. In other terms the bulk of companies who are dealing in the
same industry will eventually capture the market and led to regulations guidance
exists in the specific industry (Berry and Wilcox 2018). For example, the energy
industry might consist of a bulk of companies that operate and carry out the similar
level of corporate social responsibilities. Again, a specific regulation standard
regarding the corporate social responsibilities may be present in the market, but all the
organizations of the same industry who are adopting a similar kind of corporate social
responsibilities will contribute in the framework of the social responsibility in a
similar way. Therefore, the forces of the market control the capture theory regulation.
Hence, it is fully matched according to the requirement that has been presented in the
question that the legislations in regards to the corporate social responsibilities will be
managed by the forces of the market (Scott 2015). The capture theory regulation will
alter the structure of corporate social responsibility in technique that ties with the
present market requirements, resulting in the market forces adherence.
 Economic Interest Group Theory – The theory of economic interest group is more r
less similar to the public interest theory. It can be said that the economic interest
group theory highlights the specific processes in which the workings that are being
implemented by the business organizations to maintain the well-being and welfare of
the economic groups are taking place (Robson, Young and Power 2017). In the
context the economic groups is the group that indirectly or directly impacted by the
operations of the corporate entities. The compliance with the economic interest group

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theory will contribute in the carrying out of the corporate social responsibilities that
should be carried out by the entities. The theory of economic interest group is
implemented by the business organizations with the motive of making the corporate
social responsibilities of the companies simple and easy. The theory of economic
interest group additionally supports the corporate social responsibility framework
regulation with the help of the forces of the market by making it mandatory for the
entities to implement the operations that will enhance the working environment and
the group of economic interests. Hence, the conclusion can be made from the
understanding that the companies that who are implementing the theory of
accounting regulation will led to the formation of the framework of corporate social
responsibility that the market forces regulates.
Answer to Part C
There has been a representation of the issue in the question that highlights the point
that the Financial Accounting Standards Board of US does not allow the non-current assets
revaluation to fair value, but it is not mandatory to account for the costs of impairment
attached with the non-current assets. This is according to the “FASB Statement No.
144 Accounting for the Impairment or Disposal of Long-Lived Assets” (Weber 2014).
In addition to it question has been raised on whether the compulsory rules have
impacted in the qualitative characteristic of relevance and representational faithfulness or not.
It has definitely influenced the qualitative characteristics of the financial report prepared by
the business organization (Beatty and Liao 2014). This for the reason of the point that the
entities that have been delivering a particular standard should have also mentioned the loss or
gain of the impairment of the corporate entities financial statement. Again, as the method of
impairment has not been stated in the statements of accounting of the business originations,
this makes the users of the financial statements accounting statements confused as they may
find no basis of the impairment loss or gain (Kleven, and Saez 2016). Therefore, it can be
mentioned clearly regarding the qualitative characteristic of relevance has been hindered in
such an action. It can be identified that the reason to be that the users of the financial
statements find no resemblance in the disclosures regarding the loss or gain impairment and
may contribute in the increase in the difficulty of interpreting the annual report that
organization prepares. Additionally, such a technique also enhances the probability of
material misstatement occurrence in the books of account. In the accounting statements no
particular disclosure has been provided in the annual report of the listed corporate

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organisations of UK (Arnold and Kyle 2017). Moreover, it also makes it complicated the
process of financial reports accounting statements preparation. The accountant has to carry on
with the standard of current accounting with the standards of accounting that has been
instituted by the FASB. Therefore, it can be clearly mentioned that the qualitative
characteristic of financial reporting that deals with the particular quality of representational
faithfulness also has been disturbed by this specific practice (Wong and Yeung 2014).
Therefore, it can said that here that the adherence to the norm established by FASB results in
the non-compliance with the vital financial report qualitative characteristics.
Answer to Part D
In the given question the issue that has been raised refers to the point that many
directors options of not to valuing the assets like plant, property and equipment at fair value
and chooses to measure or value the assets based on the cost model. The directors do not
choose for assets like the property, plant and equipment asset revaluation for the point that
the process of revaluation may contribute in a loss that will positively be represented in the
statements of accounting of the business organization and will lessen down the profit that has
been earned by the corporate entity throughout the financial year (Abdel-Maksoud, Cheffi
and Ghoudi 2016). This will additionally result in the lessening the value of the firm’s
goodwill regarding the market in which the operation is being taking place.
The statement of Accounting as mentioned previously impact on the financial
statements is that the profit would lessen in case of an impairment gain and the profit would
reduce in case of an impairment loss in regards to the asset valuation.
The verdict of not making revaluation of the property, plant and equipment will
impact the shareholders wealth financial position true reflection of the business organization
will not be represented in the company’s annual report

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Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
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