Contemporary Accounting Theory: IASB, AASB Standards Report

This report provides a comprehensive analysis of contemporary accounting theory, focusing on the changes and impacts of accounting standards. It begins with a literature review that explores the incorporation of International Accounting Standards Board (IASB) standards into Australian Accounting Standards (AASB), and also addresses the incorporation of local Australian issues. The report then delves into the impact on company accounting if proposed changes are written into IAS 116/AASB 116, specifically concerning property, plant, and equipment. It examines the impact on manufacturing operations and the rationale behind adopting changes in international standards. The report highlights the prohibition of deducting costs related to property, plant, and equipment, as well as the recognition of sales in profit or loss, as a result of the proposed changes to IAS 16. The report also discusses the adoption of IASB standards by AASB and the strategic direction of the Financial Reporting Council, ensuring compliance with IASB standards and the impact of these standards on Australian entities. Finally, it addresses the AASB's role in incorporating local issues and technical considerations, particularly for not-for-profit entities.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary accounting theory
Name of Student:
Name of University:
Author’s Note:

1CONTEMPORARY ACCOUNTING THEORY
Executive Summary
The report has addressed on the several considerations made for changes pertaining to the
accounting standards. It has been further able to show the different aspects of the change in terms
of standards perceived. The first part of the report has addressed to make the relevant changes
associated incorporating the change to international accounting standards into the Australian
accounting standards. The latter part of the report has identified the impact on company
accounting if the recommended the changes are written into IAS 116/AASB 116. It has further
shown the rationale for adopting the change in the international perspective or national
accounting boards such as the AASB. The main findings has revealed that IASB standards has
been further seen to be based on the several types of the standards of the adoption which has
been seen to be based on the ensuring the profit applied by IASB to achieve the FRC strategic
direction for ensuring the application for the various types of the clause with the considerations
which has been made to ensure the application of AASB standards for reporting periods
beginning on or after 1 January 2005 and the same is seen to comply with IASB standards. The
aforementioned exposure a draft relates to the various changes has been associated to the
amendment of “IAS 16 Property, Plant and Equipment”. The main impact of this draft has been
seen in form prohibiting the companies to deduct the various types of the cost which has been
seen to be related to the cost of an item or property, plant or equipments and any proceeds
accumulated from the sales produced while bringing the asset to the location and the condition
for the operations intended by the management. The main formulation of the draft will be able to
recognise the sales from the profit or loss.

2CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Report Body.....................................................................................................................................3
Part A Literature Review.............................................................................................................3
AASB incorporating changes to IASB........................................................................................3
AASB incorporation of local, Australian issues into the Australian accounting standards........5
Part B Report...............................................................................................................................8
Impact on company accounting if the recommended changes are written into IAS 116/AASB
116...............................................................................................................................................8
Impact of the change on countries with higher exposure to manufacturing operations..............9
Rationale for incorporation of the changes in international standards or AASB......................10
Recommendations..........................................................................................................................11
References......................................................................................................................................12

3CONTEMPORARY ACCOUNTING THEORY
Report Body
Part A Literature Review
AASB incorporating changes to IASB
The report is intended to show the various types of the changes pertaining to the
accounting standards. It has been further able to show the different aspects of the change in terms
of standards perceived. In several occasions the main intention of changing the accounting
concept has been identified with complying as per varied nature of the accounting standards. The
report has been divided into two sections. The first part of the report has addressed to make the
relevant changes associated incorporating the international changes of the accounting standards
(i.e. changes being pushed from the IASB) into the Australian accounting standards. It has
further shown incorporation of local standards into Australian issues with the Australian
accounting standards. The second part of the report has identified the impact on company
accounting if the recommended the changes are written into IAS 116/AASB 116. The study has
further shown the rationale for adopting the change in the international perspective or national
accounting boards such as the AASB (Holder et al., 2013).
AASB has been seen to adopt the “International Accounting Standards Board (IASB)”
standards on 15 July 2004. In the process of the adoption of the IASB standard AASB has been
seen to act based on the various types of the “Financial Reporting Council strategic direction”.
The various types of the adoption process have been further seen to be based on meeting with the
agreed norms with AASB Consultative Group which had taken place after March 2003
(Moldovan, 2014). The equivalent issue of the IASB standards has been further seen to be based
on the several types of the standards of the adoption which has been seen to be based on the

