ACC201e Financial Accounting: Analysis of IFRS Adoption in Singapore

This report addresses the shift in Singapore's accounting standards towards International Financial Reporting Standards (IFRS) for financial years starting from January 1, 2018, as announced by the Singapore Accounting Standards Council (ASC). While IFRS adoption aims to improve the quality, reliability, relevance, and comparability of financial statements, challenges exist. These challenges include variations in IFRS application across countries due to differing regulations, potential for corrupted organizations to exploit the standards, and limitations in revenue recognition. The report highlights how companies may manipulate contracts and utilize unethical practices to report financial performance. Although new accounting regulations permit bundling of services and goods for revenue recognition, the estimation of future costs and revenues still relies on executive judgment, potentially leading to errors or fraudulent activities. The report also points out discrepancies in financial statements due to unofficial earnings measures and improper use of fair value accounting principles. Despite these issues, the report concludes that Singapore-incorporated companies should use IFRS as the foundation for their new financial reporting framework, while acknowledging and addressing its inherent limitations.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author Note

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Table of Contents
Answer to Question 1......................................................................................................................2
References........................................................................................................................................5

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Answer to Question 1
The issue that has been presented in the question is that the Singapore Accounting
Standards Council (ASC) announced that the Singapore-incorporated companies would be
moving to a amended reporting framework in regards to the recording of the financial particulars
that is similar to International Financial Reporting Standards for the financial years starting from
1st January 2018.
The adoption of the IFRS has become an important step in the accounting world. The
adoption has continued to grow from the financial year of 2005. The factors enhancing the
implementation of the IFRS revolve around the facts that these accounting principles improve
the quality of the financial statements, enhances the reliability, relevance and the comparability
of the financial statements (Albaskri, 2015).
However, there are certain areas that should be considered in determining the worthiness
of the International Financial Reporting Standards. The particular way in which the International
Financial Reporting Standards are applied differ from one country to another. This is primarily
because the different countries have different regulations that may be adhered to while preparing
the financial statements of the company. Thus, the major drawback of the accounting regulatory
principles lies in the fact that the suitability of the IFRS is poor resulting in the corrupted
organizations exploiting the financial position of the company by not representing the true and
fair view of the company (Altarawneh, 2015).
The second aspect of the regulatory principles that affect the integrity of the International
Financial Reporting Standards is revenue recognition. The current standard of the Generally
Accepted Accounting Principles reflect that the costs associated with the transactions will only
be realized when the services have been delivered in real or the money in regards to the
transaction has been received. This particular regulation has resulted in some of the software
companies to prepare the contracts in a way that carve out and upgrade the prices separately
along with the other services whose value is difficult to ascertain. This enable the companies to
resolve the accounting problems but result in the manipulation of the accounting standards that
influence the way in which business is done rather than focusing on the performance of the
company, that is the primary motive behind the preparation of the accounting statements. The

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limitations of the revenue recognition system in regards to the implementation of the
International Financial Reporting Standards have resulted in the companies to increasingly
utilize the corrupted and unethical practices for the purpose of reporting the financial
performance of the company. The multinational companies and firms that share a worldwide
reputation can evidently support this fact (Dhankar, Chakladerb & Guptac, 2015). These firms
have stated the fact that the compliance with the traditional accounting guidelines established by
the International Financial Reporting Standards have resulted in the measurement and the
recognition of the revenues and the expenses that have restricted the scope in the true and fair
view of the representation of the financial statements of the respective companies.
However, the global standard setting body has acknowledged this particular problem and
has brought about a change in the International Financial Reporting Standards and Generally
Accepted Accounting Principles. The new accounting regulations will permit the companies to
bundle the services and goods pertaining to the future, into contracts for the recognition of the
revenue in the particular financial year that it is earned by the utilization of the estimations in
regards to the future costs and revenues. However, it should be noted here that this particular
change would not be able to eliminate the problems, completely. The estimation of the costs
requires the executives of the company to exercise their judgment. This opens up the opportunity
for the managers to make errors or commit fraudulent activities like making fake inclination in
the annual reports of the companies that represent closure towards the achievement of the
financial targets of the companies (Hitz, Kaumanns & Lehmann, 2016).
The unofficial measures that have been undertaken by the corporate entities for the
treatment of the unofficial earnings like the financial component of Earnings before interest,
taxes, depreciation and amortization. The drawbacks of the International Financial Reporting
Standards have also resulted in the major discrepancies in the accounting statements of the
respective organizations (Kılıça & Uyarb, 2017).
Another problem with the International Financial Reporting Standards is that the
managers and the investors for the determination of the value of the assets of the firm do not
properly utilize the fair value accounting principles. The fair value accounting standards also
provide the required scope to the managers and other administrative executives of the firm to

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commit fraudulent activities like the understatement or the overstatement of the revenues or the
losses for representing the desired image of the firm (Kılıça & Uyarb, 2017).
Therefore, it is evident that the principle-based financial statements are much more
susceptible to fraud. However, the adoption of the new financial reporting framework by the
Singapore-incorporated companies should aim to utilize the IFRS standards as the fundamental
foundation for the establishment of the same (Samujh & Devi, 2015).

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References
Albaskri, I. K. (2015). The perception of accountants on IFRS adoption: Evidence from Libya
(Doctoral dissertation, Universiti Utara Malaysia).
Altarawneh, M. S. S. (2015). An Investigation into the Suitability of International Financial
Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) in Jordan
(Doctoral dissertation, Liverpool John Moores University).
Dhankar, R. S., Chakladerb, B., & Guptac, A. (2015). Implementing IFRS from the perspective
of public sector banks in India.
Hitz, J. M., Kaumanns, S., & Lehmann, N. (2016). Identifying consequences of mandatory IFRS
adoption: The role of selection effects.
Kılıça, M., & Uyarb, A. (2017). Adoption process of IFRS for SMEs in Turkey: Insights from
academics and accountants. Accounting & Management Information
Systems/Contabilitate si Informatica de Gestiune, 16(2).
Laswad, F., & Redmayne, N. B. (2015). IPSAS or IFRS as the Framework for Public Sector
Financial Reporting? New Zealand Preparers’ Perspectives. Australian Accounting
Review, 25(2), 175-184.
Samujh, H., & Devi, S. S. (2015). Implementing IFRS for SMEs: Challenges for Developing
Economies. International Journal of Management and Sustainability, 4(3), 39-59.