HI6025 - IFRS in Australia: Accounting Theory and Current Issues

This report provides a detailed analysis of the implications of International Financial Reporting Standards (IFRS) on Australian accounting practices, focusing on the period after its adoption. It compares accounting practices before and after December 31, 2005, highlighting the shift from Australian Accounting Standards (AAS) to IFRS. The report discusses the role of the Australian Accounting Standards Board (AASB) in maintaining accounting standards aligned with IFRS. It explores the benefits of IFRS, including improved financial accountability, transparency, and comparability in the global market. The study further examines the impact of IFRS on local government entities, key policy decisions, and the overall quality of financial reporting in Australia, emphasizing its effects on earnings management, timely loss recognition, and relevance of value. The report concludes that the adoption of IFRS has significantly impacted Australian financial reporting by emphasizing high-quality standards and principles-based accounting.

HI6025 Accounting Theory and Current Issues
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Executive summary:
In this assignment report, we have compared the international accounting in Australia after
the period of IFRS. There is the comparison of implications from the prior period to pre-
period. In this report, it has explained that accounting policy, the changes which are estimated
before the prior period accounting 31st Dec 2005 and after the post period from 31st Dec 2005.
Australian accounting standard boards (AASB) sets the framework uses the IFRS standards,
to develop and maintain the accounting standard. Basically, in this report, we are comparing
the international accounting standards in Australia after IFRS. IFRS is a standard which
brings the financial accountability in the market. International Accounting standard board
gives the global standard for the preparation of the financial statement. There are many
countries which are using IFRS.
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Contents
Executive summary:...............................................................................................................2
Introduction:...........................................................................................................................4
“Implications of International Accounting in Australia after IFRS Period”..........................5
IFRS MAIN FOCUS:.............................................................................................................6
International accounting in Australian before the IFRS period (Prior 31st Dec 2005) and
after the period (31st Dec 2005):.............................................................................................7
IFRS and local government:...................................................................................................9
Conclusion:..........................................................................................................................10
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Introduction:
International financial reporting standards (IFRS) is an accounting standard followed by the
number of companies. Australia is one of the major countries of economy who has adopted
IFRS. To conduct this a person should have the knowledge of the accounting principles,
rules, and regulation, etc. To assist this a person should have the knowledge of literature.
IFRS is reporting is made by both the profit or non-profit organization. It basically focuses on
the report that is made by after 2005 so that they provide overall effectiveness and efficiency
to take the decision. IFRS is acceptable in the global market capital because of the high
quality, efficiency, transparency, and compatibility. IFRS principles are equally implemented
over all the companies having market share in the global market because it brings relevancies
in reports and quality in financial reporting framework.
IFRS is the international financial reporting standard which flows the new standard and their
interpretations. This research is very important for local government entities. IFRS is the
complex process which is followed in Australia to understand the differences between the
other specific countries and local government. One of the reasons for the adoption of the
IFRS is the significant and the minor changes in the reporting requirements. These changes
help in adopting the methods, concepts processes and system.
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“Implications of International Accounting in Australia after IFRS Period”
According to Yurisandi and Puspitasari (2015), implementation fof IFRS principles does not
affect the companies majorly because of available flexibility in choosing accounting policies
and principles. The main purpose of implementation or applicability of these IFRS principles
is to bring quality in the financial reporting of the organisation through professional and
regulatory authority. These principles help in bringing confidence to the investors who have
investments in the company.
The main effect of IFRS is on the adoption of the Financial report of local government
entities. Australian accounting standard (AAS) accounting policy has changed to the
International financial reporting standards (IFRS) as a result there is a change in the equity
and assets, liabilities, accounting surplus, etc. The key items are different and the accounts
prepared under these two have different accounting standard. This paper replaces the national
generally accepted accounting education with the international financing reporting standards.
Nations are not properly divided or equally distributed so with the help of accounting
education GAAP has moved to IFRS. IFRS also requires the higher education and a great
variety of knowledge to enter the accounting and to re-educate the investors, accounting, etc.
The adoption of the IFRS since 2005, is to be a considered the most ambitious efforts in the
history (Yurisandi and Puspitasari, 2015).
Major implication is:
1 There is the implication in the practical accounting as the teaching of this accounting is
mixed with the other accounting.
2 There is a lack of ability to operationalise the judgment of the professional. There is the
barrier in economies to exercise the accounting practitioners.
3 It also faces the problem and completes the challenging task of teaching on principles, rules
and regulations, a mixture of both.
4 IFRS includes intellectual skills, communication skills, management skills, business and
judgment related to that. So there is a need for increasing their skills, principles of the
accounting and the business enterprise.
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5 IFRS is a principally based approach rather than the accounting method. It is of high-
quality standards, material and services are mentioned up to date.
6 Many people don't think the need for the accounting principles so that they don't adopt
IFRS, as the doesn't give the report of day to day routines.
7 Earlier accounting standard follows on status while the IFRS is based approach to teaching,
education, research.
IFRS MAIN FOCUS:
The impact of IFRS adoption focuses on specific things which can be explained through
research papers:
1 Its main focus is on the high-quality product of material and services. It has to maintain the
financial reporting with full information.
2 Its impact is also on the comparing the financial report of Australian.
3 IFRS also gives the benefits to the investors and the analysts of the public listed Australian
company.
4 They also capture the impact of surveys of the public listed Australian company. They give
the corporate attitude towards IFRS.
Benefits of achieving IFRS:
1 Economy: As the economy of the Australian company is very wide in range. With the
increasing growth in international business, it is also important to maintain the efficient
market of capital. It makes the investors invest in the company and leads to more foreign
currency to flow in the country.
