Ethical Considerations in IFRS Adoption

This assignment delves into the ethical considerations surrounding the adoption of International Financial Reporting Standards (IFRS). It analyzes two prominent theories – stakeholder and stockholder theories – to understand their influence on ethical decision-making within organizations. The text further explores how IFRS aims to promote transparency and comparability in financial reporting, enhancing mutual understanding among users of financial statements.

Running head: FINANCIAL ACCOUNTING & REPORTING
Financial Accounting & Reporting
Name of the Student
Name of the University
Authors Note
Course ID

1FINANCIAL ACCOUNTING & REPORTING
Table of Contents
Introduction................................................................................................................................2
Function and role of high quality financial accounting in the contemporary business
environment................................................................................................................................3
Application and basis of selected IFRSs set by the IASB.........................................................3
Application of IFRSs including the framework in the preparation of general purpose financial
statements...................................................................................................................................4
Application of financial analytical skills to explain financial accounting problem...................5
Designing and developing entities accounting system to maintain financial information.........9
Comparing, contrasting and reviewing financial accounting systems.......................................9
Evaluating and appraising stocks listed entities financial statements......................................10
Developing and communicate solutions to ethical issues........................................................12
Reference List..........................................................................................................................13

2FINANCIAL ACCOUNTING & REPORTING
Introduction
Brambles Limited is identified as world leader in providing supply chain and logistics
solutions based on reusable pallets, containers and crates used by multiple participants. It is
noted that brambles long-standing asset management expertise and benefits for superior
network is an integral part to its customer solutions. The company is listed in ASX with its
operations in more than 60 countries (Brambles Corporate Site. 2018).
CIMIC Group Limited is acknowledged as world leader as international contract
miner. The operations of the company are seen to be in existence since 1899 and listed in
Australian securities exchange with its head office in Sydney. Some of the services provided
by the company includes construction, mineral processing, engineering, mining, concessions
and maintenance services related to infrastructure and property markets (Cimic.com.au.
2018).
The purpose of the study is to discuss on the function and role of high quality
financial accounting and its importance in contemporary business environment. Some of the
main learnings of the study will include discussion on application of IFRSs set by IASB in
the selected organizations. The fourth part of the report will apply financial analytical skills
for evaluating, extending and solving financial accounting problems concerning “general
purpose financial statements”. The fifth part of the report relates to developing and designing
entities in accounting system for facilitating and preparation of GPFR. The latter part of the
study evaluates enterprises stock exchange as per entities financial statements. The final
section of the study develops and communicate solutions for the ethical issues addressed
orally and in writing.

3FINANCIAL ACCOUNTING & REPORTING
Function and role of high quality financial accounting in the contemporary business
environment
Modern business environment has undergone several drastic changes in a very short
span of time. Advancement in the business technology and business functions has reached to
the level which was not possible previously. These intricacies inculcated in the modern
accounting system calls for the need of following a more reliable process of accounting in the
contemporary business environment.
Every business wants to maximize its profit. The use of high quality financial
accounting allows the owners of the business to report, analyse and record company’s
financial information. In addition to this, a good quality accounting provides accurate
information associated to “cost of goods sold, income, owners’ equity, expenses and assets”.
In addition to this, in several occasions business owners are seen to rely on information for
how the money was spent on business. Financial statements are considered as the finite
output of accounting and these include aggregate financial information for a particular
accounting period. A quality financial information allows the owners of the business
benchmark their reports for comparing the same with the industry standard. The accounting
information often relates to acquire credit from bank or investor financing for their business.
In several cases, businesses require start-up capital during initiation of business operations.
Accounting is often referred to as the language of the business and this acts as the method
used to measure different companies using the same measuring stick (Ari.uitm.edu.my.
2018).
Application and basis of selected IFRSs set by the IASB
The “International Financial Reporting Standards (IFRS)” set by “International
accounting standard board (IASB)” is considered as a global standard for the preparation of
financial statements. This standard is seen to be adopted in more than 150 countries due to its

