Analysing Current Issues in Accounting

Analysing current issues in accounting
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TABLE OF CONTENTS
Task 1.........................................................................................................................................3
Task 2.........................................................................................................................................5
a.) Significant aspects covered in the exposure draft.............................................................5
b.)Issues related to agreements and disagreements along with examples..............................6
c.) Comments letters in favour or against the regulations....................................................14
d.) Interpretation of comment letter by using each theory of regulations............................15
References................................................................................................................................16
Scheper M., &Tamulis, S. (2019). FASB Extends Certain PrivateCompany Accounting
Alternatives to Not-for-Profit Entities. Retrieved from
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/audit/ASC/HU/2019/us-aers-
hu-fasb-extends-certain-private-company-accounting-alternatives-to-not-for-profit-
entities.pdf................................................................................................................................17
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Task 1
The article provides discussion relating to extension provided by FASB relating to Private
Company Accounting Alternatives on Goodwill and certain identifiable intangible assets to
non-for – profit entities. The main reason behind this alternative is issues faced by private
companies due to a complex procedure associated with goodwill impairment test and
accounting of certain identified intangible assets. It relates to public interest theory which
represents interest of society in which it operates rather than personal interest of regulators.
The statement provides description of the alternative accounting methods to be applied
relating to intangible asset and goodwill to provide an ease to organizations
The main issue discussed in the article is alternative accounting methods relating to goodwill
and intangible assets. Federal Accounting Standard Board is established to improve generally
accepted accounting principles in public interest. The specified update provided by FASB
will lead to an easier approach towards valuation of goodwill and intangible assets.
Figure 1: FASB extends certain private company accounting alternatives to not-for-profit
entities.
Role and significance of FASB
The main role of FASB is to establish and enhance the quality of existing standards of
financial accounting and reporting. It is done for providing required knowledge and guidance
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to the public, issuers of financial reports, auditors and users of financial information.
TheFASB’s standard-setting- procedure is believed as independent method which leads to
improving accounting standards on consistent basis. The procedure is developed to attain
viewpoint from those who will utilize or prepare financial reports, through application of
public interest theory. It has not been made to increase the wealth of government but for
providing ease in accountability of intangible asset. The organization is working to address
the requirements relating to more consistent, transparent and converged financial accounting
standard across the world (Jiang, Wang and Wangerin, 2018). However, now with update
provided by FASB, alternative approach can be complied by the organization in which
goodwill is required to be amortized in period of ten years (Baker, 2017). In case any other
period has been used than justification relating to same is required to be provided to prove it
more appropriate.
Australian Accounting Standard 18: Accounting for Goodwill
In accordance with para 5.1 of AAS 18, purchased goodwill is required to recognize as a non-
current asset at acquisition, unless it is case of an investment in associated company.
However, in case of purchase in business acquisition, the exchange transaction assists in
ascertaining the value of goodwill (Australian Accounting Standard 18: Accounting for
Goodwill, 2015). The specified method recognizes the specified expenditure as an asset or
expense at the time when expense is made (Carvalho,Rodrigues and Ferreira, 2016). The
amortization procedures assert that goodwill should be amortised as an expense in profit or
loss on a straight-line basis over the period from date of acquisition to the year in which
benefits relating to goodwill are expected to arise (Dinh, Kang, Morris, and Schultze,2018).
Goodwill accounting alternative method
Accounting standard update (ASU)2019-06 asserts that non- profit organization are allowed
to amortize goodwill through the application of straight-line basis for period over ten years or
less than ten years in can it can prove that another useful life is comparatively more
appropriate (Scheper and Tamulis, 2019). Impairment test of goodwill is required to be done
even in case circumstances change which represents that fair value of the entity (or reporting
entity) is less than its carrying amount. In case the organization comply with alternative
method than same is required to apply this method to all the goodwill and new goodwill
which has been acquired after the effective date of ASU. The amendment has considered
Capture theory as it has ensured that the new provision is advantageous to the parties subject
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