Accounting Practices & Global Standards

This assignment delves into the evolving landscape of accounting practices, particularly focusing on the influence of International Financial Reporting Standards (IFRS). It examines how IFRS impacts stakeholder reporting, emphasizing the importance of considering various stakeholders' perspectives. The discussion also touches upon the potential future directions of financial accounting in a globalized world. Students are encouraged to analyze relevant research and case studies to understand the complexities and implications of these accounting standards.

Running head: ACCOUNTING THEORY
Accounting Theory
Name of the Student
Name of the University
Author Note

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Table of Contents
Table of Contents.............................................................................................................................1
Implication of measurement methodologies of financial reporting under IASB and the leasing
standard............................................................................................................................................2
The measurement method provided decision-useful information and what you understand the
benefits of it.....................................................................................................................................3
Critical analysis of the techniques Sigma Healthcare Limited........................................................3
The impact it has on the chosen stakeholder...................................................................................3
The ways AASB 16 would benefit or disadvantage the stakeholder...............................................4
The effect that AASB 16 have on the Sigma healthcare stakeholder’s income statement, balance
sheet and cash flow statement and its effect on the stakeholder’s financial statements..................5
AASB 16 would result in reporting that would be more useful to users.........................................6
References........................................................................................................................................8

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Implication of measurement methodologies of financial reporting under IASB and the
leasing standard
The measurement methodologies that have been used for financial reporting under IASB
are as follows:
• The cost on the historical basis;
• The value given to business which is also known as current cost;
• The fair value;
• The realizable value; and
• The value which is in use.
This is used in accrual accounting which is used to measure the costs and the income
earned as recording in cash flows (Andon, Baxter & Chua, 2015). This is the current value
measurement. In the absence the direct evidence is given and it argues on various characteristics.
There are changes in the system and therefore there is movement of measurement in the
historical cost to the new basis which is the fair value. The International Accounting Standards
Board (IASB) has the ‘initial and subsequent measurement’.
The new IRFS will change the procedures and it will include the operating lease.
Secondly the lease if not capitalized will be shown in the balance sheet and that will be
recognized as the right to use such asset and then there arise the liability for the obligation
(Burkins, 2014).

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The measurement method provided decision-useful information and what you understand
the benefits of it
The standard of IASB is responsible for International Financial Reporting Standards.
IFRS which is incorporated and it is consistent with the practical solutions which deals with the
financial reporting which have emerged over the years and it is built on accumulated business
practices of centuries (Cummins & Worley, 2014). The IFRS is not a completely new and
uniform approach to financial reporting, but it is the result or outcome of a. There are uncertain
future outcomes and it is helpful to provide a clean and fair picture of the current position as well
as the performance to date. The current position shows that, among other things:
• The assets that are to be measured under IASB ;
• The various assets measured in different bases (Duke, 2017).
• The various liabilities which are to be valued or can be measured at different bases (Habidin
et al, 2016).
Critical analysis of the techniques Sigma Healthcare Limited
The impact it has on the chosen stakeholder
The new lease standards which have a huge impact on stakeholders of the company that is Sigma
Healthcare Limited .The new standard enables in higher level of interest rate (Oliver,2014).This
will impact the industries and Sigma. The retailers will have their shops in the mall and thus it
will include the renewal options of the company. Then it will have an impact on the mining
services and therefore it will help in the expensive equipment held in the operating leases. In the
industry it will be required to capitalize the amount in the balance sheet and for the industry. For

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the pharmacy industry the amount is also to be capitalized in the balance sheet for the aircrafts
(Halloran, 2014).
Exception to the new lease system which affects the stakeholders:
1. The short term leases where the period is twelve months.
2. The low valued or less price laptops or tickets and computers have the effect.
If the company Sigma healthcare has lease payments and their assets are recognized and which is
on a straight line basis for a period over the lease term and it helps in the lessee’s benefits.
(Patrício, 2014).
The ways that AASB 16 will benefit and the disadvantage that stakeholder have
The Australian Accounting Standard16 on lease which was released on (Seve, 2016). The new
standard in Sigma healthcare is a standard which was effective for the finance and the operating
lease. It is seen that the AASB 16 have the disclosure of the statements and the increase in the
EBITDA margin (Scholten et al, 2017).
The effect that AASB 16 have on the Sigma healthcare stakeholder’s income statement,
balance sheet
Leases for Sigma healthcare limited have a consolidated entity and their risks and also the
benefit of the ownership is called the finance lease (Williams & Bastian, 2016). The liability
which is raised corresponding is represented as the future obligation for the rental out of the net
of finance charges (Mirza &Nandakumar, 2013).

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Operating leases are the leases which cannot be capitalized. Operating lease are the payments
which are to be charged to profit or loss account and it is incurred on a straight line basis. ( Jung,
Park & Chung, 2016).
AASB 16 which would have result in reporting
The lease documents that are prepared for the Sigma Healthcare Limited will be effecting in the
following ways.
 It has to convey the right to control and use the lease
 It is recognized as a identified asset ((Nobes, 2014)
 The new standard conveys that the lessee is for long time.
The assets that are also known as identified assets are taken on lease basis and this lease contract
will be affecting the identified assets. The lease which will convey to both the lesser and the
lessee the right to use the assets (Kraft, 2014). Once the right of lease is transferred then the right
will also be conveyed for a particular period of time.
 It is known that the lease and it will also substantially have a huge economic benefits of
that particular identified asset, and
 The lease standard can be used directly and it is also used for the particular i dentified
asset (Smieliauskas, Craig &Amernic, 2017).
The new information will be required which will help in determination of the calculation which
will be required for the calculation of the leased asset. The new accounting model of the
company will help in the changes in financial metrics and key performance indicator and

