IFRS-Reporting Adoption Implication to Accounting

This report analyzes the effects of IFRS adoption in Australia on accounting quality, earnings management, and financial reporting practices. It also discusses the implications of IFRS adoption on investors and analysts.

IFRS-Reporting Adoption Implication to Accounting 1
IFRS-REPORTING ADOPTION IMPLICATION TO ACCOUNTING
By (Student’s Name)
Professor’s Name
College
Course
Date

IFRS-Reporting Adoption Implication to Accounting 2
Executive summary of the outcome of the chosen topic
This report is based on the paper AASB Research Report No. 3: “the effects of IFRS
adoption in Australia: Evidence from academic research” published in October 2016. The main
of the AASB Research Center is to give thought leadership on the reporting issues. The paper
resulted from the need to help AASB and Financial Council (FRC) to assess the IFRS adoption
in Australia in 2005. Thus a comprehensive literature review was undertaken. The IFRS is the
framework for reporting by all sectors in Australia including not-for-profits and for-profit. The
outcome of this survey constitutes a portion of a bigger review project on IFRS undertaken by
AASB to inform its perspectives on the way IFRS need to be integrated into the ARF in future.
The survey primarily focused on the IFRS adoption impact on publicly-listed Australian firms
and additional capital market stakeholders that is for-profit-sector (Apergis 2015).
Focus significant implications of international accounting from their chosen paper or
chosen annual report
The key finding from this survey and analysis based on the present evidence relating to
the IFRS adoption effects include: Adopting IFRS by the firms in Australia seems to have had
positive results for investors alongside analyst on study on disclosing enhanced analysts
following, and forecast accuracy. Other studies have reported positive results via the
enhancement in the value relevance of the financial reporting following the adoption of the
IFRS, and the decline in the firms’ number involving earnings management. The findings of this
research have also backed the adoption of the goodwill impairment of IFRS and the deferred
taxes regimes as having enhanced quality of accounting (Bond, Govendir and Wells 2016). Other
research, nevertheless, have suggested that the quality of accounting have substantially enhanced
when weighed against the AGAAP and that initial AGAAP treatment for intangible assets that

IFRS-Reporting Adoption Implication to Accounting 3
are identifiable stood increasingly appropriate. The outcome further show that the utilization of
IFRS has seen financial reports being longer yet easier to read. Several studies have also reported
positive outcome of the comparability promotion among the entities in Australia with respect to
the financial reporting practices wither global counterparts. The survey of the literature around
the period of IFRS adoption unearthed a degree of pessimism among the listed firms’ managers
towards various possible gains from the accounting convergence.
In respect of accounting quality, it is noted that some studies have reported positive
results from the shift to goodwill impairment while other studies have shown that alterations to
the internally generated intangible assets’ treatment have decreased the Australia financial report
quality. The shift to goodwill impairment seems to have additional aftermath provided the
obvious rise in the portion of purchase price which companies currentlty allocate to goodwill,
compared to additional assets and other studies outcome showing that either pre-or post-IFRS
adoption still no proof of a connection of the identifiable assets from the combination of business
with the post-acquisition performance.
In regards to readability of financial information, there has been a suggestion that the
IFRS use has seen longer and longer reports with ease of reading. These outcome relating to the
IFRS influence on the Australian financial reporting quality and practices parallels the
conclusion hit by a wider literature scrutiny of the previous empirical study which has consider
the IFRS-accounting quality internationally (Bryce, Ali and Mather 2015). The review of the
literature has further attributed the mixed outcomes to issues of sampling and the utilization of
the diverse quality measures. The issues of sampling has been connected to the fact that many of
research have regarded the outcomes of willful adoption of IFRS on the quality. As observed by
the Chua and Taylor (2008) alongside McLeay (2011), the firms that adopt IFRs willfully could

