HI6025: Implications of International Accounting Standards in Australia

HI6025 Implication of International Accounting
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Contents
1. Executive Summary:.........................................................................................................3
2. Implication of International Accounting Standards:.............................................................4
3. IFRS Policies changes:......................................................................................................5
Conclusion:..........................................................................................................................9
References:......................................................................................................................10
Appendix:.........................................................................................................................11
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1. Executive Summary:
The Australian Commission has needed to adopt IAS or IFRS in order to measure and harmonise
accounting and international financial reporting regulations and standards for ASX listed
companies as of 31 Dec 2005. Converting to IFRS and international accounting has indicated
much more than accounting changes, rules, laws and firms major concern was to understand the
corporate governance and accounting differences between Australian GAAP and IFRS in the
concern of IFRS and accounting standards. The purpose of this reading is to address such
mentioned above concern by producing and identifying empirical evidence of various features of
Australian accounting policies and IFRS in the context of Australian accounting standards.
Overall findings represent more relevant and identical process and impacts of international
accounting changes.
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2. Implication of International Accounting Standards:
The IAS/IFRS is an International Accounting Standards/International Financial Reporting
Standards) which is consisted of all sets of accounting principles and regulations in an
international manner. The adaptability of accounting laws aims and rules to establish accurate
and exact regulations within the Australian Union in order to draw up comparative and
competitive business transactions and annual reports and financial standards. Application of
international accounting standards represents an important and effective measurement of element
in the subject to describe and contain an effective and relevant Australian capital market, that
have impelled the Australian Commissions to address all sets of uniform accounting regulation
and international financial reporting standards for listed ASX companies (Firt & Gounopoulos,
2017).
The Australian Community Regulation has listed all the ASX companies under 1606.2002 in the
regulation of Australian Market to reform and regulate financial reporting standards for
producing and preparing financial consolidated statements as from December 31st, 2005. In
Australia. The Law Regulators had delegated the Government of Australia to implicate one or
more regulative and legislative laws and decrees interpreting all needs and requirements of AUS.
Regulations adopted by Australian firms within a year of the ruling coming into force.
At the beginning of the year 2003, ASX listed companies, banks and financial forces produce all
those interim and annual reports and consolidated financial reports accordingly with IAS/IFRS.
At the starting of international accounting standards in 2005, IFRS made changes into the
regulation of Cash flows, hedge recovery, adjustment and reclassification to reflect all
fluctuations of presentation, realisation and valuation of assets and liquidation required by IFRS
regulation. Such changes made compulsory or ASX listed companies, banks and financial
authorities from Dec 2005. Their adopted was also made compulsion for non-listed Companies
in form of both individual and comprehensive income statements (Firt & Gounopoulos, 2017).
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3. IFRS Policies changes:
The changes in the transition of IAS/IFRS have meant to be fundamental and regulative changes
for many Australian and Non-listed companies. Conversion into accounting changes such as
changes in GAAP (Generally accepted accounting principles), accounting exercises has made
whole changes in financial reporting which have affected the perception of business performance
in the market. After changes in international accounting standards have made firm’s enabled to
prepare IFRS financial statement and annual report that allow them to implicate global financial
and accounting reporting methodologies and evaluated accounting facilities in the international
marketplace. IFRS and accounting standards have formulated and concerned to understand the
extent in order to define differences between prior accounting standards and after making
policies based on firms business and market performance. Such differences are emerging from
the adaptability of application of IAS/IFRS compared with Australian Accounting principles
affecting various accounting areas such as leasing, financial reporting, revenue recognition and
recognition & valuation of deferred taxes and port retirement accounting benefits (Jouber, et. al.,
2017).
The regulatory changes in international accounting has addressed regulation and by the adoption
of IAS/IFRS in Australian Financial statement. Australian firms have not shifted the national
accounting regulation but also revisited the question regarding reflection the importance of IFRS
and determining financial reporting outcomes. It has also created the application of overall
international convergence of accounting and financial principles and reporting. Australian firms
have also represented the comparable financial information with an effort of removing the
several differences between all accounting reporting and principles in order to the production of
two set of financial reports and regulation as closer as well as for preparation of comparable
financial information (Morris, 2017).
An overall study of IFRS changes defines possibilities of the implication of adaptability of IAS
and IFRS by looking at all potential influences of these accounting treatments and adjustments of
pooling accounting reports to make business position and performance more strong and effective.
Such analyses propose the implications of the application of IFRS schedule and principles which
shows why the companies should voluntarily decide to shift all set of accounting standards and
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their characteristics of adopting non-listed companies as well as the significance of adaptability
of business firm’s performance (Cereola, et. al., 2017).
According to the analyses and assumption of IAS and IFRS accounting standards, the changes
have made in Net income (equity) as a synthesis of the differences between Australian
accounting systems and IFRS in the procedure of conversion of latest accounting systems.
The below shown table indicates changes in IAS/IFRS values and accounting formation in
different accounting and financial areas.
(Source: Alade, 2018).