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therefore introduce the volatility of the balance sheet and the profits or loss due to the
measurement.
Part B
a)
Statement showing Calculation of Provision
Particulars Amount
Current Liability
Estimated cost of repairs – products with minor defects $ 2,000,000.00
Expected % of products sold during FY14 having MINOR defects in
FY15 15%
Estimated Warranty for Provision on Minor Defects (A) $ 300,000.00
Estimated cost of repairs – products with major defects $ 12,000,000.00
Expected % of products sold during FY14 having MAJOR defects in
FY15 5%
Estimated Warranty for Provision on Major Defects $ 600,000.00
Estimated % of defects to be settled in 2015 40%
Estimated amount of Defects settlement in 2015 (B) $ 240,000.00
Provision for warranty under current liability (A+B) $ 540,000.00
Provision for warranty under Noncurrent Liability $ 360,000.00
Discounting Factor 0.88999644
Provision for warranty under Noncurrent Liability $ 320,398.72
Table 1: Calculation of Provision
(Source: Created by Author)
b)
Statement showing Calculation of Provision
Particulars Amount
Current Liability
Estimated cost of repairs – products with minor defects $ 2,000,000.00

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Expected % of products sold during FY15 having MINOR defects in
FY16 12%
Estimated Warranty for Provision on Minor Defects (A) $ 240,000.00
Estimated cost of repairs – products with major defects $ 10,000,000.00
Expected % of products sold during FY15 having MAJOR defects in
FY16 3%
Estimated Warranty for Provision on Major Defects $ 300,000.00
Estimated % of defects to be settled in 2016 20%
Estimated amount of Defects settlement in 2015 (B) $ 60,000.00
Provision for warranty under current liability (A+B) $ 300,000.00
Provision for warranty under Noncurrent Liability $ 240,000.00
Discounting Factor 0.88999644
Provision for warranty under Noncurrent Liability $ 213,599.15
Table 2: Calculation of Provision
(Source: created by Author)
Statement Showing closing balance of provision as on 30/06/2016
Particulars Current Liability Non-Current Liability
Opening provision $ 540,000.00 $ 320,398.72
Add:
Provision during the current year $ 300,000.00 $ 213,599.15
Less:
Warranty Provision paid $ (300,000.00) $ (100,000.00)
Closing Balance of provision $ 540,000.00 $ 433,997.86
Table 3: Closing balance of provision
(Source: Created by Author)

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c)
Statement Showing Calculation of Depreciation
Particulars Amount
Carrying amount of Machine to be replaced on 30/06/2014 $ 280,000.00
revised estimated life of the asset 2
Revised Depreciation Amount (A) $ 140,000.00
carrying Amount of Machine with normal useful life $ 280,000.00
Estimated useful life 10
Depreciation per year (B) $ 28,000.00
Depreciation Amount for 2015 and 2016 (A+B) $ 168,000.00
Table 4: revised depreciation amount
(Source: created by Author)

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References
Andon, P., Baxter, J. &Chua, W.F., 2015. Accounting for stakeholders and making accounting
useful. Journal of Management Studies, 52(7), pp.986-1002.
Burkins, A.G., 2014. The Possible Impact of International Financial Reporting Standards for
Local Government Entities (Doctoral dissertation, Walden University).
Cummings, T.G. & Worley, C.G., 2014. Organization development and change. Cengage
learning.
Duke, C.R., 2017. How Healthcare Accounting Adapts to Lean Practices.
Habidin, N.F., Shazali, N.A., Ali, N., Khaidir, N.A. &Jusoh, O., 2016. The impact of lean
healthcare practice on healthcare performance: the mediating role of supply chain
innovation in Malaysian healthcare industry. International Journal of Critical
Accounting, 8(1), pp.79-93.
Halloran, J.L.H., 2014. Accounting technologies and new public management: a field study in a
NSW public school.
Jung, W. O., Park, S. O., & Chung, H. (2016). Debt financing and voluntary adoption of the
international financial reporting standards: Evidence from Korean unlisted
firms. Emerging Markets Finance and Trade, 52(1), 39-51.
Kraft, P. (2014). Rating agency adjustments to GAAP financial statements and their effect on
ratings and credit spreads. The Accounting Review, 90(2), 641-674.

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Mirza, A., &Nandakumar, A. (2013). Wiley international trends in financial reporting under
IFRS including comparisons with US GAAP, Chinese GAAP, and India accounting
standards.
Nobes, C. (2014). International Classification of Financial Reporting 3e. Routledge.
Oliver, K. (2014). Balance Sheet Presentation under IAS 1 and US GAAP.
Patrício, M.S.F., 2014. Donations of non-financial resources: The motivation and consequences
of measuring and accounting for it (Doctoral dissertation).
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.
Seve, F., 2016. An examination of the impact of the changes to regulations affecting the scope
for income classification shifting in Australia.
Smieliauskas, W., Craig, R., &Amernic, J. (2017). GAAP as Ineffective Legal Defense of
Financial Reporting: Implications for Truthfulness, Auditability, and the IASB's
Proposed 2015 Conceptual Framework.
Williams, T.R. & Bastian, A., 2016. Introduction to Concepts in Quality, Value, and Safety for
Health Care. Quality and Safety in Radiation Oncology: Implementing Tools and Best
Practices for Patients, Providers, and Payers.

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