IFRS Adoption: Impact Analysis on Australian Financial Standards

This report examines the adoption of International Financial Reporting Standards (IFRS) in Australia, focusing on the implications and benefits of replacing Australian Accounting Standards Board (AASB) standards with international equivalents. It discusses the increased legibility of financial records, the reliability of accrual accounts, the impact on goodwill impairment and the valuation of internally generated intangibles, and the relevance of book value and earnings for equity valuation. The report also addresses the cost-benefit analysis of adopting IFRS, highlighting the reduction in bookkeeping costs for companies operating globally. Research findings from various studies are incorporated to support the analysis, and the practical contributions and relationship of the project to international accounting principles are explored. Desklib provides access to similar solved assignments and past papers for students.

Adoption of IFRS Standards
in place of AASB Standards

Disclosing the Impacts of
Adopting Australian
Equivalents to
International Financial
Reporting Standards

TABLE OF CONTENT
 Introduction
 Implications of adoption of an international
financial system based on IFRS
 Rise In the legibility of the financial records.
 Reliability of the firm’s accrual account
 Goodwill impairment and the value of internally
generated intangibles
 Book value and Earnings for the valuation of
equity
 Cost - benefit of adoption of international
accounting system of financial record keeping
 Practical contribution
 Relation of the project with the unit done in class
 Summary
 References

Introduction
• The presentation explains the adoption of international
financial standards in Australia based on IFRS. It includes the
benefits of adoption of these standards, reporting standards
associated with IFRS, the insights gained after completion of
the project and how they relate to unit completed in the class
based on International accounting.

Implications of adopting an
international financial system
based on IFRS Rise In the legibility of
the financial records.
 Reliability of the firm’s accrual
account
 Goodwill impairment and the
value of internally generated
intangibles
 Book value and Earnings for the
valuation of equity
 Cost - benefit of adoption of
international accounting system
of financial record keeping

Rise In the legibility of the
financial records.
 After the adoption of IFRS standards, there has
been a rise in the legibility of the financial
standards. The research in this area was carried
on by Cheung and Lau (2016, p. 162), the report
said that after the adoption of the new system
there was rise in the legibility of the financial
records, though they were lengthier than the
previous financial statements here level of
complexity fell by a significant level.

Reliability of the firm’s accrual
account
 Lai et al (2013b) in this research carried out, it
was found that accrual reliability has shown a
significant decline. This decline was linked to
declining working capital, non – current operating
assets and financial accruals. The research added
further that after the adoption of the standards
the relevance of the financial information has
risen significantly.

Goodwill impairment and the value
of internally generated intangibles
 This is particularly concerned with impairment of
goodwill and other intangibles in the books of
accounts. The research in this area was carried
out by Ji and Lu (2014), they found that after the
adoption of the new financial standards based on
IFRS for financial reporting the value of the
intangibles has declined. They added the
intangibles that were brought in the books of
financial accounts after the adoption of IFRS
standards have stayed in the books and are still
common.

Book value and Earnings for the
valuation of equity
 Clarkson et al. (2011) carried out a research in
this field. His results pointed out that after the
adoption of IFRS in Australia there was minor rise
or decline in the ability of accounting number for
explaining the price variation. They added: “the
value relevance of aggregate book value and
earnings is a natural place to look for the impact
of IFRS adoption on financial reporting quality
given the paramount role of equity valuation in
the IFRS conceptual framework”.

Cost - benefit of adoption of
international accounting system
Today in the globalized world
companies operate at the global
level, this requires them to prepare
financial reports as per the
standards laid down by their home
country but also for the countries in
which they are undertaking business
activities. After the adoption of IFRS
standards, the companies are no
longer required to make multiple
financial statements. They can just
prepare the financial reports based
on IFRS principles, this leads to a
reduction in the cost of
bookkeeping. This saves the
company’s resources which were
previously being utilized to prepare
unnecessary financial records.

Practical contribution
 After carrying out research in this area,
there has been a significant increase in
the information related to the system of
international accounting. Particularly new
insights were gained in the area of
international accounting and if the
company maintains its accounts with IFRS
standards, it does not have to prepare
duplicate financial statements, that leads
to the reduction of cost. There was new
information that was learned while
working on this project.

Relation of the project with
the unit done in class
 International accounting unit done in class
explains international accounting, its benefits and
how does it lead to a reduction in the cost of
bookkeeping. The project explains the similar
things, with respect to adoption of international
accounting system in Australia and implications of
adoption of the system. After adoption of this
system, the companies gained a significant
advantage which was mentioned in the class. At
the same time, the deeper insights about
international accounting gained in the class were
further strengthened in this project and it also
helped in doing this project.