4CONTEMPORARY ACCOUNTING THEORY
ensuring the profit applied by IASB to achieve the FRC strategic direction. This is done to
ensure the application for the various types of the clause which has been seen to be based on the
consideration which has been made to ensure the application of AASB standards for reporting
periods beginning on or after 1 January 2005. The same is seen to comply with IASB standards
(Nguyen & Molinari, 2013).
In the adoption of the IASB standard, AASB has been seen to be based on the various
types of the standards which have been able to consider the different types of approaches made
in form of the content and wording of IASB standards. It has been further seen that words are
only changed as per the need to accommodate with the various types of the Australian legislative
environment (Morais dos Santos & dos Santos, 2014). This particular consideration can be seen
with the need to include the Australian application paragraph which has been mentioned as per
the Corporations Act 2001. The aforementioned changes has been related to the change factors
which has not seen to be affected for the different types of the considerations made in form of the
substance of the requirements (Gordon & Street, 2013). It has been further observed that IASB
has focused on the various types of the considerations which have been made in terms of the
setting off the standards for the different types of the reporting of entities. The overall adoption
process has been further seen to be identified with the various types the consideration which has
been seen to made as per the AASB standards. This is seen to be limited with the different
additional requirements for the not-for-profit entities. The various circumstances have been made
as per the non-profit entities which have been able to comply with the Australian equivalents
standards made as per the IASB standards. The main motive for the changes pertaining to AASB
has been further seen to be considered with a motive to achieve highest quality of financial report
as per the IASB standards (Hoffman, 2016). In several cases, AASB needs to make the

5CONTEMPORARY ACCOUNTING THEORY
additional changes which are seen to be made per the additional disclosure which were not
present before the integration of the accounting standards with IASB. The removal of optional
treatments has been further seen to not impact on the capacity on the Australian entity to achieve
the compliance in terms of IASB standards. In several cases the additional disclosure pertaining
to the AASB has been based on the varied type the important considerations which has been
taken into account with the limited scope of AASB policy on “optional treatments and scope
exclusions in relation to the adoption of IASB standards for 2005”(Xu et al., 2017).
AASB incorporation of local, Australian issues into the Australian accounting standards
It has been inferred that Australia has adopted the “International Financial Reporting
Standards (IFRSs)” on 1st January2005 which in line with the financial reporting council. The
various types of the issues in IASB framework has been based on the IFRIC work program,
included in AASB program. The main involvement of the AASB has been seen to be varying as
per issue-by-issue and may be substantive or non-substantive. The various types of the technical
issues have been further seen to be associated based on the “International Public Sector
Accounting Standards Board (IPSASB)”. AASB is seen to closely monitor the various types of
the significance to the public sector local reporting in Australia(Guthrie & Pang, 2013).
AASB has further identified the technical issues in terms of the factors requiring the
consideration. The main issue has been identified in terms of the elation to for-profit entities
which are seen to be normally referred to as IASB. The main types of the issues affected for the
non-profit has been related to both private and public sectors which has been
locally/domestically addressed as per IPSASB (Satin & Huffman, 2015).

6CONTEMPORARY ACCOUNTING THEORY
Once the technical issue has been identified AASB has been able to develop the project
proposal. This has been further related to contain the potential benefits which are undertaken
based on the costs of not undertaking and the resources which are available with the likely
timing. AASB has been further able to review the proposal based on the decision to whether the
project has been sufficient for the consideration and should be placed on its agenda (work
program).
In case the board decides not to add a topic to the agenda, it may be decided by the board
to make a formal decision to add the items which has been not added in the agenda list. In such a
situation, the board decides to make minutes to record to make the decisions which have been
seen to be made by the Board Agenda (Beckman, 2016).
Some of the other issues have been identified in a situation where the requirement
standards need to be integrated specifically to not-for-profit (NFP) entities. The study has been
able to identify the main policies which need to be contained in “AASB 127 Consolidated and
Separate Financial Statements”. This has been further based on the conflicts arising from the use
of uniform accounting policies. The recoverable amount of CGU fair report has been further seen
to be prepared based on the AASB 136 as per the increasing CGU’s fair value less the cost in
selling and the value in use (Etheridge & Hsu, 2013).
Some of the common incorporation issues of the AASB have been considered based on
AASB 121, dealing with the effects of changes in the rates of foreign exchange. Other issues has
been identified in terms of the concerning matters which has shown that the various types of
considerations of the local accounting standards which has not taken into account by AASB 121
(Detzen, 2016). The main requirement pertaining to this has been applied based on the various

