This article discusses the current development in accounting thoughts, focusing on the accounting system chosen by Pioneer Ltd and the changes proposed by IASB in IAS 37. It also includes comments from different companies on the proposed changes.
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Running head: Current Development in Accounting Thoughts Current Development in Accounting Thoughts Name of the Student Name of the University Author Note
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1 Current Development of Accounting Thoughts Table of Contents Answer to Question 1.................................................................................................................2 Answer No 2:.............................................................................................................................5 Executive Summary...............................................................................................................5 Introduction............................................................................................................................5 Proposal..................................................................................................................................5 Comments to the proposal amendment..................................................................................6 Comment given CPA Australia..............................................................................................8 Comment of Canadian Accounting Standards Board..........................................................11 Comments of the Rio Tinto..................................................................................................14 Conclusion............................................................................................................................17 Reference..............................................................................................................................17
2 Current Development of Accounting Thoughts Answer to Question 1 The accounting system which is been chosen by the Pioneer Ltd is been shown in this article so that it can show the business accounting information. The article is been published in 3rdApril 2019 which is been shown in the financial review of the company. The company was following wrong accounting treatment in regards of their business which is been shown in this article, the company is been based in Australia (Pioneer Credit Limited 2019). It also show about the auditor and other management review upon the controversial accounting policy of the company which is been followed in the business. The company is been based upon Australia and it carry its business operation in Australia and New Zealand and the company deals in providing different financial services to the individual of the respective country (Pioneer Credit Limited 2019). The company is one of the best in its industry and so it has got a very good brand name in the company. The company is not able to show the proper value of their asset and this article is based upon the accounting policy. As per the article it can be seen that the company is not able to follow the proper policy and principle in regards for the preparation of the financial statement as it does not able to follow the accounting standard properly and it is also been seen that the company is not able to follow the norms as per the conceptual framework which is been followed by all the company in the country (Pioneer Credit Limited 2019). So it can be say that the company is not able to follow the standard properly. The Accounting policy which is been laid in the Generally Accepted Accounting Policy has said not to be follow the unorthodox accounting process but it can be seen that the company have followed the same for the valuation of the financial asset of the company. It can be seen that the company is not able to the accounting as per the accounting standard and this was also be laid by the auditor of the company.
3 Current Development of Accounting Thoughts The auditor of the company is also worried about the financial statement preparation of the company as it is not been mention properly and also not as per accounting standard. It can be said that the company have a conflict with the conceptual framework of the country as the management have told that they will not able to change their accounting treatment which is been followed by the company in the financial statement (Pioneer Credit Limited 2019). The employee of the company is able to give the whistle blower and able to gave the more information of the company. As per the accounting standard the company have to do change in the valuation policies than only it will able to make the proper accounting statement of the company. The main business which the company is having is the purchase of the impaired book and then all they are the also very effective in regards of the collection of the money from the debtors. The price which is been agreed between the seller and the buyer so it is been valued for the debt portfolios (Pioneer Credit Limited 2019). PWC was the auditor of the company and as per the auditor they cannot able to get proper information about the company financial statement so they are not able o judge whether the financial statement of the company is showing fair value or not. So as per auditor as they were not able to get sufficient information so they gave the company a qualified report. As per ASIC the company should value of their asset upon amortised cost but they have valued the same upon the fair value of accounting so it is been consider as wrong accounting treatment. As per the management communication they are also not ready to change the policy also this make the accounting more problematic. As per of the company accounting policy so this been consider as problem as a auditor report also gave them qualified report so as a result it have to lose its market share value in the stock exchange. As per the wrong accounting the company is losing all its investors and also they are not able to hold their share price as it was losing rapidly. In last 12 months the company has lost 46% of share so it is a big problem for the company. It is the
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4 Current Development of Accounting Thoughts duty of the company to provide sufficient amount of the information in the financial statement so that it will help the user to get more understandable information of the company financial statement. As per the case in the article it can be said that the stakeholder theory will most appropriate for the situation as the stakeholder also consist of the worker and the employee of the organization. If anyone is been affected by the decision of the company than there are consider as stakeholder as per the stakeholder theory (Pioneer Credit Limited 2019). So it is the duty of the company to consider this while taking important decision in the activities of the business. Stakeholder should also be consider as main part of the organization as it should not able to consider only the interest related to the stakeholders. It should treat all the groups equally and should take their decision accordingly. As per the article it clearly shows that the company is not able to give appropriate information and also not able to follow proper accounting standard so it is a problem for all the stakeholder of the company. The company management also not able to maintain their policy as per the framework so it should be taken into consideration as per the stakeholder theory The article show about the Pioneer ltd policies and how it is not able to show the same so if the company is able to follow the entire accounting standard so it will able to make more accurate financial statement and it will also able to show proper report as per the conceptual framework policy of the accounting standard. The company have to suffer from penalty and also it can go for the dissolution if the company is not able to change the valuation as per the accounting standard and conceptual framework. The company should follow the stakeholder theory and should able to consider the client also in the financial decision of the company.