4FINANCIAL ACCOUNTING & REPORTING
high quality and transparency features in the reporting. The principle philosophy behind the
application of IFRS is transparent and fair treatment of accounting. The application of the
standard ensures that the financial statement is able to provide a complete, relevant,
transparent and accurate picture of the transactions with least scope for manipulation
(Iasplus.com. 2018).
The use of IFRS is observed to use a single set of global accounting standard and trust
between the investors and investees along with buyers and supplies. In addition to this, the
foreign investors are able to easily trust on the financial statement of the company and make
investment with more ease. This particular standard is conducive in enhancing the confidence
of global stakeholders and fascinated the process of merger and acquisitions and access to
international capital and investment. In several cases, IFRS offers greater compatibility of
financial statements with more accuracy (Yurisandi and Puspitasari 2015).
Application of IFRSs including the framework in the preparation of general purpose
financial statements
The companies primarily using “General Purpose Financial Reporting (GPFR)” need
information about resources of the entity not only to assess the future prospect but also to
know about effectiveness and efficiency of the management in discharging their
responsibilities for entities existing resources (Manes Rossi and Aversano 2015). The IFRS
framework is able to take into account that prudential aspect and market regulators may find
general purpose financial reports to be more useful. It is further noted by the framework that
board considers the objectives of financial reporting may not be consistent in nature.
Henceforth, the letters of the financial information is not the primary users and GPFR are not
primarily directed to the regulators or other parties (Sutton, Cordery and Zijl 2015).

5FINANCIAL ACCOUNTING & REPORTING
Some of the main changes brought by IFRS for the preparation of GPFR statements
includes the consideration of changes pertaining to economic resources and claims, financial
performance reflected by accrual accounting, financial performance reflected by fast cash
flows, changes in the reporting entity, qualitative characteristics based on useful information
and application of enhancing qualitative characteristics. The final aspect of the framework
has included the elements such as recognition of the elements of financial statements and
measurement of the immense in the financial standards with the acknowledgment of
“historical cost, current cost, net realizable value and present value” (Aasb.gov.au. 2018).
Application of financial analytical skills to explain financial accounting problem
The application of the financial analytical skills is performed with ratio analysis in the
key areas of financial statements including “profitability ratio, return on equity, short-term
liquidity ratio analysis, data equity ratio and market performance ratio".
As per the profitability ratio analysis, despite of having high net profit margin for
Brambles limited, it has reduced from 10.80% in 2015 to 10.07% in 2016. On the other hand,
CIMIC Group has increased its net profit margin ratio from 3.92% in 2015 to 5.35% in 2016.
The ROE of both the firms are competent enough to generate profits from its shareholders
investments in the company, although CIMIC Group has shown significant improvement in
this area. In a similar fashion, the representation of all the other ratios has shown that CIMIC
Group is in a better financial position.
Profitability Ratio Analysis: -
Brambles Ltd CIMIC Group
Particulars 2016 2015 2016 2015
Revenue (A) 5535.4 5440.5 10853.6 13280.8
Net Profit/Loss after Tax (D) 557.4 587.6 580.3 520.4
Ordinary Equity(H) 2955.1 2641.1 3312.4 4115.3

6FINANCIAL ACCOUNTING & REPORTING
Net Profit Margin (D/A) 10.07% 10.80% 5.35% 3.92%
Return on Equity (A/H)) 19% 22% 18% 13%
2016 2015
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
10.07% 10.80%
5.35%
3.92%
Net Profit Margin
Brambles Ltd
CIMIC Group
2016 2015 2016 2015
0%
5%
10%
15%
20%
25%
19%
22%
18%
13%
Return on Equity
Brambles Ltd
CIMIC Group
Short-Term Liquidity Ratio Analysis: -
Brambles Ltd CIMIC Group
2016 2015 2016 2015
Total Current Assets (A) 1469.9 1351.1 5074.8 5353.8

