HA3011 Advanced Financial Accounting: Financial Reporting Standards

This report provides a detailed analysis of advanced financial accounting topics, including the adoption of International Financial Reporting Standards (IFRS) and its impact on financial reporting quality. It addresses the benefits and limitations of IFRS, highlighting concerns about increased costs, excessive disclosures, and potential misinterpretations. The report also examines the Corporations Act and its influence on corporate social responsibility, discussing relevant theories such as Public Interest Theory, Capture Theory, and Economic Interest Group Theory. Furthermore, it evaluates the impact of FASB standards on the qualitative characteristics of financial reports, specifically relevance and representational faithfulness. Finally, it touches on the debate surrounding the valuation of assets, particularly property, plant, and equipment, and the preference for cost models over fair value revaluation. Desklib offers a wealth of study resources, including solved assignments and past papers, to aid students in mastering these complex topics.

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

1ADVANCED FINANCIAL ACCOUNTING
Answer to Part A
The topic deals with the matter that has been raised in given question statuses the
point that the adoption of the International Financial reporting Standards by the listed entities
that makes them enjoy the certain benefits that have contributed in the improvement of the
financial report’s quality. In this context it can be said regarding the standards of accounting
that have been established with the motive of establishing the point that the corporate
organizations have made the statements of accounting preparation easier for the third party
investors and the other stakeholders of the business. The improvement of the quality of the
accounting statements and the sense of a clarified image or information in regards to the
specific business has helped the stakeholders in taking the various potential economic
verdicts. However, it has been identified the various opinions with regard to the fact that
impacts the adoption of International Financial Reporting Standards is possessing a negative
impact(Kim, Shi and Zhou 2014). In other words in accordance to the financial report
experts that has been framed as per the International Financial Reporting Standards, has led
to a huge amounts of money is needed particularly while preparing the accounting statements
reports according to the standards instituted body of regulation of accounting. Along with that
the persons who are involved in the preparation of financial reports have also been of the
view that the International Financial Reporting Standards adoption have also led to too much
of disclosures of annual report for the business organizations which can be considered as
unnecessary. This has also drastically increased the annual report volume and the financial
information that has been reflected has become more complicated.
The qualitative characteristics financial reports that can identified in order to associate
with the International Financial Reporting Standards can be regarded as the qualitative
characteristics of relevance, understandability, timeliness and faithful representation. The
point that must be considered in this regard that the reporting standards that have been further
misused or have led to the ruination of the financial report quality. Evidence can be obtained
in this regard is from the fact that the faithful representation’s qualitative characteristics has
replicated in the disclosures overload in annual report of the corporate entity. This has also
led to the increase of the complications of interpreting the accounting statements and has
given rise in the difficulty of the stakeholders or the third party investors of the business
during the interpretation of the financial information from the annual report (Vernimmen et
al. 2014). The quality of relevance which one of the qualitative characteristic has also led to
the increase in the chances materiality risks or misstatement in the accounts books. As a

2ADVANCED FINANCIAL ACCOUNTING
result, the relevance is a qualitative characteristic that have ruined the quality of the
accounting statements of the business organizations. Then comes the next qualitative
characteristic that is the quality of understandability has also resulted in the enhancement in
the volume of the disclosures and declarations in the financial report of the company. This
has excessively increased the lenghth of the financial report, increased the complications and
additionally resulted in the disclosure of the unnecessary information by the third party
investors and the business stakeholders. Moreover the compliance of the reporting standards
have contributed in investment of a huge amount of money. In other words the International
Financial Reporting Standard compliance has led to the increase in the operating cost of the
business entity (Nobes 2014). Lastly, there comes the next qualitative characteristic of
timeliness have also additionally increased the complexity of the corporate entity’s
accounting statements. Therefore, as conclusion the International Financial Reporting
Standards have been pointed out essentiality in this specific answer and it can be said that
there have been many advantages of this reporting standard, however there have pointed out
several limitations that are needed to be coped up by the business entities (Weygandt,
Kimmel and Kieso 2015).
Answer to Part B
In the present question the issue that has been represented throws light the fact that
the accounting statements or the financial reports that are prepared by the corporate entities
have been carried out in compliance with the Corporations Act. The major criteria that the
business entities must be followed with is the Corporations Act.
In other terms the Corporations Act points out the major requirements that must be
considered by the corporate organizations on the basis of the fact that the annual financial
report of the companies that have been prepared reflect the major qualitative characteristics
like timeliness, comparability and other vital Corporate Reporting qualities. Also the
Corporations Act highlights the regulations according to which the corporate social
responsibilities should be carried out by a company (Martin and Roychowdhury 2015). In the
study the focus is on the point that the investigation of the Corporations Act that had been
conducted did not result in the addition of any further legislation to the Act and the judgment
that had been passed was that the regulation regarding the corporate social responsibilities of
the business organization’s would be reliant on the characteristic of the market forces.

