HI6025: Impact of IRFS on Australian Public Sector Accounting

This report examines the implications of International Financial Reporting Standards (IRFS) on the Australian public sector, focusing on the changes and challenges brought about by their adoption. It discusses the impact on accounting staff, decision-making processes, and the overall developmen...Read More

Running head: IMPLICATIONS OF IRFS ON PUBLIC SECTOR 1
Implications of IRFS on public sector
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IMPLICATIONS OF IRFS ON PUBLIC SECTOR 2
Implications of IRFS on public sector.
Executive summary
Public sectors have different reactions on the adoptions of the IRFS. The adoption of
IRFS has affected the public sector in different ways, making them have diverse responses on the
same. These report will focus on mainly the impact that IRFS has on the accounting standards of
the public sector entities. The adoption of the IRFS applies to all sectors of the economy. The
public sector being part of the Australian economy has to adapt to the new change. However,
there are various challenges that the report will mention which make it difficult for the public
sector to adopt the IRFS. These essential issues as will be mentioned in the story would raise the
question if it were possible to use the standards for public organizations or public entities.
The report will focus on the challenges that the information has had on; staff is working
on public sector entities, the problem that arises from determining assets and liabilities on the
public sector and the difficulty in developmental growth while maintaining the records standards.
The report does not end without looking at the improved levels of credibility that the IRFS has
brought to the public sector entities (Bugeja, Czernkowski, & Moran, 2015). This is concerning
keeping the accountants ethical and disciplined. Keeping in mind that public sectors could be one
of the most corrupt sectors of the economy. The accounting report mainly has got its implications
from the report by Kamran Ahmed (la Trobe University and Manzurul Alam (Murdoch
University Australia) the effects of IRFS on financial reports of public sector entities. Australian
accounting, Business and finance Journal published 6(3) 2012. The report has general
information about public sector and the IRFS. This report draws impacts from it and discusses
them.

IMPLICATIONS OF IRFS ON PUBLIC SECTOR 3
IRFS accounting implications on the staff of the public sectors
The IRFS accounting level has different levels of calculation, different to the AASB.
There are reports about the assets and liabilities. The assets are further divided into intangible
and tangible assets. There are very slim differences between these two aspects. The two are
supposed to be determined by an accounting expert. This aspect was not previously there on the
AASB standards. This, therefore, means two implications for the public sectors. The first
implication is that they have two hire new accounting staffs that are equipped with the modern
IRFS standards. This will be one way of adopting and implicating the new rules.
Secondly, the public sector entities have to hire more accounting staff. Some accounting
staff will be involved in the calculation while other will be included in the reporting. The
reporting of accounting losses and profits from the fields. The reporting of liabilities. The
reporting of depreciating assets and the councils. The discussed two implications of IRFS
standards on accounting staff automatically invites another inference. The other suggestion asks
to focus on resources. There have to be enough resources that aid in the collection of this kind of
financial and accounting data.
The effect of the IRFS on decision making
The public sector had only one tire of accounting decision to make concerning the
AASB. The regional government directors only operated to make accounting decisions that were
in cash flow forms. The same choices would be used when presenting the accounting financial
statements to the national government. Since the coming of the new standards, the public sector
councils have to decide on two separate levels. Previous to the AASB standards where both
management accounting and external reporting were the same. Currently, with the new IRFS, the
councils have to make internal and external accounting report. They have to use it for internal

IMPLICATIONS OF IRFS ON PUBLIC SECTOR 4
decision-making processes, and they too develop a superior information system which is
specifically designed to incorporate both the AASB standards and the new IRFS. The external
accounting standards where the decision is first made has to meet the IRFS standards of ethical
legislation and regulations. The second tier decision has to meet the council and local
management entity of internal decision making within the scope of the local board. Although
there are possibilities of correlations, care should be taken not to overlook one over the other.
The dual reporting regime has particular effects on the public sector that will be mentioned at the
last part of this report.
The implication of IRFS on the development of the public sector
There has been numerous complains that adopting and using the new IRFS standards is
quite involving. From asset evaluation, depreciation policies, useful lives, and other unmentioned
essential policies. In this way, there are several ways in which the government and the IRFS
standards are keenly following to ensure that the standards are developed (Bugeja, & Loyeung,
2017). The rules of making it the standard an economic policy has significantly added pressure to
the local governments. This, therefore, affects the local counties development. The entities have
reportedly been so keen to implement and follow the policies that they did have time to focus on
other developmental factors (Goode, 2017).
The managers are so in-depth into keeping financial records and standards while keeping
up with the IRFS, that they don’t have adequate time to focus on investments. One of the case
studies recognizes that before the implementation of the IRFS, the public sector was able to
invest in real estate’s business, they further claim that with the coming of these standards it is