5 Current Development of Accounting Thoughts Answer No 2: Executive Summary The report show about the exposure draft which is related IAS 37. It show about the changes which are came by IASB and also the review which are been given by different company upon the change which are done by IASB. Introduction This part is been based upon the analysis of the exposure draft that is been issued in the International Accounting Standard Board which is been consider as per the public for the business reporting framework (AASB Standard 2014). The draft is been based upon the IAS 37 which is been related to the Provision, Contingent Liabilities and the Current Asset. It shows about the details in regard of the Onerous Contracts – Cost of Fulfilling a contract (Buchanan 2019, 1 April). It show the for and against of the recommendations that is been shown in the exposure draft. It also shows about the different theories which are there in the draft. Proposal The contract which show the unavoidable cost which is been there in the exceed of the economic benefit is been treated as Onerous Contract.As per the IAS 37 it also discuss about the contract portrays unavoidable cost as it is the least of the payment which is been made on the penalty which have arise for the non-performance of the contract and cost spend upon the performance of the contract (Buchanan 2019, 1 April).It is not able to show the valuation of the cost for the fulfilment of the contract in the business. The main point which is shown in the article is about the cost of the contract which are related to the construction. The issue which can be shown in the IAS 37 is the identification of the costs. It can be said that the company use different cost treatment and it also differ from one company to another
6 Current Development of Accounting Thoughts so as per the understanding the user it should provide proper clarification should be given by the company. It should be said they there should be changes in the onerous contract so that it can able to give proper framework which is been followed by the companies in different country so it should be changed (Deegan 2014).The changes which are been done the committee help to give details of the definition of the onerous contract and also how the company can able to measure the contract so that it can able to fulfil the requirement of the contract of the business. Comments to the proposal amendment Comment of BPO Network The changes which are been suggested by the IASB, is not able to satisfy the expectation of the BDO network so it made the comment upon it. The reason of the same is been shown below: oThe changes are not appropriate as it should take into consideration all the cost which are been spend by the company as there are directly related to the coast estimation of the contract. oThe non-incremental cost which is to be considering in future are included as onerous contract. So the changes which are been done in IASB is not able to take the operating losses which are done by the company in future so it is not a proper change which is done by IASB.The changes are not appropriate as it is not real about the provision which is related to cost of the contract. oThe amendments which are been made is not able to fulfil the definition of the onerous contract. As it show about the unavoidable cost as it should not be able to record the same.
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8 Current Development of Accounting Thoughts Comment given CPA Australia It can be seen that it has been supported the same as when the company is able assess the contract as onerous contract in regards that it able to fulfil the cost which is related to the
9 Current Development of Accounting Thoughts contract as per the incremental cost that is should be consider initially for the purpose of the analysing of the same. The reason for the same is been shown below: oIt able to satisfy the cost as it shows about the onerous contract as it is been directly related to the contract and not only the incremental contract of the same. It show that due to this reason it will able to give an proper accounting and able to give proper report of the same. oIt is not able to agreed about the changes which are there in the paragraph 68B as the charges of the general and administrative cost are not able to show whether they are as it cannot able to determine the cost related or not.
