Inconsistent Application of IFRS

The inconsistent application of IFRS undermines its value and leads to poor decision making. Many firms do not incorporate the use of IFRS standards, resulting in unreliable financial information. Strict rules should be set to ensure consistent adoption of IFRS standards.

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Accounting and Finance

Question 1
According to the ACCC the proposed merger between TPG telecom Ltd and Vodafone
Hutchison Australia was a matter of concern as it would substantially reduce retail mobile
services competition in the market. The competition watchdog are of the view that an aggressive
pricing strategy would be adopted by TPG telecom Ltd that would offer cheap plans with large
data allowances thus a merger would not be allowed Colangelo (2019). The decision of
Publishing their decision to block the $15 billion merger between the two companies is what
infuriated investors. This is because the leak resulted to a fall in share price of TPG telecom by
13, consequently, making the market value of the firm to go down by $1billion Barnes( 2016).
In the past, investors have got hold of sensitive information prior to the time they should have
received the information but never from a regulator. Never has a regulator leaked information
like the ACCC did. In general, the objective is to look after the capital market, favoring the good
functioning and expansion of the economy.
The entities define illegal acts, such as acting without registration in the ACCC or "creating
artificial conditions of demand, offer or price of securities, manipulation of prices, fraudulent
operation and unfair practice", besides operating administratively in the investigation of illicit

activities.In this sense, an investor who, prior to the disclosure of material fact not expected by
the market to favorably position itself in an operation, buying a significant quantity of shares and
then disclosing them, sells them, earning considerable profit, is likely to be detected by the
ACCC. Thus, due to the fact that it is unusual, the agency will have its monitoring mechanisms
activated, with the consequent analysis and production of reports that may culminate in
administrative procedures, as well as the police and Public Prosecution.
The ideal is that "informational symmetry" is the determining factor for conscious investment
decisions, that is, based on information common to all, the investment is made based on market
experience, the study and technical preparation of the investor, and not in the spurious and
opportunistic practice of manipulating privileged information Kothari (2019). Information
symmetry guarantees investors equality, equalizes competition in search of better earnings and
rewards the best prepared.In fact, the practices described here, involving an administrator who
buys shares of the company in which he works, or of a company in the process of acquisition,
based on privileged information that he holds, not yet made public.
Question 2
Using a normative theory, explain why the financial statement of a extraction,
transportation and burning fossils business should include climatic risks disclosure.
A normative theory is a theory used in decision making by providing instructions on how
people should make decisions. The theory helps organizations to maximize value of their
outcome.
A general purpose financial statement are published throughout the year to assist
creditors and investors in their decision making, such statements include balance sheets, a

statement of the business equity, statement of cash flows and income statements. A financial
statement should be prepared, presented and disclosed to the investors and it should contain all
the valuable information about the underlying risks caused by the ever changing climatic
conditions for the purpose of investors’ decision making.
The impacts of climatic changes are a major risks that affect the extracting, transportation
and burning fuel companies Fassin, De Colle and Freeman (2017). Thus far the importance of
reporting climatic change risks as foreseen in the financial review of companies has been
stressed. In light of these concerns the normative theory provides a basis through which a
criteria for determining the ethical issues involved with climatic change and how it affects the
financial statements used by investors and stakeholders.
Extreme climatic conditions pose a major threat to the business as it may disrupt the
functioning of the critical processes that are crucial to the operations including vessels used in
extraction and transportation Harrison, Freeman, and Abreu (2015). For instance energy
transmission transportation such as power line and pipelines are at a risk of being affected higher
temperature and the dangerous weather occasions foreseen, risks such as rise in sea levels,
extreme cold, floods and landslides affect the pipeline transportation Grayston (2019). The
increasing sea levels will also make the pipelines installation and maintenance expensive.
In the rainy climatic conditions, open pits in the extraction industry are likely to be
impacted by increasing rainfall leading to floods and landslides. This makes it hard for extraction
of coal and hence minimize value of the outcome leading to possible losses in the company.
Such information should be disclosed in the financial statement to help investors make the
decision on whether to invest in the industry.

The increasing high temperatures are likely to disrupt the extraction and exploration of
coals by providing the unfavorable conditions to do so. The existing carbon imminent regulations
will generate incentives for gas emission reduction from the burning of fossils which is
responsible for global warming and air pollution. Such incentives will restrict the company from
its normal operations hence reduce its profits.
The company financial statement should include all the possible risks related to climatic
changes to help investors in their decision making process.
Question 3
The problems on which economists focus their analytical efforts, as stated above, clearly have
something external to a purported pure logic, internal only to theoretical developments. The
greatest example of this, as put in most of the Manuals of Economic Thought History, is the
emergence of Keynes's "General Theory of Employment, Interest and Currency"in the context of
the In addition to this example, authors who could be viewed as scientists devoted entirely to the
inner logic of their science, working isolated from the outside world, also lend themselves to
such considerations generally associated with Keynes. Leon Walras is an example of this, as can
be seen in the analysis by Paula (2002).
The variety of currents of thought in economic theory is an invitation to reflection for anyone
interested in philosophy of science. It is also motivating for those economists who can be
classified as relativists by some, but pluralists by others Gittins (2004). To unmask the "winds"
that led men, from different times and places, to think economic phenomena as they thought, is
one of the most interesting tasks that the researcher of the history of this discipline has to offer