3ADVANCED FINANCIAL ACCOUNTING
The explanation can further be extended on the basis of the theories that have been
mentioned in the question, the theories are as follows:
 Public Interest Theory – The theory of public interest includes the specific theory
that represents the point that the operations of the business organization must carry
out in regards to the public welfare. In other words it can be said that the theory of
public interest has been prepared supporting the public and represents the element that
the business organizations should carry out the vital operations with the motive of the
public welfare (Macve, R., 2015). The Business organization’s identify and analyze
the environment of the business surroundings where the company is engaged. Hence,
public interest theory adaptation will contribute in corporate social responsibilities
automatic regulation of the corporate entity who have adopted. This is due to the
workings of the entity that will be headed towards with the purpose of public social
welfare.
 Capture Theory – The capture theory indicates on the theory that the business
organizations have been dealing in a particular industry will contribute in the
operation regulation of the industry. In other terms the bulk of companies who are
dealing in the same industry will capture eventually the market and led to regulations
guidance exists in the particular industry. For example, the energy industry might
consist of a bulk of companies that operate and carry out the similar level of corporate
social responsibilities (Christiaens et al. 2015). At the same time, a specific regulation
standard regarding the corporate social responsibilities may be present in the market,
but all the organizations of the same industry who are adopting a similar kind of
corporate social responsibilities will contribute in the framework of the social
responsibility in a similar way. Therefore, the forces of the market control the capture
theory regulation. Hence, it is fully matched according to the requirement that has
been presented in the question that the legislations in regards to the corporate social
responsibilities will be managed by the forces of the market. The capture theory
regulation will alter the structure of corporate social responsibility in technique that
ties with the present market requirements, resulting in the market forces adherence.
 Economic Interest Group Theory – The theory of economic interest group is more
or less alike to the public interest theory. It can be said that the economic interest
group theory highlights the specific processes in which the workings that are being
implemented by the business organizations to maintain the well-being and welfare of

4ADVANCED FINANCIAL ACCOUNTING
the economic groups are taking place. In the context the economic groups is the group
that indirectly or directly impacted by the operations of the corporate entities. The
compliance with the economic interest group theory will contribute in the carrying out
of the corporate social responsibilities that should be carried out by the entities. The
theory of economic interest group is implemented by the business organizations with
the motive of making the corporate social responsibilities of the companies simple
and easy. The theory of economic interest group additionally supports the corporate
social responsibility framework regulation with the help of the forces of the market by
making it mandatory for the entities to implement the operations that will enhance the
working environment and the group of economic interests (Leuz and Wysocki 2016).
Hence, the conclusion can be made from the understanding that the companies that
who are implementing the theory of accounting regulation will led to the formation of
the framework of corporate social responsibility that the market forces regulates.
Answer to Part C
There has been a representation of the issue in the question that highlights the point
that the Financial Accounting Standards Board of US does not allow the non-current assets
revaluation to fair value, but it is not compulsory to account for the costs of impairment that
are associated with the non-current assets. This is accordance to the “FASB Statement No.
144 Accounting for the Impairment or Disposal of Long-Lived Assets”.
In addition to it question has been raised on whether the compulsory rules have
impacted in the qualitative characteristic of relevance and representational faithfulness or not.
It has definitely influenced the qualitative characteristics of the financial report prepared by
the business organization. This for the reason of the point that the entities that have been
delivering a particular standard should have also mentioned the loss or gain of the impairment
of the corporate entities financial statement (Beams, Brozovsky and Shoulders 2017). Again,
as the method of impairment has not been stated in the statements of accounting of the
business originations, this makes the users of the financial statements accounting statements
confused as they may find no basis of the impairment loss or gain. Therefore, it can be
mentioned clearly regarding the qualitative characteristic of relevance has been hindered in
such an action. It can be identified that the reason to be that the users of the financial
statements find no resemblance in the disclosures regarding the impairment loss or gain and
may contribute in the increase in the complexity of interpreting the annual report that
organization prepares. Additionally, such a technique also enhances the probability of

