Advanced Financial Accounting: Qualitative Analysis and IFRS Impact

This report delves into advanced financial accounting, examining the qualitative features of financial statements under IFRS, the role of regulations, and the motivations behind asset revaluation. It analyzes the relevance and faithful representation of financial information, referencing opinions from financial experts on the usefulness of IFRS for investors. The report discusses the Australian government's decision regarding social and environmental responsibilities within the Corporations Act of 2001, considering public interest, economic, and capture theories. Furthermore, it explores the US Financial Accounting Standards Board (FASB) regulations on asset revaluation and their implications on financial statement portrayal. Finally, the report identifies key factors motivating directors to revaluate their property, including information benefits, financial statement impacts, and capital market efficiency. This document is available on Desklib, a platform offering study tools and solved assignments for students.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
Name of the student
Name of the University:
Author note

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Table of Contents
Answer A:..................................................................................................................................2
Answer B:...................................................................................................................................4
Answer C:...................................................................................................................................5
Answer D:..................................................................................................................................7
a:.............................................................................................................................................7
b:.............................................................................................................................................7
c:.............................................................................................................................................8
Reference:..................................................................................................................................9

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Answer A:
In order to extend the financial performance of a firm, qualitative features of an
organisation is required to produce their financial statement. These are made in such a way
that that it can aim the qualitative ideologies of the same so as to guide the investors in their
endeavours. According to the (Chaudhry, 2015), major parts that are considered under the
general form of the qualitative features are the faithful relevance and depiction of the
financial performance of the firm. in the same manner, there are various other parts that are
incorporated in the enhancing the qualitative features of the timeliness, understandability,
comparability and opinions of the International Financial Reporting Standards (IFRS) that
enforce the general principles of the same (Barth, 2015). This report provides focus on the
feature that certain parts of the financial statement of the firm are incorporated in the
financial reporting, however, all of them are non-coherent in nature. Details regarding the
same can be found below:
As per the Geoff Roberts who was the earlier head of the AXA Finance, there are almost no
inquiries from the economic investigators as well as from the fund managers for the financial
statement adjustment so that the accurate financial brief of an organisation can be perceived
that are conducted depending upon the norm of the IFRS (Jodoin, 2017). Due to this, they
safeguarded from the any issues while contrasting the financial statement of the various
organisation along with getting information about their financial standing in the operation
market. Thus, important evidences are sourced from these sources that implies financial
statements prepared as per the IFRS norm potentially have comparability and
understandability in them. Under this context, these two qualitative values initiate to expand
the value of the financial information of the firms (Dudin, Prokofiev, & Fedorova, 2017).
However, arguments are there that financial statement made as per the IFRS norm fails to
provide details about the understanding of the firm and miserably fails to bring in comparison

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of the same. Under this context, deficiency can be observed that in IFRS as per the terms of
the understanbility and the comparability.
As per the argument of the Terry Brown, who was the financial director of the
Wesfarmers, financial statements of the firm can be misunderstood, if financial analyst focus
to explain the same with the utilisation of the IFRS standard and the firm lacks knowledge
regarding the norm of the IFRS (Defond, 2018). Verifiability is another important qualitative
feature of the financial statement of the firm that enhance the financial statement’s quality by
producing path to the end operators to apply their financial knowledge as well as the financial
observation of the financial statements regarding the financial position of the firm. It would
aid the firm to determine the insight of the financial statement and have important factors that
has influenced the performance of the firm. This interprets that ability of the end users to
judge the content described in the notes by the means of the application of their knowledge
and observations. Depending upon the above mentioned statement, understanbility and the
verifiability aspects of the qualitative features are not present in the reporting framework of
the IFRS (Mayo, 2017).
According to the perspective of David Craig, the CFO of Commonwealth bank, the
speculators don't deliver cautious consideration to IFRS-created budgetary frameworks, as
they are of the idea that such reasons may additionally deliver misrepresented records with
appreciation to the monetary exhibitions and cash associated locations of the corporate
factors (Skinner, 2017). It’s far essential to assure significance and persistent depiction of the
financial statements exposed inside the every year reviews of the associations with a specific
aim to make beneficial outcomes, so the challenge selections can be attempted definitely by
the firm. In the event that these highlights are absent, no knowledge regarding the economic
states of the associations will be achieved. It has been recognized that the associations
speaking to the cash related data through setting up the financial articulations as according to

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IFRS framework appear to be in significance and committed portrayal. Due to this reason, the
speculators do consider the financial statement a favourable option for their decision
(Chaudhry, 2015).
Finally, it is great to specify that financial statement expects to provide the clients
information regarding the budgetary explanations with specific economic information that
might be vital for deciding the financial position of the firm, which means the budgetary
states of the commercial enterprise institutions along attempted suitable hypothesis
alternatives (Tsalavoutas & Dionysiou, 2014). The conversation above indicates the absence
of some important qualitative features, which confines the objective of financial reporting.
Answer B:
During 2006 Australian government took an important decision associated with the
modifications in the Corporations Act of 2001, where any introduction of the regulation in
order to enhance the social and the environmental responsibilities is missing (Fisch, 2015). In
spite of the initiating regulations, Australian government has asked the forces of the market to
perform with the purpose. Through aiding three well faced regulations, Australian
government decision can be analysed. Details regarding the same are as follows:
Public interest theory:
As per this theory introduced rules have significant amount of role in assurance of the
public welfare. In addition to this, it ensures that it benefits the stakeholders that makes it
insignificant in order to meeting the role of the public demand. Under the given situation of
the Australia, it could be applied, so that Australian government can initiate regulation as per
the Corporations Act (Henderson & Donnay, 2017). Doing so Australian government can
enhance the social as well as environmental responsibilities among the general public.
Economic theory:

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One of the basic idea of the economic theory regarding the industries is that, they are the
creator of the regulations and it is aimed to enhance the growth of both the common
individuals as well as the business enterprises. Thus, according to this theory, it is evident
that the Australian government could have initiated regulations in the Corporations Act so as
to promote social as well as environmental responsibility (Skinner, 2017). basic reason for
this is to transfer the burden of the social responsibility from the producer to the common
individuals and both the parties are need to adhere with the norms decided by the governing
authority for the social and environmental benefit.
Capture theory:
It is only the turnaround of general society interest hypothesis that argues, no controls
are required for guaranteeing the welfare of the people. Rather than presenting directions, this
hypothesis lays attention on the working of the market powers with a specific end goal to
fulfil the general premiums of the clients (Grillo, Einloft, & Seferin, 2017). Also, the
standards of this hypothesis recommend that the controllers could control with the directions
for guaranteeing their self-interest; thus, directions would not be suitable. This hypothesis is
connected in the given circumstance, that the correct advance is gone up against the piece of
the Australian government by not authorizing directions for advancing natural and social
obligations in the Corporations Act (Gans & Ryall, 2017). Since directions are not there,
there is no possibility for the controllers to control the same for meeting their self-interests.
Answer C:
After cautious evaluation of the given situation, it can be said that there is a certain
regulation in the US Financial Accounting Standards Board (FASB). As per this direction,
there is no requirement for the business associations in US to play out the system of asset
revaluation. Rather, they are expected to consider those hindrance accuses related of their
non-current resources (Michels, 2017). In this regard, it is essential to specify that some

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critical ramifications are natural on faithful portrayal and pertinence of the financial statement
because of the asset revaluation norm that are portrayed as followed:
 The FASB control for non-current resource revaluation and has helped gigantically in
the plan of a solitary structure in connection to the financial statement of the
revaluation of non-current resources. Such perspective guarantees in keep up
importance of the financial reports (Barth, 2015).
 At the point when the accounting capacities are related with the implementation of the
revaluation of non-current resources, the accountants of the business associations
experience couple of specific issues and such issues have brought about inappropriate
portrayal of the financial reports of the associations. In any case, within the sight of
FASB control, the business ventures are obliged to hold fast to all the required
directions and standards identified with revaluation of fixed assets (Lim, Macias, &
Moeller, 2014). Therefore, it helps in building commitments towards the loyal
portrayal of the estimations of fixed assets in the financial statement articulations.
 There are multifarious models of accounting, which could be related with the
revaluation of fixed assets prompting complexities and troubles for the business
endeavours so as to represent revaluation of fixed assets. However, the current FASB
direction has brought a solitary structure keeping in mind the end goal to revalue the
fixed assets, which is colossally important in limiting the accounting (Watts & Zuo,
2016).
 All the financial statement explanation clients like investors, creditors, resource
providers, clients and others are required to make them comprehend of the accounting
treatments (Gross, n.d.). Out of many, one such perspective is to discover the huge
likenesses and contrasts in the accounting treatments required for revaluing the fixed
assets, which could be guaranteed with the assistance of the new FASB direction.

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Answer D:
There are plenty of factors that acts as the motivation for the directors of the firms to
revaluate their property. Key motivating factors that influence the directors to revaluate their
assets are as follows:
a:
While the revaluation of the fixed assets procedure is under operation, directors need
to perform revaluation of their assets frequently that provides them added benefit. Such
revaluation enables the directors to have adequate information regarding the asset values
(Borji, 2015). Proper knowledge regarding the property value enables the directors of the
plants to bring in smooth performance as well as aid them during the course of merger, price
negotiation and acquisition. Additionally it has been observed that frequent revaluation of the
fixed assets aids the directors to achieve insight regarding the actual return on employed
capital that help the director in policy making as well as smoothen the fund allocation in the
firm.
b:
If the firms are not indulged in undertaking the decision of revaluating their fixed
assets like, property, equipment, plant and others, then it would have provided much amount
of impact on the financial statement as well as financial position of the firm. When the
method of the revaluation is not enabled, property, equipment and plant are expected to
elaborate or minimise their financial position that make the valuation improper (Tsalavoutas
& Dionysiou, 2014). Thus, under this condition, there would be realisation of the abnormality
in the revenue of the firms from its fixed assets, which can influence the selling or
procurement decision of the firm. In addition to this, firm could expect to face reduction in
overall earning over the time if the firm fails to perform revaluation of their fixed assets.

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With the fall in the income level, it would impact the profit and the share price of the firms,
which will ultimately cause undesirable performance of the firm.
c:
The capital market efficiency aid to drive the verdict related with the revaluation. In
case of the lack of efficiency in the market, price of the stock of the firm would denote
information that is provided in the annual reports of the firm (Watts & Zuo, 2016). The
reduction in the asset per share of the firm can be considered as the stock price. However,
higher reported income of the firm might guide in offsetting the share price. The decision of
refraining from the revaluation of the asset provides negative impact on the shareholder and
the repercussion impact of the same makes the shareholders impacted by the decision of the
firm. During the time of the no revaluation of the fixed assets of the firm, profit level of the
firm is expected to fall by a large extent (Fisch, 2015). As the firm face reducing profits
through their endeavours, the share price return will also be reduced because of fall in the
price of stock of the firm. Under this condition, it would limit the overall return of the
investment to the shareholders affecting the wealth of the same. To conclude, it can be said
that, fall in the share price would reduce the financial position of the firm as well as reduce
the balance of the shareholders assets too.

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