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Advanced Financial Accounting Assignment : IFRS

   

Added on  2021-05-30

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Financial Accounting 1Advanced Financial Accountingby Student NameCourse & Course CodeProfessorUniversityCity & StateDate
Advanced Financial Accounting Assignment : IFRS_1

Financial Accounting 2Part A: Criticism on the adoption of IFRS in AustraliaAustralia decided to replace its accounting standards with the International Accounting Standards Board (IASB) win 2002 with an aim of enhancing the flow of Australian business in the global market. However, some Australian accountant and financial experts have criticised the use of IFRS as captured by Agnes King in her article entitled ‘Unwieldy rules useless for investors’ (Albu & Albu, 2012, p. 45). According to the critics, IFRS is too complicated to be understood by investors and can easily mislead their sections making. This part analyses the criticism against IFRS while seeking to defend the importance of IFRS to investors and other stakeholders who rely on financial statements for decision making(Bayerlein & Farooque, 2012, p. 112). First critics hold that investors do not read the IFRS financial statements simply because they do not understand the accounting standards. The claim by critics is based on the fact that analysts and investors never ask questions about the financial statements. However, the IFRSwas prepared by an independent board to provide timely and consistent information to the investors. The financial statements prepared using IFRS are detailed which is why investors do not seek explanation from company executives. Good disclosure of information by IFRS do not require elaborative explanation from investors (Shamrock, 2012, p. 51). Second, since its adoption in Australia, IFRS has remained relevant and lived true to the intended purpose. IFRS was adopted to fill several gaps in the Australian Accounting Standards (AAS) (Shamrock, 2012, p. 76). Some of the gaps in AAS were accounting for the cost of employer-sponsored superannuation, the recognition and measurement of financial instruments, impairment of non-financial assets and accounting for share-based payments. These issues had significant impact on disclosing the true financial position of any company. Since full adoption of IFRS by Australian companies in 2005, financial statements have
Advanced Financial Accounting Assignment : IFRS_2

Financial Accounting 3become richer and comprehensive of information for analysts and investors compared to before (Opperman, 2009, p. 33). It is difficult for financial experts and accountant to explain why they are uncomfortable with IFRS. According to a survey conducted by the PWC found out that investors highly rely on more regulated financial statements that have been prepared using IFRS for investment decision making. Instead of not asking questions when financial statements are not clear, Investors would choose not to invest in the company (Hilton & O’Brien, 2009, p. 181). Part B: Theories and CSRThis section uses the three theories, that is, (Public Interest Theory, Capture Theory and Economic Interest Group Theory of regulation to explaining the decision by the Australian government not to enact legislation that require corporations to engage in Corporate Social Responsibility (CSR) and let market forces determine the right cause of action for the companies (Baker, 2005, p. 699). a)Public Interest Theory and CSRThe Public Interest Theory states that regulations should always seek to benefit and protect the general public. Public interest theory give the government the responsibility of protecting the welfare of its citizens. Even a free market where actions taken by business are guided by the market forces, government reserves the right to intervene when corporations are taking advantage of the public. Public interest theory hold that the actions taken by companies should in line with the public interest while focusing on wealth maximisation. Therefore, the government should take necessary measures in ensuring that corporates take part in CSR(Baker, 2005, p. 702).
Advanced Financial Accounting Assignment : IFRS_3

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