Penno (2017). This not only to know the "sweat and tears" that built the economy, but mainly to
recognize that plurality is the tonic of human knowledge about the economic aspects of life.
There is no way of practicing economics without considering the various worldviews to be
legitimate, with fundamental differences in modes of thinking, and even more so, without the
scholar also recognizing himself as the object of his study.
In this sense, this work seeks to understand the methodological aspects of research in the history
of economic thought, proposing an interpretative model, a protocol for reading what we will call
the "context of discovery" in economics. This expression wishes to make reference to the
theoretical and methodological innovations that supposedly characterize the emergence of a new
and specific approach in economy Bernile, Hu and Tang (2016). The propositions which are seen
as novelties brought about by classical economics, Marxism and historicism, neo-classicism, the
twentieth-century Austrian approach, and institutionalism characterize these "discoveries." Our
aim, then, is to unveil the intellectual motivations that lead economists to propose new
approaches, to want to replace in whole or in part the economic knowledge they knew, to think
economics from a different and specific point of view.
Apart from the personal accidents and the psychological types of each of the pioneers of the
schools of economic thought, we argue that new ideas arise much in the light of the different loci
of economic thinkers in geographical space and historical time. It is peculiar to a place, one or
more worldviews, in relation to a certain social reality in which the thinkers are inserted. Finally,
drawing on philosophers and economists, we seek to form a network of categories and concepts

that allow us not only to understand the emergence of new economic ideas, but also to
understand them as derived from certain historical periods.
Question 4
Why listed companies might shift its focus from shareholders to stakeholders
Stakeholders are people in an organization they are the board of directors, management of
companies, employees, shareholders, suppliers and customers in which the company runs, they
are keenly involved in the organizational projects and any concern affecting positively or
negatively the implementation of the project.
Each project management team identifies the stakeholders and determines the project
requirements and prospects of all parties. It’s the duty of the project manager to evaluate the
contribution of each stakeholder.The stakeholder theory suggests putting the society, the
customers, employees, suppliers and the management at the focus of business instead of just
focusing on shareholders. Although the change is not immediate, more and more companies are
on the verge of this changes. The world of business is being reconsidered so that it incorporate
people and also add value inform of profit Floyd and List (2016). Attaining sustainability helps
organizations gain advantage over their consumers, study shows that consumers focus on social
and environmental issues.
Any organization that focuses on stakeholders attains operational effectiveness and the employee
motivation leads to more profitable outcome Witt and Stahl (2016). The well-being of the
companies depends on the stakeholders, the clients, customers and employees have a very high
impact on an organization achieving its set strategies and objectives, they have the power to
influence the decisions of the company.

Before, the relationship between organizations and society and society and organizations setting
was disregarded, however with the new expertise the environment has become useful to the
business and hence it’s being given more attention.
The stakeholder theory insists that the company’s real success lies involvement of stakeholders, a
stakeholder is anyone invested in or involved in the company, they are the group of people
without whose support the company would come to an end or fail Ernst & Young.(2012).
An organization that constantly uses the opinions and influence of its stakeholders is in an
enhanced position to improve and succeed, their influence helps shape the company for better. It
yields good public relations with the society by creating a good and favorable view with the
society flagging a long term future success of the company.
Due to this benefits brought about by focusing on stakeholders, many companies might shift
from focusing its attentions to shareholders of the company to the stakeholders because of the
benefits that come with it. This will enable the company to attain sustainability and also
maximize its profit.
Question 5
Inconsistent application of IFRS undermines its value
IFRS, international financial reporting standards, is a set of accounting standards agreed upon by
a non-profit organization called International Accounting Standards Board (IASB). This
standards help improve the transparency of the financial information and financial statements.
This standards help organizations achieve quality information and improve their decision
making. It gives useful information about cash flow and performance of the organization for the

purpose of decision making of the firm. The systems was introduced to ensure accountability and
responsibility and also ensure proper allocation of resources
Although not all organizations have adopted the use of these standards, it is legally required for
all firms to adopt IFRS standards in their operations. The possible benefits of IFRS in
organizations can be greatly felt if only it was applied consistently by all firms. The fact that
many firms do not incorporate the use of IFRS standards, its value is destabilized.
The use of unbalance data presentation brings about inconsistency, ambiguity and incorrect
information being presented to the analysts hence leading to poor decision making.
The fact that this standards have not been used, the firms have no knowledge on how to apply
this standards , the information being disclosed is mostly unreliable. Constant use of these
standards will enable and ensure greater accountability and hence lead to identification of
problems associated with authorities and the ways to curb them can be introduced.
Few firms are aware of the benefits associated with using these accounting standards, most of
them are ignorant or unwilling to use them because they would expose the fraud and the
deception involved Floyd and List (2016).. A specific understanding of these standards is
important, firms should be advised and educated on the importance of adapting these accounting
standards to ensure there is correct financial reporting.
Another reason why most firms haven’t incorporated these standards is because they consider
them tedious and time consuming. A lot of technical knowledge is required in order to use these
standards yet some firms lack such knowhow.

