HI6025 Group Assignment: Critical Review of IFRS Adoption in Australia

This report provides a comprehensive analysis of the adoption of International Financial Reporting Standards (IFRS) in the context of accounting theory. It begins with an executive summary outlining the financial accounting processes and the importance of adhering to accounting rules and regulations, followed by an introduction that highlights the significance of IFRS in company financial statements. The report then delves into the conceptual framework in accounting, explaining its role in guiding companies in their financial reporting. The core of the report focuses on the adoption of IFRS in Australia and the United Kingdom, detailing the reasons for adoption, transitional issues faced by companies, and the challenges encountered during the implementation process. It also explores the benefits of adopting IFRS, examines similarities in the adoption process between the two countries, and assesses the effects of IFRS implementation. The report concludes with recommendations for national accounting bodies, aiming to improve accounting standards. Throughout, the report emphasizes the importance of IFRS in ensuring accurate and effective financial reporting, providing a valuable resource for understanding the complexities of global accounting standards. The report also covers the challenges of IFRS adoption, providing a comprehensive view on the topic.

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

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ACCOUNTING THEORY
Executive Summary
The report shows the financial accounting process in the company; it shows the company can
carry all the business activities as per the accounting rules and regulation of the accounting
standard. It explains about the adoption of IFRS in Australia and the U.K. and shows what
the problem which the Country has faced in regards to approval of the IFRS in the company
is. The report also explains the benefits which the organisation, can get from the adoption of
the accounting standard, lastly the report show about the recommendation to the IFRS Bodies
so it can able to bring more amount of change in the accounting standard.

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Table of Contents
Introduction................................................................................................................................4
Conceptual Framework in Accounting......................................................................................4
Meaning of IFRS........................................................................................................................5
Reason for Adopting IFRS in Accounting.................................................................................5
Transitional Issue faced By Company.......................................................................................6
Challenges Faced in the Adoption of IFRS................................................................................8
Benefits of Adoption of IFRS....................................................................................................9
Similarities in the Adoption of IFRS.......................................................................................10
Effect of Implementation of IFRS............................................................................................10
Recommendation to National Accounting Bodies...................................................................11
Conclusion................................................................................................................................11
Reference..................................................................................................................................13

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Introduction
Financial Accounting helps the company to gain all the information which are
required by the company to present in their financial statement; the company should have
require amount of data which will help the financial user to gain proper information about the
company business (Abernathy et al., 2015). The company has to make proper presentation so
that, it can present the accounts as per the accounting standard which will help them to give
all the information correctly in the company financial statement. Each company should
follow all the rules made for the company, so this will help them to carry all the business
activities properly and effectively (Ball, Li and Shivakumar 2015). The report shows how the
company can follow IFRS in the business, its show the relevance and importance of IFRS in
company business. The report also shows about the two countries and how each Country can
comply with the rules and regulation which listed in the IFRS and how it able to carry it
business activities more efficiently and effectively in the business. It show how the country
able to adopt the IFRS in their company and how it able to implement the changes which are
required as per the global reporting system. It also how about the benefits and the challenges
which are faced by the country while implementing IFRS in their companies.
Conceptual Framework in Accounting
Conceptual Framework helps the company to know all the rules and regulation which
it have to maintain in carrying its business activities. It helps the user to see the information
which is related to company financial statement so it can able to interpret the financial
reporting efficiently (Barth et al., 2018). It should able to know the method which the
company should able to follow in the financial statement as each company can have different
accounting policy in their business activities, so the conceptual Framework helps the
company used to know all the details which are there in regards of financial statement.

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Example – Each company and Country have to follow different methods in regards to a
financial account and reporting as it is as per the requirement of business model or the
regulations itself. It makes a difference in the accounting method of each company, so this
can make a difference in between the user of financial statement (Brusca et al., 2018).
Company is following different method as one company can record the transaction of sale as
the goods are dispatched from factory. The other company may able to record the sale when
the goods can reach the customer so this show that there is significant difference in both the
company in regards of accounting concept so this help the user to know all the details quickly
and effectively in the business.
Meaning of IFRS
It stands for International Financial Reporting Standard which is issued by IFRS
Foundation and International Accounting Standard Board; it provides all the proper
accounting standard so that the user can meet all the company requirement quickly and
effectively in the business (Callen 2015). It helps the company to know all the rules and
regulation in the company financial statement. This show all the procedure which the
company have to maintain while preparing their financial statement in the business.
Reason for Adopting IFRS in Accounting
Country Australia has adopted the IFRS on 1st January 2005 as Australian Accounting
Standard Board published this in Research Report 4” Review of Adoption of International
Financial Standard in Australia” The Country is able to get productive as on 1ST January, so
this ability to get all the company is able to comply the rules and regulation in the company
financial statement (Campbell et al., 2018). The Country able to see many benefits in the
adoption of IFRS, so that have adopted the same in the Country, the benefits which the
Country saw in IFRS Ruling is it helps them to attract more amount of investment in the