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11 Current Development of Accounting Thoughts Comment of Canadian Accounting Standards Board As per the Canadian Accounting Standards Board it state that the paragraph 68 which is been related about the Provision, Contingent Asset and Contingent Liability that it should show all the cost which are been directly related to the contract. The points are been shown below: oThe changes which are there in the Paragraph 68 of IAS 37 should clearly details about the about the cost which is to be included in the contract. As the board have to check the contract which is been giving some economic benefit and should represent the same.
12 Current Development of Accounting Thoughts oThe company management should show all the economic benefit which it arise from the contract so that the better presentation of the same can be done by the company. As IASB should clearly mention whether is should be included or not about the contract.
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14 Current Development of Accounting Thoughts Comments of the Rio Tinto The management of the company of Rio Tinto is not able to be satisfied with the changes so the reason behind the same is been given below: oAs the changes are been made so it will directly affect the disclosure which are been given by the company as it is not a logical approach of the amendment. It have two more changes which is not there in the IASB amendment oIt is also not agreed with the changes which have arise in the paragraph 68A- 68B of the draft.
15 Current Development of Accounting Thoughts
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17 Current Development of Accounting Thoughts Conclusion The conclusion which can be make is it show about the exposure draft which is been related to the IAS 37. It shows different company review and how they are agreed or disagree with the proposal of the changes came by IASB. The one point which was there in all the same that the IASB should give more clarification in regards of the economic benefit which is arise in the contract.
18 Current Development of Accounting Thoughts Reference AASB Standard. (2014).Provisions, Contingent Liabilities and Contingent Assets.Retrieved fromhttps://www.aasb.gov.au/admin/file/content105/c9/AASB137_07- 04_COMPjun14_04-14.pdf AboutASIC.(April2019).AustralianSecuritiesandInvestmentCommission(ASIC). Retrieved from https://asic.gov.au/about-asic/ About the AASB. (April 2019).Australian Accounting Standards Board (AASB).Retrieved fromhttps://www.aasb.gov.au/About-the-AASB.aspx Aboutus.(April2019).PioneerCreditLimited.Retrievedfrom http://corporate.pioneercredit.com.au/about-us/ ASIC.(2013).InformationSheet151:ASIC'sapproachtoenforcement.Retrieved fromhttps://download.asic.gov.au/media/1339118/INFO_151_ASIC_approach_to_enf orcement_20130916.pdf Buchanan, A. (2019, 1 April). BDO:Exposure Draft ED/2018/2 - Onerous Contracts - Cost of FulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25316_ANDREWJBUCHAN ANBDO_0_BDOCLED201802.pdf Deegan, C. (2014). Financial Accounting Theory (4th ed.). McGraw-Hill: Sydney. Frost, J. (2019, 24 April). Pioneer Credit's accounting all-stars.Australian Financial Review. Retrievedfromhttps://www.afr.com/rear-window/pioneer-credit-s-accounting-all- stars-20190423-p51ghj