7FINANCIAL ACCOUNTING & REPORTING
Receivables (D) 1150 1044.6 3209.6 2659.6
Cash and equivalents (B) 156.1 166.2 1576.5 2167.8
Total Current Liabilities (F) 1658.8 1579.5 5799.2 4306.5
Current Ratio (A/F) 0.89 0.86 0.88 1.24
Quick Ratio [(B+D)/F) 0.79 0.77 0.83 1.12
2016 2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
0.88
1.24
0.89 0.86
Current Ratio
CIMIC Group Brambles Ltd
2016 2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20
0.79 0.770.83
1.12
Quick Ratio
Brambles Ltd CIMIC Group
Debt Equity Ratio
Brambles Ltd CIMIC Group
2016 2015 2016 2015

8FINANCIAL ACCOUNTING & REPORTING
Total Liabilities (A) 4941.2 4953.5 6708.7 5561.5
Total Assets (B) 7896.3 7594.6 10021.1 9676.8
Debt Equity Ratio 0.63 0.65 0.67 0.57
2016 2015
0.52
0.54
0.56
0.58
0.60
0.62
0.64
0.66
0.68
0.63
0.65
0.67
0.57
Debt Equity Ratio
Brambles Ltd CIMIC Group
Market Performance Ratio
Brambles
Ltd CIMIC Group
2016 2015 2016 2015
Basic EPS 37.3 37.3 176.6 153.4
EPS 37.30 37.30 176.60 153.40

9FINANCIAL ACCOUNTING & REPORTING
2016 2015
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
37.30 37.30
176.60
153.40
Market Performance
Brambles Ltd CIMIC Group
Designing and developing entities accounting system to maintain financial information
The preparation of the financial statements is documented with providing the relevant
information on nature of business, risks, prospects, objectives and key strategies. In order to
maintain the financial reports as per IFRS it is important to identify the present issues in the
accounting standards, evaluate background materials on accounting standards and
convergence of existing standards.
Comparing, contrasting and reviewing financial accounting systems
The interpretation of financial statements of Brambles Ltd. have shown that the
financial statements comply with “International Financial Reporting Standards (IFRS)” as
dispensed by the “International Accounting Standards Board (IASB)”. In addition to this, the
general purpose financial report is prepared as per the standard of “Australian Accounting
Standards (AAS)”. Some of the other alternative pronouncements made by the company are
in accordance with “Australian Accounting Standards Board (AASB)” and the requirements
of the “Corporations Act 2001 (Act)”. Under the aforementioned standards the financial

10FINANCIAL ACCOUNTING & REPORTING
statements draw up to the conventions of historical cost accounting except for the
consideration of financial assets at fair value through profit or loss.
As per evaluation of the financial statement of CIMIC Group Limited the general
purpose financial report is prepared as per “Australian Accounting Standards (“AASBs”)”
accepted by the “Australian Accounting Standards Board (“AASB”)” and in agreement with
the “Corporations Act 2001”. In addition to this, the consolidated entities comply with the
IFRS standard as adopted by IASB. It is for the discerned that the standards and amendments
which are set for the early adoption in the financial report includes AASB 16 Leases.
Evaluating and appraising stocks listed entities financial statements
The evaluation and appraising of the stocks listed entities is identified with graphical
representation of stock price movement and that calculating the required rate of return for
both the companies. As per the findings is discerned that CIMIC Group is in a better position
in terms of its stocks and thereby attracting more number of investors.
12/1/2014
2/1/2015
4/1/2015
6/1/2015
8/1/2015
10/1/2015
12/1/2015
2/1/2016
4/1/2016
6/1/2016
8/1/2016
10/1/2016
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
Stock Price Movement Chart
Brambles Monthly change CIMIC Monthly change
ASX Monthly change