IMPLICATIONS OF IRFS ON PUBLIC SECTOR 5
difficult to analyze the measures while keeping developments improved. Managerial standards
have therefore been smothered from creativity of development to profits and loss management.
Impact of IRFS on ethical accounting standards of the public sector
With the previous implementation of accounting standards, there were specific misquoted
margins on profits and losses by the council’s local managers. Many audit reports had shown
accountants who interfered with the balance sheet to affect the external presentation. The story
even further determined that the accountants would have priority meetings with account
supervisors before the actual interviews on accounting levels. The accounting standards helped
maintain the ethical standards of accounting. These standards imply that the managing
accountants in the public sector have to become more responsible and abide by their moral rules
(Firth, & Gounopoulos, 2017).
An implication of the IRFS on public sector
The assets that are written to the public sector are difficult to determine if they are assets.
Determining the fair value of an asset is a recommendation in the new standards. The standards
further recommend that there is the sustainability of the market value of the assets. This
implications of the accounting standards can be neglected by the public sector (Bugeja, and
Loyeung, 2015). The assets of the public sector can be challenging to analyze. An example of an
asset which can be challenging to examine regarding sustainability and market value, for
example, is a road transport network within the local government. Such infrastructure is,
therefore, challenging to use as assets as they cannot be sold to produce profits.

IMPLICATIONS OF IRFS ON PUBLIC SECTOR 6
HOW IRFS HAS IMPACTED ON THE PUBLIC SECTOR
The standards have changed on the various accounting operations of the public sector
entities. Based on the implications that these IRFS standards have had on the public sector
entities (Bryce & Mather, 2015). The substances have been forced to adapt to the new systems.
Ranging from how the companies hire their accountants to how they treat their professional
valuation of assets.
Impact of the IRFS on hired staffs of public sector
The public sector is currently forced to hire accounting staff that is capable of
understanding without a doubt the new standards of accounting (Apergis, 2015). The most
advantageous public sector authorities are the ones situated in urban locations, as they can easily
access such accounting professional. However, it is difficult for accounting professionals from
rural areas to access such accounting professionals that adapt very fast to the new IRFS
standards. The public sector in the rural areas, therefore, have to involve their top trained
managers. Some of the public sector entities have organized training for their accounting officers
to understand into more in-depth analysis the operations of the IRFS (Wee, Tarca, & Changn,
2014).
Impact of IRFS on quality of accounting standards in the public sector entities
The accountants have also learned to become even more responsible in the public sector
entities. These standards have had a positive impact by increasing the ethics of accountants,
therefore, reducing corrupt cases. It is now easier to do audits in the public sector entities. As the
level of accountability has increased, the public sector entities authorities do not have to worry
about corrupt cases anymore (Bond, Govendir & Wells, 2016).

IMPLICATIONS OF IRFS ON PUBLIC SECTOR 7
Impact of the IRFS on public sector development
These accounting standards have led to the slowed growth of these entities. A lot of time
is taken balancing the interest required by the rules that were creatively thinking about how to
develop projects. Projects have to be delayed, so the accounting balance meet the regulations
expected. When all the managers are so engaged in such, the company, therefore, therefore,
makes very little progress (Bond, Govendir & Wells, 2016).
Impact of the IRFS on the public sector infrastructure
The provincial government has also been forced to invest in infrastructure that favors the
implementation of the IRFS. Some local governments have employed technological types of
machinery and software that can do financial accounting operations (Grossman, Smith, & Tervo,
2016). These operations are so simple when done by these soft wares and are accurate than when
a human is involved. The human might only be required when making financial, assets and
liabilities estimations (Benson, Clarkson, Smith & Tutticci, 2015).

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Reference
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MENA countries. International Journal of Economics and Finance, 7(10), 182.
Benson, K., Clarkson, P. M., Smith, T., & Tutticci, I. (2015). A review of accounting research in
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Bond, D., Govendir, B., & Wells, P. (2016). An evaluation of asset impairments by Australian
firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), 259-
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Bryce, M., Ali, M. J., & Mather, P. R. (2015). Accounting quality in the pre-/post-IFRS adoption
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IMPLICATIONS OF IRFS ON PUBLIC SECTOR 9
Grossman, A. M., Smith, M., & Tervo, W. (2016). Measuring the Impact of International
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