International Financial Reporting Standards (PDF)

ANSWER
IMPLICATIONS OF INTERNATIONAL ACCOUNTING AUSTRALIA AFTER IFRS
PERIOD
The financial statements are required to be prepared in accordance with the accounting standards
of the particular specific country. The IFRS has been laid down only to provide the more
meaningful and useful information to the shareholders. In Australia, Australian Accounting
Standard Board has been complying by the companies and Australia has been the first to adopt
the IFRS in local government entities (Chua, 2012).
The company that has been selected for the purpose of the identifying and discussing the
implications from the adoption of the IFRS is Woolworths Limited. It is the company having
headquarters in Australia and has been one of the top hundred ASX listed companies. The annual
report for the financial year ending June 2005 and June 2006 have been considered and analysed.
In accordance with the AIFRS 1 which deals with the first time of adoption the IFRS, the
company has restated the figures of the year ending 2005 in the financial statements of the year
ending 2006 as it is the relevant period after IFRS.
The implications from the adoption of the IFRS are the following:
- Comparability – The first implication that has been inferred from the adoption of the IFRS is
that it ensures the comparability of the financial statements of the company across the globe.
Prior to the year of 2005, there has been the compliance of different accounting standard
which usually varies from the country to country. With the adoption of the IFRS the
comparison will be easier. It will not be only for the inter company but also help in the intra
company comparison (Bryce, 2015). For instance in the given case, now the financial
statements of the competitor of the company – Wesfarmers Limited can be easily and
meaningfully compared. It has thus impacted the presentation requirements that have been
given in the AASB 101 relating to the presentation of the financial statements. The
comparability will not be only for the figures as stated in the financial statements but also on
the basis of the accounting policies as chosen by the company for instance for the property
plant and equipment.

- Reduction in the Equity – The adoption of the IFRS in the year 2006 has depicted that the
equity of the previous financial year has been decreased. As per the annual report for the
company for the year ending 2005, the equity that has been disclosed by the company is
2197.10 million dollar and while making the financial statements in accordance with the
IFRS, it has been observed that the company has reported the equity of 2000.20 million
dollar. It denotes that the adoption of the IFRS will always lead to decrease in the equity of
the company. This has been majorly due to the decrease in the surplus of the company for
the year ending 2005 as per the adoption of the IFRS (Woolworths Limited, 2006) .
Particular 2005 – Before IFRS 2006 – After IFRS
Equity 2197.10 million dollar Reported figure of 2005 in
comparative data is 2000.20
million dollar.
- Quality Reporting of Intangibles – As per the earlier Australian accounting GAAPS and
standards, intangibles are usually amortized on the straight line basis and accordingly no
impairment testing is done for the intangibles. But as per the IFRS, intangibles are required
to be valued on the basis of the cost less the amount of the amortization and the impairment.
The AASB 138 has prescribes the differences between the intangibles having the definite
lives and the intangibles having the indefinite lives and accordingly have stated as to how the
intangibles will be valued and carried in the books of accounts that too after the amortization
and the impairment in accordance with AASB 136.
Particular 2005 – Before IFRS 2006 – After IFRS
Intangibles 2011.40 million dollar Reported figure of 2005 in
comparative data is 2046.40
million dollar.
The above table denotes that the intangibles have been valued in the year of 2006 financial
statements as restated figure is the correct. It is because it is the value which has been arrived
after charging the amortization and the impairment. It depicts that such information as

contained in the financial statements will be very useful for the analysts and the users of the
financial statements as the presence of intangibles is considered as the positive point for the
creation of the image of the company.
- Accounting Quality – The accounting quality with the early adoption of the IFRS has been
improved. It is because of the fact that the assets and the corresponding liabilities are now
has been correctly reported (Chalmers, 2011). In the given case of the Woolworths Limited,
the net equity has been correctly arrived similarly the intangibles and in the same manner the
following table denotes for the Property plant and equipment.
Particular 2005 – Before IFRS 2006 – After IFRS
Property plant and
equipment
3552.60 million dollar Reported figure of 2005 in
comparative data is 3359.30
million dollar.
Thus, the above are the major implications that have been identified.
REFERENCES
Bryce, M.,., (2015), “Accounting quality in the pre-/post-IFRS adoption periods and the impact
on audit committee effectiveness—Evidence from Australia”. Pacific-Basin Finance
Journal, 35, pp.163-181
Chalmers, K., (2011), “Changes in value relevance of accounting information upon IFRS
adoption: Evidence from Australia”. Australian Journal of Management, 36(2), pp.151-173
Chua, Y.L., (2012), “The impact of mandatory IFRS adoption on accounting quality: Evidence
from Australia”. Journal of International Accounting Research, 11(1), pp.119-146
Woolworths Limited, (2006), “Annual Report-2006” online available at
https://www.woolworthsgroup.com.au/icms_docs/183553_Annual_Report_2006.pdf accessed on
23-05-2018