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country as there will be the low cost of capital in the business. It able to have less application
of rules and regulation, and there is no such complexity, so this will reduce the cost of
preparation of financial statement and able to reduce the overall cost of the company. It can
help the company in a cost reduction process as there is more amount of introduction of
optional accounting treatment in the company which less amount of compliances in the
business. This will help them to carry all the business activities properly and effectively in
business.
Country U.K. has adopted the IFRS on 31st December 2014 as from this date all the
company which are carrying their business in the U.K. has to follow the same while carrying
their business activities in the Country (Capkun, Collins and Jeanjean 2016). The country
government has seen many benefits in the adoption of IFRS, so they adopted the same in
company financial statement, which will helps them to gain more amount of investment in
company business which will help them to gain an advantage in the Country and also able to
give some push to the overall country economy. It also helps the company to provide detail
information which will help them to get a proper amount of feedback by the financial user.
Transitional Issue faced By Country
The company in both the Country has faced many transitional issues in regards to
IFRS as it has to face any problem while implementing the standard in their financial
statement. The issue which is faced by the company are:
1. Company is not having the proper amount of knowledge and experience in regards of
the norms as per IFRS, so this makes them a big problem while implementing the
same in the financial statement (Cascino and Gassen 2015). The standard has different
Framework, so this creates more amount of problem for the company as it is not able
to know what to apply in the business and what not to apply in the same. The

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company employee not only have to gain the knowledge which is required in the
accounting standard but also has to develop new skills to able to apply the same in the
financial statement.
2. Company has to face difficulty while preparing the accounting policy, as it also
wants to get the financial statement properly so that the financial user is able to get all
the information in the business. As the company is not having proper accounting
policies, so this will directly affect the company financial statement, and it will not be
able to give proper amount of information to the financial user of the company
(Christensen et al., 2015).
3. Company is not able to get proper amount of support from the employee as if the
company is not able to get the support which it requires, then it will not be able to
gain the change in the company business activities so to make sure that all the change
happen properly, each employee of the company is able to contribute in the change
than only the company will able to reach its goals quickly and effectively (De George,
Li and Shivakumar 2016).
4. Company management is not able to change their policy in regards to accounting, so
this will affect the company financial statement. As it will not be able to meet the
changes, so this will affect overall management and company will not be able to apply
the changes as per the standard, so this was also an issue which the company has to
face will implementing the standard in the business (Florou and Kosi 2015).
5. Company is not able to imply the standard properly so this directly affects the
financial statement, so this let them not carry all the activities in the business,
company should not be able to have to know all the regulations and rules which affect
the overall presentation of company financial statement (Henderson et al., 2015).

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6. Company should disclose all the necessary information in the business, so this will
help the financial user to know more about the business activities, company are facing
any problem in regards of disclosure as the company is facing any problem in regards
of the information which are required by the company to show in the disclosure of
company financial statement. The lack of information let to have wrong disclosure
that directly affect the overall performance of the company financial statement.
Challenges Faced in the Adoption of IFRS
Country Australia is a concern it able to comply with all the rule and regulation which are
mentioned in IFRS, but it has to face many challenges to adapt the IFRS in the business. The
challenges which the company had faced are:
1. The Country is shifting from a national standard to an international standard, so this
directly affects the company business as it has increased the requirement, so the
company can face many problems while implementing the IFRS in the company
financial statement (Kieso, Weygandt and Warfield 2019).
2. It has to restructure the AASB as it has to incorporate the changes in the accounting
standard so the company has to follow all the accounting standard properly and
effectively in the business, as it should able to have proper utilisation of all the norms
in the company business (Li, Sougiannis and Wang 2017).
3. It has to reconsider all the reporting framework, in the company able to make proper
utilisation of company resources. The company should able to change all their
requirement as per the accounting framework, which will help them to gain an
appropriate amount of knowledge in the preparation of the financial statement.