7CONTEMPORARY ACCOUNTING THEORY
types of the measurement which has been seen to be applied based on the AASB 139 and AASB
9. This has shown several contradictions in the recognition of local integration. The issue
resolution process has been explained below with the diagram as follows:
Figure: AASB issue resolution process
(Source: Aasb.gov.au, 2017)
Based on the different evaluation made in this section, we have been able to learn that the
equivalent issue of the IASB standards has been further seen to be based on the several types of
the standards of the adoption which associated to profit applied by IASB. This is done to achieve
the FRC strategic direction for ensuring the application for the various types of the clause which
has been considered as per the application of AASB standards for reporting periods beginning on
or after 1 January 2005. The same is seen to comply with IASB standards. It has been further

8CONTEMPORARY ACCOUNTING THEORY
discerned that COGS in case of most extractive and manufacturing industries which are seen to
be applying IAS 2 Inventories.
Part B Report
Impact on company accounting if the recommended changes are written into IAS
116/AASB 116
The aforementioned exposure draft relates to the various changes has been associated to
the amendment of “IAS 16 Property, Plant and Equipment”. The main impact of this draft has
been seen in form of prohibiting the companies to deduct the various types of the cost which has
been seen to be related to the cost of an item or property, plant or equipments and any proceeds
accumulated from the sales produced. This needs to done while bringing the asset to the location
and the condition for the operations intended by the management. The main formulation of the
draft will be able to recognise the sales from the profit or loss (Pacter, 2014). The application of
this standard would result in ensuring greater discipline for the application process of paragraph
17 or IAS 16. From the application of the relevant principles as per the exposure draft it can be
seen that that cost of acquiring or constructing an asset is based on the consideration paid and
accumulated which is seen to en necessarily bring the various types of the conditions set by the
management intended to use. In case equipment is acquired or self constructed then the test
needs to be conducted to check the necessary process for acquisition or construction of the asset
(Choi, Peasnell, & Toniato, 2013). The cost of the test has been further seen to be based on the
consideration of the several types of the factors which are seen to be associated the adoption of
the different types of the factors which has been taken into account the acquisition cost
(Iasplus.com, 2017).

9CONTEMPORARY ACCOUNTING THEORY
Impact of the change on countries with higher exposure to manufacturing operations
In general, depreciation has been seen with an important part of the COGS in case of
most extractive and manufacturing industries which are seen to be applying IAS 2 Inventories.
Any consumption of the asset during the testing process has been seen to be based on the
different types of the consideration which has been based on the testing of the assets which are
negligible for consideration. The exposure draft has further noted that the various types of the
cost of conversion have not included depreciation of the assets which has been further seen to be
associated to the assets available for use. In such a case the resulting COGS and the gross margin
will be misleading in nature. In the determination of the cost of the items it has been further
consideration that the varied types of the standards need to be further based on the proposed
amendments which needs to be made as per the judgement beyond that already required applying
IFRS Standards. The use of the various types of the judgements pertaining to the manufacturing
sector has been seen with the sales proceeds being an important consideration for the assessment
of the use of PPE. There has been no reasonable cost associated to the cost of sales (IASB &
IFRS Foundation, 2016).
It has been further seen that the process of making the assets has been made available for
the use of asset to begin the production of the goods. The proposed amendment will lead to
significant amount the changes pertaining to the different considerations which has been seen to
be made in items included for testing but not currently used in the IFRS standard (IASB, 2016).
Rationale for incorporation of the changes in AASB
The main rationale for the adoption of the changes in AASB as recommended IASB has
been identified with prohibition for the deduction of the various types of the cost pertaining to
the deduction of the cost of the asset which has been further seen to be based on the bringing that