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19 Current Development of Accounting Thoughts Frost, J. (2019, 3 April). ASIC kept watch on Pioneer Credit for 12 months.Australian FinancialReview.Retrievedfromhttps://www.afr.com/business/banking-and- finance/asic-kept-watch-on-pioneer-credit-for-12-months-20190402-p51a0p Henderson, S., Peirson, G., Herbohn, K., Artiach, T., &Howieson, B. (2014). Ethics in accounting. InIssues in financial accounting, 15th ed., pp. 949-971. Frenchs Forest, NSW: Pearson Australia. Hoogervorst, H. & Prada, M.(2015).Working in the Public Interest: The IFRS Foundation and the and IASB.Retrieved from http://www.ifrs.org/-/media/feature/about-us/who- we-are/working-in-the-public-interest.pdf? la=en&hash=1B548A5E42E34CB412FD38E1EB40879C7C16C7E7 HowwedevelopIFRSStandards.(April2019).IFRSFoundation.Retrievedfrom http://archive.ifrs.org/How-we-develop-standards/Pages/How-we-develop- standards.aspx HowwesetIFRSStandards.(April2019).IFRSFoundation.Retrievedfrom https://www.ifrs.org/about-us/how-we-set-standards/ How we work in the public interest. (April 2019).IFRS Foundation.Retrieved from https://www.ifrs.org/about-us/the-public-interest/ IFRS Foundation.(2018a).Conceptual Framework for Financial Reporting.Retrieved from http://www.ifrs.org/issued-standards/list-of-standards/conceptual-framework/ IFRS Foundation.(2018a).Conceptual Framework for Financial Reporting.Retrieved from http://www.ifrs.org/issued-standards/list-of-standards/conceptual-framework/ IFRS Foundation.(2018a).IFRS Standards Exposure Draft ED/2018/2 Onerous Contracts- CostofFulfillingaContract.ProposedamendmentstoIAS37.Retrieved
20 Current Development of Accounting Thoughts fromhttps://www.ifrs.org/-/media/project/onerous-contracts-cost-of-fulfilling-a- contract-amendments-to-ias-37/ed-onerous-contracts-december-2018.pdf In Brief- Onerous contracts: Proposals to clarify IAS 37 Provisions, Contingent Liabilities andContingentAssets.(December2018).IFRSFoundation.Retrievedfrom https://www.ifrs.org/-/media/project/onerous-contracts-cost-of-fulfilling-a- contract-amendments-to-ias-37/ed-onerous-contracts-factsheet-dec-2018.pdf Jayesinghe, M. (2019, 12 April). CA Sri Lanka:Exposure Draft ED/2018/2 - Onerous Contracts-CostofFulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25345_AmeenaAnverTheInst ituteofCharteredAccountantsofSriLankaCASriLanka_0_EDonIAS37OnerousContract sAccountingStandardsCommitteeofSriLanka.pdf LeadershipPrinciples.(April2019).PioneerCreditLimited.Retrievedfrom http://corporate.pioneercredit.com.au/about-us/leadership-principles/ Mezon,L.(2019,15April).CanadianAccountingStandardsBoard:ExposureDraft ED/2018/2-OnerousContracts-CostofFulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25361_LindaMezonCanadian AccountingStandardsBoard_0_CanadianAccountingStandardsBoardResponseOnerous Contracts.pdf Onerous Contracts- Cost of Fulfilling a Contract (Amendments to IAS 37).(2019a).IFRS Foundation.(April). Retrieved fromhttps://www.ifrs.org/projects/work-plan/onerous- contracts-cost-of-fulfilling-a-contract/ Pflugrath, G. (2019, 21 March). CPAAustralia:ExposureDraft ED/2018/2- Onerous Contracts-CostofFulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25309_RAMSUBRAMANI
21 Current Development of Accounting Thoughts ANCPAAustralia_0_submissiononED20182onerouscontractscostsoffulfillingacontrac t.pdf Pioneer Credit Limited. (2018). Annual Report for year ended 30 June 2018. Retrieved from http://corporate.pioneercredit.com.au/wp-content/uploads/2018/08/180824-1-FY18- ANNUAL-REPORT.pdf Stephenson, P. (2019, 18 April). Vodafone:Exposure Draft ED/2018/2 - Onerous Contracts - CostofFulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25376_PaulStephensonVodaf oneGroup_0_VodafoneED_2018_2commentletter.pdf Thomas, O. (2019, 12 April). Rio Tinto:Exposure Draft ED/2018/2 - Onerous Contracts - CostofFulfillingaContract.Retrieved fromhttp://eifrs.ifrs.org/eifrs/comment_letters//527/527_25346_OwenThomasRioTint o_0_ED20182RioTintocomment120419.pdf Whoweare.(April2019).IFRSFoundation.Retrievedfrom https://www.ifrs.org/about-us/who-we-are/