5ADVANCED FINANCIAL ACCOUNTING
material misstatement occurrence in the books of account. In the accounting statements no
particular disclosure has been provided in the annual report of the listed corporate
organizations of UK. Moreover, it also makes it complicated the process of financial reports
accounting statements preparation. The accountant has to carry on with the standard of
current accounting with the standards of accounting that has been instituted by the FASB.
Therefore, it can be clearly mentioned that the qualitative characteristic of financial reporting
that deals with the particular quality of representational faithfulness also has been disturbed
by this specific practice (Tschopp and Nastanski 2014). Therefore, it can said that here that
the adherence to the norm established by FASB results in the non-compliance with the vital
financial report qualitative characteristics.
Answer to Part D
In the particular question the issue that has been raised refers to the point that many
directors has the opinion of not to valuing the assets like plant, property and equipment at
their fair value and opts for the measurement or valuing the assets on the basis of the cost
model. The directors do not choose for assets like the property, plant and equipment asset
revaluation for the point that the process of revaluation may contribute in a loss that will
positively be represented in the statements of accounting of the business organization and
will lessen down the profit that has been earned by the corporate entity throughout the
financial year. This will in addition to it will result in the reduction of the value of the entity’s
goodwill regarding the market where the operation is being taking place (Camilleri 2015).
The Accounting statement as mentioned prior to this have an impact on the financial
statements is that the profit would increase in case of an impairment gain and the profit would
reduce in case of an impairment loss in regards to the asset valuation.
The decision of not revaluing of the property, plant and equipment will not impact the
wealth of the shareholders financial position and the true reflection of the business
organization will not be represented in the annual report of the organization (Vigneau,
Humphreys and Moon 2015).

6ADVANCED FINANCIAL ACCOUNTING

7ADVANCED FINANCIAL ACCOUNTING
References
Beams, F.A., Brozovsky, J.A. and Shoulders, C.D., 2017. Advanced accounting. Pearson.
Camilleri, M.A., 2015. Valuing stakeholder engagement and sustainability
reporting. Corporate Reputation Review, 18(3), pp.210-222.
Christiaens, J., Vanhee, C., Manes-Rossi, F., Aversano, N. and Van Cauwenberge, P., 2015.
The effect of IPSAS on reforming governmental financial reporting: an international
comparison. International Review of Administrative Sciences, 81(1), pp.158-177.
Kim, J.B., Shi, H. and Zhou, J., 2014. International Financial Reporting Standards,
institutional infrastructures, and implied cost of equity capital around the world. Review of
Quantitative Finance and Accounting, 42(3), pp.469-507.
Leuz, C. and Wysocki, P.D., 2016. The economics of disclosure and financial reporting
regulation: Evidence and suggestions for future research. Journal of Accounting
Research, 54(2), pp.525-622.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Martin X, Roychowdhury S. Do financial market developments influence accounting
practices? Credit default swaps and borrowers׳ reporting conservatism. Journal of
Accounting and Economics. 2015 Feb 1;59(1):80-104.
Martin, X. and Roychowdhury, S., 2015. Do financial market developments influence
accounting practices? Credit default swaps and borrowers׳ reporting conservatism. Journal
of Accounting and Economics, 59(1), pp.80-104.
Nobes, C., 2014. International Classification of Financial Reporting 3e. Routledge.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Tschopp, D. and Nastanski, M., 2014. The harmonization and convergence of corporate
social responsibility reporting standards. Journal of Business Ethics, 125(1), pp.147-162.
Vernimmen, P., Quiry, P., Dallocchio, M., Le Fur, Y. and Salvi, A., 2014. Corporate
finance: theory and practice. John Wiley & Sons.

8ADVANCED FINANCIAL ACCOUNTING
Vigneau, L., Humphreys, M. and Moon, J., 2015. How do firms comply with international
sustainability standards? Processes and consequences of adopting the global reporting
initiative. Journal of Business Ethics, 131(2), pp.469-486.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting.
John Wiley & Sons.