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IFRS 19-Employee benefit:
Australian GAAP requires the liability for it measurement for TFR(Reserve for employee
termination indemnity) to record all nominal value and to calculate as per the requirement of
civil and business accounting code. The gains and loss regulated and determined by actuarial
computation to recognise as revenue and profit in the financial statement of accounting value and
operations. The adjustment made related to measurement and recognition and indemnification of
new actuarial liabilities for the benefits and revenue associated with the Australian firms for the
employees. After changes in IFRS 19 regulation for employee’s benefits creates 0.62% equity
lower than another identity (Loyeung, et. al., 2016).
IFRS -12 Income Tax
Under Australian GAAP, deferred taxes can be valued as per assets and liabilities including
calculation of temporary differences between the book and fair value of all assets and liabilities
to compute taxable income. The adoption of IFRS 12 is not able to provide any special
computation to the accrual of all deferred tax liabilities (Bryce, et. al., 2015).
IFRS 16- Business property, plant and equipment:
Under GAAP and IFRS regulation, assets, property and plants can be valued at generally adopted
records and costing methods, corresponding to the all purchase price including direct variable
and fair of the property of bringing the property and assets over useful depreciated life and value
of assets. Under international GAAP, a most samples of financial statement of companies revalue
specific property plant and essential equipment of assets based on historical costs and required
all specific laws of Australian countries to relocate financial resources (Firt & Gounopoulos,
2017).
IFRS 37- Provision, contingent liabilities and assets:
Under Australian GAAP, the overall provision for contingent liabilities and contingent assets
concerns all cost and revenue can be charged to determine their value and nature, whose
determination and existence can be probably valued. When the financial impact of financial
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liability and assets can be determined by valid expectations in third parties, the provided amount
of assets and liabilities can be affected reasonably according to implicit obligations.
IFRS 39- Financial instrument: recognition and measurement:
The differences between Australian GAAP and IFRS accounting standards can be summarized
with the effect of instruments for GAAP defined as hedging and non-hedging activities in the
application of recognition and measurement of financial instruments.
IFRS 2- inventories:
According to the implication of accounting rules and condition as per Australian firms’ financial
statements, the companies determine the cost of inventories as per LIFO method but IFRS does
not allow to the valuation of inventories with the LIFO, it wants alternative valuation of FIFO
and weighted average method in order to make inventory process more flexible.
Above provide justification implicates and concludes that companies are able to adjust and
arrange all financial statements of the firms according to the treatment of IFRS policies and
procedures. Above given example of treatments and adjustments of assets and liabilities in
financial statements provide effective knowledge for the companies to initiate and adopt more
flexible policies of accounting treatments (Li, et. al., 2017).
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Conclusion:
The beginning year of 2005, the Australian companies and commission have required judging
and in initiate adaptability of IFRS process and policies in order to make business more flexible.
All transition to IFRS policies and international accounting standards has made firms more
flexible and accountable to cover differences between their primary and secondary needs. This
report has been made to describe accessibility and liability of the Australian firms and companies
whether they are ASX listed or non-listed. This report has also described set of standards which
are essential to be implicated in international accounting regulations and policies before making
mandatory policies requested by Australian commission.
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References:
1. Li, S., Sougiannis, T., & Wang, I. (2017). Mandatory IFRS Adoption and the Usefulness
of Accounting Information in Predicting Future Earnings and Cash Flows.
2. Firth, M., & Gounopoulos, D. (2017). IFRS adoption and management earnings forecasts
of Australian IPOs.
3. Cereola, S. J., Nichols, N. B., & Street, D. L. (2017). Geographic segment disclosures
under IFRS 8: Changes in materiality and fineness by European, Australian and New
Zealand blue chip companies. Research in Accounting Regulation, 29(2), 119-128.
4. Alade, M. E. (2018). Effect of International Financial Reporting Standards Adoption on
Value Relevance of Accounting Information of Nigerian Listed Firms (Doctoral
dissertation).
5. Scholten, R., Lambooy, T., Renes, R., & Bartels, W. (2017). Accounting for Future
Generations. Does the IFRS Framework Sufficiently Encourage Energy Companies to
Reflect on Climate Change in the Valuation of Their Production Assets, Taking into
Account the New Initiative of the Task Force on Climate-Related Financial Disclosures?
An Exploratory Qualitative Comparative Case Study Approach.
6. Joubert, M., Garvie, L., & Parle, G. (2017). Implications of the New Accounting Standard
for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance
Sheet. The Journal of New Business Ideas & Trends, 15(2), 1-11.
7. Bryce, M., Ali, M. J., & Mather, P. R. (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, 163-181.
8. Morris, R. D. (2017). Discussion of: The Phoenix Rises: The Australian Accounting
Standards Board and IFRS Adoption. Journal of International Accounting
Research, 16(2), 155-157.
9. Loyeung, A., Matolcsy, Z., Weber, J., & Wells, P. (2016). The cost of implementing new
accounting standards: The case of IFRS adoption in Australia. Australian Journal of
Management, 41(4), 611-632.
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Appendix:
file:///C:/Users/locua/Downloads/download
Below provided images are the examples of changes and differences between Australian GAAP
and IFRS regulation which has already been described in above report:
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