IFRS-Reporting Adoption Implication to Accounting 4
be unrepresentative of companies and it is challenging hence to control for incentives alongside
additional market elements which could have impacts on the quality. In general, 19 papers were
identified that examined the IFRS accounting quality for the firms in Australia. It thus remains
imperative to recognize that current published studies in Australian setting has taken into account
the undergoing going refinement (Benson et al. 2015).
In respect of earnings management, the survey also reviewed the impact of IFRS on
earnings management and noted that it has decreased the quantity of firms involving in earnings
management. The overall result indicated that distribution of income assessment results reported
by 422 firms in Australia showed that earnings management under the IFRS stood aligned with
the AGAAP. Also, the earnings management, timely loss recognition and value relevance have
been assessed in this review. According to Chua et al. (2012), the comparison was made between
the qualities of accounting under IFRS and AGAAP regimes based on three distinct views. The
analysis found that IFRS had enhanced the accounting quality of the Australian firms. After the
mandatory adoption of the IFRS, the firms in Australia involved in less earnings management by
means of smoothing income, better timely loss recognitions as well as enhancement in the value
relevance of the information generated by accounting.
In respect of the value relevance of earnings and equity, Chalmer et al. (2011) probed the
impact of IFRS adoption on equity and earnings’ value relevance for the ASX listed companies
over a timeframe between 1990 and 2008. Specifically, the focus was on the ability of the book
value of equity and the earnings reported (NI) to capture info which impact the prices of share.
The outcome was that the value relevance of the equity of the shareholder stood consistent
crossways the pre-IFRS and the transitions as well as the IFRS era. Such a consistent with the
idea that companies were expecting the likely influence of the adoption of IFRS on the choices

IFRS-Reporting Adoption Implication to Accounting 5
of accounting (Apergis 2015). It was unearthed that evidence existed of change in transitioning
year before adopting the IFRS. Moreover, statistical analysis unearthed that changes in earnings
identified stood attached to both large and small industries enterprises and those that reported
AGAAP-IFRS variations in either earnings or equity in year 2005. Eventually, it was concluded
that earnings persistence surged after the IFRS adoption. Provided this findings, it was concluded
by that it meant that earnings, irrespective of the potential for higher volatility under the IFRS,
remain more persistent and thus more value-relevant after adoption of the IFRS. Moreover,
Godwin et al. (2008) examined the effects of IFRS adoption on value relevance of the quality
and earnings using the comparative IFRS and AGAAP outcomes released as portion of the shift
to IFRS.
The study found no evidence that IFRS earnings alongside equity remain of higher
quality or even more relevant as opposed to those equity and earnings in AGAAP. Such
outcomes stood consistent irrespective of the size of the firms, financial performance or industry
sector that is profit against loss-making firms. It was thus summarized by the researcher that both
equity and earnings adjustment for intangible assets remain adversely linked to price. This
implied that shifts to IFRS accounting for intangible remain extremely conservative when
weighed against AGAAP. It was further discovered that provisions, impairment and investment
adjustments are value relevant but never consistent (Firth and Gounopoulos 2017).
Conceptualize and focus contribution how your chosen topic align with international
accounting topic from your accounting theory and current issue Subject
From this survey report, I have been able to shown the relationship between my chosen topic and
the international accounting topic of IFRS adoption from my accounting theory and current issues
Subject. As has been seen from the discussion, this work has shown the impacts of IFRS on the quality of
accounting information. It has been highlighted that it. The outcomes of this survey has shown that a

IFRS-Reporting Adoption Implication to Accounting 6
IFRS need to be integrated into the Australian Reporting Framework due to its advantages. In general,
there is no substantial evidence demonstrating that adoption of IFRS is needed from the various studies
reviewed in this paper. Whereas the analysis if the present Australian evidence supports the view that
IFRS has benefited the economy of Australia, it has made realized that this issues needs a further research
to give more light on IFRS adoption potential like cost of capital alongside staff mobility. Thus, I have
been able to show that IFRS adoption by the firms in Australia seems to have a positive outcome for
analysts and investors on the basis of the research showing enhanced analysts following as well as analyst
forecasting accuracy together with dispersion.

IFRS-Reporting Adoption Implication to Accounting 7
References
Apergis, N., 2015. The role of IFRS in financial reporting quality: Evidence from a panel of
MENA countries. International Journal of Economics and Finance, 7(10), 182.
Benson, K., Clarkson, P. M., Smith, T. and Tutticci, I., 2015. A review of accounting research in
the Asia Pacific region. Australian Journal of Management, 40(1), 36-88.
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian
firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), 259-288.
Bryce, M., Ali, M. J. and 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.
Bugeja, M. and Loyeung, A., 2015. What drives the allocation of the purchase price to
goodwill?. Journal of Contemporary Accounting & Economics, 11(3), pp.245-261.
Bugeja, M. and Loyeung, A., 2017. Accounting for business combinations and takeover
premiums: Pre-and post-IFRS. Australian Journal of Management, 42(2), 183-204.
Bugeja, M., Czernkowski, R. and Moran, D., 2015. The impact of the management approach on
segment reporting. Journal of Business Finance & Accounting, 42(3-4), 310-366.
Firth, M. and Gounopoulos, D., 2017. IFRS adoption and management earnings forecasts of
Australian IPOs.