Strict rules should be set to ensure firms adopt these standards in their systems and ensure that
they are incorporated in their daily operations, this will help in ensuring responsibility,
accountability and proper allocation of resources.
Question 6
The largest listed construction company in Australia CIMIC is alleged to have engineered its
accounts by up to $800 million in the past two years to boost its share price. The new Australian
accounting rule which was enacted last year resulted into a reversal of $700 million that were
previously booked as revenues. A research conducted by GMT research has also questioned how
CIMIC acquired a maintenance group UGL for $524 million and how there was a large reduction
in net assets on acquisition and the jump in profits afterwards Burton,Summers, Wilks and
Wood ( 2017). The total operating cash flow had been inflated by $1.4billion in the last two
years to 3.1 billion. Shareholders are losing out because of such tactics employed by the
company.
Positivism in the accounting world tries to reference some observations that occur in the
economic world in an objective way, where we can observe the accounting as it is; with its
shortcomings, its strengths, but which teaches us how the most relevant events have arisen and
which today allow us to have a clearer idea of the theories that have been implemented, all
thanks to great authors who took on the task of dedicate his time to research, thus rejecting all
absolutist and idealist conceptions Loussikian (2019). The fact is the only scientific reality.In an
accounting system the general theory and the economy in general must be congruent, in this way

it is possible to satisfy the needs of the users of the information and at the same time allow the
system to be more successful.
Similarly, we could see how administrators can manipulate their profits through the fraudulent
use of accounting standards, it is important to emphasize that as accountants we must ensure the
common good and abide by a code of professional ethics that sets us apart from these facts
ChenDong and Chen (2016). According to the main authors of the positive Accounting theory,
Watts and Zimerman explain one of the ways in which decisions made in organizations can
affect a company if it depends on individual biases, for example the way in which an
administrator seeks to maximize their benefits , on the one hand, the increase in the price of the
shares and on the other, the increase in the incentives of cash bonds, therefore a significant
change in the accounting standards increases the income, but in turn this would lead to according
to the measurement applied the price of the stock falls, from all this there is a kind of dilemma
between administrators and shareholders or directors who do not manage.
Question 7
With Australia inserted in the scenario of globalization and the capital market, there was a need
to adopt international accounting standards in order to minimize the different criteria and
practices to recognize and measure each transaction even in a political environment.
Brief context of accounting harmonization in Australia

Australian accounting continues to undergo many changes in different aspects, but the main one
was the adoption of international standards known as International Financial Reporting
Standards (IFRS). These changes affected all sectors, including financial accounting - that linked
to the day-to-day operations of companies and their financial statements - government agencies
and college banks. After all, the teaching of accounting had to adapt to this new reality and, thus,
the whole environment involving the accounting practice has undergone great transformations
perceived until today Loughran and McDonald (2016). It should be remembered that the process
of accounting harmonization respected the legal and corporate characteristics of Australia, and
with this, many of the points were adapted to the Australian reality.
For some time, it was common to use the term "standardization" instead of the term currently
accepted and used: "harmonization".In the case of harmonization, there is an agreement for
changes, as happened in Australia, elaborated respecting the current norms and characteristics of
the country and its commercial operations Christensen, Nikolaev and Wittenberg‐Moerman
(2016). Standardization, in turn, is a process that seeks to reduce all the objects of a process to a
single type, unified, simplified and using a single pre-established model. Thus, the need to
harmonize Australian accounting with IFRS was observed, rather than standardizing it according
to the world standard. In a political environment this is also done to meet the goals of the
government.
One of the advantages of the harmonization process was the ease of understanding of the
statements, the sending and receiving of employees between headquarters and branches of
different countries, access to international resources and negotiation of securities in international
exchanges.

However, by seeking greater respect for the corporate, legal and tax structure of each country,
harmonization can lead to a reduction in accounting practices that are globally understood and
well-founded.
These difficulties are due to the high degree of differences between accounting standards and
practices among the different countries, especially in Australia, where the great influence of the
government and the complexity of the fiscal question are different from other economic
structures.
The financial statements of publicly-held companies shall also comply with the standards issued
by the Australia Securities and Exchange Commission, and shall be audited by independent
auditors registered in the same committee. The financial statements are prepared in accordance
with the international accounting standards adopted in the main securities markets.
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