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Contemporary Issues in Accounting - PDF

   

Added on  2021-05-31

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Contemporary Issues in Accounting 1CONTEMPORARY ISSUES IN ACCOUNTINGBy (Student’s Name)Professor’s NameCollegeCourseDate

Contemporary Issues in Accounting 2Table of ContentsIntroduction......................................................................................................................................3Question One...................................................................................................................................3Question Two...................................................................................................................................6Question Three.................................................................................................................................8Conclusion.....................................................................................................................................11References......................................................................................................................................12

Contemporary Issues in Accounting 3IntroductionAustralian Accounting Standards Board (AASB) is a board that controls, sets andmaintains accounting standards. Economic activity has grown in the last years causing it toexpand drastically and reach the international market. However, the different standard-settingboards in different countries each have their policies. This poses a problem since financialinformation is not the same across the bodies. This issue is very significant, and the AASBbelieves that by the setting of a single standard for all, then the economic activity in theinternational market will be much more comfortable and smooth. In this report, I will address theissue by looking at the various bodies for setting standards and what are their objectives toachieve the goal of a single set of accounting standards. I will be using a descriptive approachbased on data from textbooks, journal articles, IASB and AASB articles.Question OneAs mentioned earlier the financial reporting standards differ globally. Internationalharmonization aims at making sure that the financial reports do not very much in the differentcountries (Joubert et al. 2017). This can be done by setting a similar set of procedures in whichthese reports are made so that the difference can be minimal. On the other hand, standardizationaims at implementing and developing standards for financial reporting that are the same. This isalmost impossible to achieve. Therefore harmonization is a better option because it can eliminatethe differences in the reporting standards (Yeung et al. 2107).This is extremely important for multi-national companies because they are unable tocompare their financial statements due to the different reporting standards. The InternationalFinancial Reporting Standards (IFRS) aims at promoting harmonization for globalization. For the

Contemporary Issues in Accounting 4IFRS to set up these standards, they need cooperation from other standards-setting boards. Theseare Financial Accounting Standards Board (FASB), International Accounting Standards Board(IASB), Generally Accepted Accounting Principles (GAAP) and AASB.The processes used by these boards to achieve these objectives are:First, they work together to implement the IFRS standards. The FASB and IASB have ashort-term international convergence project. This project aims to improve GAAP and IFRS.With this convergence, they hope to achieve harmonization in globalization.Second, they have directly adopted the IFRS standards in place of national GAAP. In theIASB's constitution, adoption of the IFRS is a crucial objective. The IASB has also taken theindirect route where they change the national standards so that they closely relate to the IFRS. The third one is the implementation of the IFRS to achieve high-quality standards. Theboards implement the IFRS in the reporting of their financial statements to eliminate thedifferences in the reporting standards (Botzem et al. 2017).Lastly, the boards ensure that the national standards are accepted abroad. This is alsoknown as mutual recognition. This has been achieved already in some countries such as US andCanada and even some European countries. Having a single set of accounting standards is veryimportant (Alexander and Nobes 2008). It enables transparency between multinationalcompanies. When there is one set of reporting standards companies can easily compare theirfinancial statements and make informed economic decisions. Thus clarity is achieved through thesmooth comparison of financial statements. It enables economic efficiency. Since the financialreports do not differ, one can identify risks or opportunities in different countries, and this helpsinvestors in knowing how to invest. This helps in improving the cost of capital.

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