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The Country U.S. has also able to adopt the IFRS in all the company, but while
implementing the same, it has to face many challenges, the challenges which the
company has to face are shown below:
1. Company has to face a challenge while recording the accounting information in
the business as it has to comply the new standard which they do not have much
knowledge so this let them affect the overall business of the company.
2. Company is having less amount of training in regards of the compliance of the
financial statement, so this will affect the company preparation of the financial
report, so the company has to check all the norms properly in the company
financial statement.
Benefits of Adoption of IFRS
1. Proper Compliance of Rules – Each company can comply proper rules and
regulation as this help them to gain an advantage in the market; the company
should able to perform its activity correctly and effectively in the business
(Maskell, Baggaley and Grasso 2017). This standard helps them to gain proper
knowledge which will help them to follow all the principle properly and
effectively in the business.
2. Improve International Investment – The standard everywhere so it is
considered as global standard so this help the Country to have more
investment in the company business as it should take into consideration about
the accounting standard which is followed by the company (Maynard 2017).
An investor usually compares the business performance with other company
so to have a proper comparison company should have followed the global
standard, so this helps them to get more amount of investment in the company
business.

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3. Generalised Standard – Company is following the similar standard in the
Country, so this lets them have similar kind of financial statement, so this will
help them to show a better presentation of company financial statement
(Narayanaswamy 2017). It enables the opportunity of the company to
diversify its operation internationally and able to get more amount of
expansion in the business.
4. Consistency - the Company, can have a proper amount of consistency in the
business, so this will help them to provide a proper amount of information to
the financial user. This help the company to have all the accounting policy
accurately so that it can able to present the financial statement as per all the
norms and regulation of the standard (Neel 2017).
Similarities in the Adoption of IFRS
Each Country can follow the standard properly in the business, so this will help the
company to follow all the activities correctly and effectively in the business. The Country has
many problems while implementing the standard in company activities. It has faced similar
problem while implementing the standard as both face the issue of facing standard in the
implementation, the company are unable to know the accounting policy which should be
implemented in the company financial statement (Parson et al., 2015). Both the Country has
faced problem in the adoption of standard in overall company business as it has modified the
national standard to global standard which will take time and also it will affect the overall
company performance as the company will not be able to get a proper amount of details about
the standard which they have to follow in the company business.
Country is able to have proper reporting framework, but as the company is changing
to the new standard it has to face many challenges as it have learned all the rules and
regulation which they have to follow in regards of financial statement so this will affect the

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company as it has to face any problem in regards of the application of accounting standard in
the company (Pratt 2016).
Effect of Implementation of IFRS
The above paragraph in regards of adoption of IFRS in two countries shows that the
Country has to face many problems in the initial stage, but as they can go with the flow, the
Country can get much amount of benefits in the company business (Robson, Young and
Power 2017). As the adoption is lead them to gain more amount of investment in the
company business so this led them to get more amount of investment which will help the
Country to gain more amount of business in the economy. It also helps the Country to get
more details amount of knowledge about the company business, which will lead them to give
a proper amount of clarity in the company business.
Company is able to have proper amount of disclosure in their financial statement that
will them to show all the required information of the business, the standard help the company
to gain all the amount of knowledge which is required by the company to have in order to
prepare their financial statement of the business (Schaltegger and Burritt 2017).
Recommendation to National Accounting Bodies
1. It should able to modify the rules and regulation in the accounting standard so that
this will help the accounting framework to follow all the need and requirement of the
company efficiently and able to carry their business operation properly in the
business. Company has to make many adjustments in regards of the accounting policy
so it should able to consider this while implementing the change that will help the
company to carry their business activities quickly and smoothly in the business.
2. It should make the rules and regulation more simple as this will help the company to
follow the rules and regulation easily in the business, standard has easy rules and

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regulation so this will give more clarity to the company and as a result the company is
able to apply the number of rules and regulation properly in the business. It will create
a concern to give all the required information quickly and effectively in the business
and help the company to follow all the rules quickly and effectively in the business.
Conclusion
The report concludes about the financial accounting system as this system help the
company to gain proper knowledge in regards of company financial statement. The company
should able to prepare all the financial statement correctly and with the help of a financial
accounting system, it can carry all their activities as per the norms and regulations in the
business. It have to follow all the accounting standard while carrying their business activities,
so this will help them to give all the required amount of information to the company financial
user and able to get the proper amount of investment from the same. The report concludes
about the importance of conceptual Framework as this is the policy which then the company
have to follow in regards of the preparation of financial statement and help the company to
carry all the activities properly in their business. It also concludes about the adoption of IFRS
in Australia and U.K. as it shows the challenges, which the Country has to face to adopt the
IFRS as it has to change all the national accounting standard to global standard so that it can
able to adopt the international standard properly in the business. It also concludes about the
benefits which the Country can get from the adoption of the accounting standard which will
help them to increase the foreign investment in the company as well as it will them to gain a
more competitive advantage in increasing the overall economy of the Country. It concludes
as how the companies is able to meet up with the adoption of IFRS in their business activities
and how it able to carry its business procedures. Lastly, it conclude as what the similarities of
challenges faced by both country and the benefits it able to get from the adoption of IFRS in
the company business activities.