2 Investors: Investors want to invest outside the country. So they want the information which
is understandable, reliable, and relevant with the time. So it helps the investors in analysing
the accounting financial standards so that with the high-quality material they can invest in the
global market.
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3 Industry: The main aim of the industry is to raise capital from foreign markets. They raise
the money at lower cost, by complying with the accounting standards. IFRS helps in the
accounting properly with principles so it helps the industry to analyse the foreign market also.
4 Professionals: IFRS accounting helps professionals to analyse the audit report or it also
helps in the sell their services as experts in a different part of the country. They help in
making the report which is mobilised in work (Yurisandi and Puspitasari, 2015).
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International accounting in Australian before the IFRS period (Prior 31st Dec,
2005) and after the period (31st Dec, 2005):
There are many differences in the Australian accounting before IFRS ( International financial
reporting standard) and the GAAP ( Generally accepted accounting principles). The effect of
the changes with the time also. IFRS is more comprehensive financial accounting which
includes the high-quality work, principles, financial instrument, cost measurement and
employment benefits. Whereas GAAP includes the items such as insurance, intangible assets,
extractive activities and the framework (Yurisandi and Puspitasari, 2015).
Decision to adopt IFRS:
It is adapted from 1st January 2005. It is adaptable in accordance with the timetable. IFRS is a
stable platform which gives the companies comparable financial statement. It has a lower cost
of capital as comparison to others. It helps the investors to attract the capital of the company.
There is no need to re-cast the financial reports. It also doesn’t require that much cost in the
preparation of the statements of the companies. It also helps in filling the gaps of the
Australian GAAP , such as financial statement. There is also the implementation of the cost
of the change in the economy. It helps the employee in giving the accounting guidance. It
also focuses on the own for-profit standards to develop the freedom.
Key policy decisions:
The same transaction is accounted in the same manner no matters which business entity
undertakes it. But there are few exceptions on that. As this accounting standard is acceptable
in the private as well as public sector, we can compare the assistance and the accounting
skills across the different entities. In IFRS the policy statement has to be issued soon as per
the accounting standards in relation to the profit entities. To analyse the audit and the
financial report are also the part of multinational group (Yurizan and Puspitasari, 2015
The main objects are:
To allocate the available resources and scarce resources. To develop the assistance
performance, skills, financial position to facilitates the easy understanding. It helps in
assisting the directors with their duties and obligations. IFRS helps the Australian economy in
reducing the cost of the capital of the company, it helps in to enable the easy understanding of
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the accounting standards. It also helps the investors to maintain the capital market. Aas per
the implementation of the international financing report standards in Australia, its main
impact is on the quality focus on basically three things management of earnings, timely loss
recognition, and the relevance of the value. Australia has a wide range of metric based
accounting and information based market. It also helps in reducing the earning of the
company and improved the time management of the company.
Purpose of the publication:
This publication helps in the upcoming changes that are occurring in the accounting standard.
It provides the key requirement of the international accounting standard which is effective for
the first time reporting period. It also provides the agenda of the data and the summary of the
data published. It also summarises the key features of the other projects.
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IFRS and local government:
IFRS is applicable to all the sectors of the economy of the Australian, which means the
sectors which are earning profit or not. Private sector and public sector both are undertaken in
the IFRS accounting standard. It means it also takes the sector which is neutral. Public sectors
and the private sectors have the major difference in terms of ownership and objectives
(Yurisandi and Puspitasari, 2015).
The Australian public sector is made up of the three tiers of the government: local
government, state government, and the Commonwealth government. Public sector maintains
their accounts on the basis of the cash. In public sector, the local government maintains the
accrual method of accounting. As there is AASB who has made the rules, regulations and the
guidelines for the process of adoption. The introduction of IFRS standards of accounting in
local government it seems to be complicated as compared with the private sector. The public
local government has the social as well as complex objectives and arrangements whereas the
private companies have the dominance in infrastructural assets.
To prepare the financial statement of the local government in accordance with the IFRA and
accounting standard we have to collect the data. The Australian IFRS reporting period starts
from 31 December 2004 and in the first year the local government is required to restate the
comparatives and reconciliation to AASB. This data requires the comparison between the
assets and liabilities, equity and earnings and surplus. As the paper aims are to change or to
locate those changes that occur in the assets, liabilities, equity, earnings and surplus. These
changes should show in comparative accounting figures. From this list, we make the annual
report for the year ended 30 June 2005. Data collected is not that big task but to collect
that of their subsidiaries and to maintain the foreign currency data in the company is quite
difficult. IFRA gives the base to analyse the data and to compare the financial statements
with the other (Yurisandi and Puspitasari, 2015).
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Conclusion:
The adoption of the IFRS and its implementation has a great impact on the Australian
financing reporting. Earlier the Australian company follows the GAAP which is not that
much acceptable as comparison to IFRS. IFRS focuses on the high-quality product, and it
follows the principles, rules and regulation. It also focuses on the changes of the accounting
standard of the public local government entity. They also provide the key items so that is
useful and effective in the annual reports of the company. It basically shows the difference
between the IFRS and AASB assets, liabilities, surplus and equity. Further, we also
investigate or analyse the IFRS adoption process. IFRS gives the basic understandings of
comparison also adopt different strategies to implement.
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References:
Yurisandi, T. and Puspitasari, E. (2015). financial reporting quality- before and after IFRS
adoption using NICE Qualitative characteristics measurement. [online] Ac.els-cdn.com.
Available at: https://ac.els-cdn.com/S1877042815054312/1-s2.0-S1877042815054312-
main.pdf?_tid=d73b024c-3863-487c-865f-
d12b285885be&acdnat=1526998783_85077bf276087d8edc5abd67a844e341 [Accessed 22
May 2018].
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