11FINANCIAL ACCOUNTING & REPORTING
Calculation of required rate of return
Brambles Ltd
Brambles
Monthly
change
CIMIC
Group
CIMIC
Monthly
change
ASX
Delayed
Price
ASX
Monthly
change
10.6 20.63 5588.30
11.1 4.717% 21.50 4.217% 5928.80 6.093%
11.52 3.784% 21.15 -1.628% 5891.50 -0.629%
10.83 -5.990% 21.09 -0.284% 5790.00 -1.723%
11.44 5.633% 24.24 14.936% 5777.20 -0.221%
10.6 -7.343% 21.75 -10.272% 5459.00 -5.508%
10.88 2.642% 23.80 9.425% 5699.20 4.400%
9.84 -9.559% 23.41 -1.639% 5207.00 -8.636%
9.74 -1.016% 23.50 0.384% 5021.60 -3.561%
10.38 6.571% 27.72 17.957% 5239.40 4.337%
10.89 4.913% 25.05 -9.632%
5166.50
-1.391%
11.57 6.244% 24.30 -2.994% 5295.90 2.505%
11.13 -3.803% 24.07 -0.946% 5005.50 -5.483%
12.49 12.219% 31.56 31.118% 4880.90 -2.489%
12.12 -2.962% 34.76 10.139% 5082.80 4.137%
12.48 2.970% 35.79 2.963% 5252.20 3.333%
12.85 2.965% 37.40 4.498% 5378.60 2.407%
12.39 -3.580% 35.75 -4.412% 5233.40 -2.700%
13.45 8.555% 29.24 -18.210% 5562.30 6.285%
12.32 -8.401% 29.61 1.265% 5433.00 -2.325%
11.98 -2.760% 28.74 -2.938% 5435.90 0.053%
11.53 -3.756% 29.59 2.958% 5317.70 -2.174%
11.78 2.168% 30.82 4.157% 5440.50 2.309%
12.4 5.263% 34.94 13.368% 5665.80 4.141%

12FINANCIAL ACCOUNTING & REPORTING
βa 0.69 βb 0.33
Risk Free Rate
(Rf) 2.06% 2.06%
(As per Government
Bond rate 2 Year
Yield)
Expected market
return of
Brambles Ltd
(Rm1) 0.85%
Expected
market
return of
CIMIC
Group
(Rm2) 2.80%
Developing and communicate solutions to ethical issues
The adoption of ethical standards as per IFRS is evident in more than hundred
countries which has adopted to the ethical solutions provided by the IFRS. The two important
theories justifying the concerns are associated to ethical problems which is mainly identified
with tendency towards stockholder theory and stakeholder theory. The ethical consideration
as per the stakeholder shows obligation of firm towards legitimate interests of the
stakeholders. On the other hand, the stockholder theory aims to address the obligation of the
firm only towards its stockholders. The mutual understanding of the ethical consideration is
included with ineligibility and comparability as articulated by IFRS. The mutual
understanding of communication is considered as on the most important discussion on ethical
concepts. IFRS is able to mobilize intelligibility and comparability of the financial statements
to ensure maximum number of the users have a mutual understanding of the several types of
financial terms used in the statements. The comparability also attempts to establish a
standardized process of techniques to understand the usage of similar language which would
result in better comparability of the financial statements.
Conclusion

13FINANCIAL ACCOUNTING & REPORTING
The learnings from the discourse is able to display that the use of quality financial
information allows the owners of the business to benchmark their reports for comparing with
the industry standard. The IFRS framework is able to take into account the concepts which
shows prudential and market regulators may find general purpose financial reports to be more
useful. It is further noted by the framework that board considers the objectives of financial
reporting may not be consistent in nature.
Reference List
Aasb.gov.au. (2018). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 26 Jan.
2018].
Ari.uitm.edu.my. (2018). [online] Available at:
http://ari.uitm.edu.my/main/images/MAR/vol14-1/chapter1.pdf [Accessed 26 Jan. 2018].
Brambles Corporate Site. (2018). AR2017. [online] Available at:
http://www.brambles.com/ar2017-about [Accessed 26 Jan. 2018].
Cimic.com.au. (2018). Profile - CIMIC Group. [online] Available at:
https://www.cimic.com.au/our-business/profile [Accessed 26 Jan. 2018].
Iasplus.com. (2018). Conceptual Framework for Financial Reporting 2010. [online]
Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 26 Jan.
2018].
Manes Rossi, F. and Aversano, N., 2015. Advancing performance measurement: Italian local
government vis-à-vis the IPSASB project. International Journal of Productivity and
Performance Management, 64(1), pp.76-93.