10CONTEMPORARY ACCOUNTING THEORY
asset to the location and condition necessary. This is done to make it capable of operating in the
manner intended by management. Instead of taking the aforementioned action it has been seen
that the firms’ needs to be associated to the necessary changes pertaining to the adoption of the
sales recognition based on the proceeds in profit or loss. The adoption of this exposure draft has
been seen to be conducive to make the necessary changes in the AASB for increasing the quality
as per the recommendations by IASB. It has been further seen that the various type the necessary
changes needs to be implemented both in manufacturing and non manufacturing sectors. Some of
the various types of the other rational in the adoption of the exposure draft have been further
seen to be based on the important consideration made as per the cost of an item of PPEs. This has
been seen to include the various types the considerations based on the deduction made as per the
net proceeds arising from the selling of any assets as per location and condition (Álvarez et al.,
2014).
The different types of the interpretations made in the report has been further able to state
that the exposure draft needs to be addressed with the different types the factors which are seen
to be considered for making the additional disclosure in the report pertaining to the PPE
evaluations (Ruhl & Smith, 2013).
Recommendations
The main recommendations for the issue resolution process have been identified with the
varied types of the factors which need to be addressed with different types of the considerations
made in the report. In case of a technical issue AASB needs to develop a particular project
proposal plan for the assessment of potential benefits of undertaking the project and the making
evaluations on the cost considerations. The various types of the issue have been further seen to

11CONTEMPORARY ACCOUNTING THEORY
be added to the different type of the other scenarios which are seen to relate to the associated
significance in each country, in order to develop comparable requirements.
It has been further seen that in case of any issue, AASB needs to consult with the
stakeholder for making the related documents available to the public and making the necessary
discussions with the stakeholders of the company on various types of the issues pertaining to the
exposure drafts, invitations to the comment and discussions papers. The study has favoured the
adoption of this exposure draft has been seen to be conducive to make the necessary changes in
the AASB for increasing the quality as per the recommendations by IASB. It has been further
seen that the various type the necessary changes needs to be implemented both in manufacturing
and non manufacturing sectors.

12CONTEMPORARY ACCOUNTING THEORY
References
Álvarez, I., Calvo, J. A., & Mora, A. (2014). Involving academics in the accounting standard
setting process: An application of the Delphi methodology to the assessment of IASB
proposals. Journal of Management and Governance, 18(3), 765–791.
https://doi.org/10.1007/s10997-012-9244-3
Beckman, J. K. (2016). FASB and IASB diverging perspectives on the new lessee accounting.
International Journal of Managerial Finance, 12(2), 161–176.
https://doi.org/10.1108/IJMF-08-2015-0161
Choi, Y. S., Peasnell, K., & Toniato, J. (2013). Has the IASB been successful in making
accounting earnings more useful for prediction and valuation? UK evidence. Journal of
Business Finance and Accounting, 40(7–8), 741–768. https://doi.org/10.1111/jbfa.12025
Detzen, D. (2016). From compromise to concept? – a review of “other comprehensive income.”
Accounting and Business Research, 46(7), 760–783.
https://doi.org/10.1080/00014788.2015.1135783
Etheridge, H., & Hsu, K. H. Y. (2013). Financial instrument credit impairment models-a rift in
the convergence of iasb and fasb accounting standards. Academy of Accounting and
Financial Studies Journal, 17(1), 119–126.
Gordon, E. A., & Street, D. L. (2013). Building IASB Research Capacity: A Commentary.
Journal of International Financial Management and Accounting, 24(2), 176–201.
https://doi.org/10.1111/jifm.12009

13CONTEMPORARY ACCOUNTING THEORY
Guthrie, J., & Pang, T. T. (2013). Disclosure of goodwill impairment under aasb 136 from 2005-
2010. Australian Accounting Review, 23(3), 216–231. https://doi.org/10.1111/j.1835-
2561.2013.00204.x
Hoffman, C. W. (2016). Revising the Conceptual Framework of the International Standards:
IASB Proposals Met with Support and Skepticism. World Journal of Business and
Management, 2(1), 1. https://doi.org/10.5296/wjbm.v2i1.8868
Holder, A. D., Karim, K. E., Lin, K. J., & Woods, M. (2013). A content analysis of the comment
letters to the FASB and IASB: Accounting for contingencies. Advances in Accounting,
29(1), 134–153. https://doi.org/10.1016/j.adiac.2013.03.005
IASB. (2016). IFRS 15 Revenue from Contracts with Customers. In IFRS Green Book 2016 Part
A (pp. A729–A794). https://doi.org/http://www.ifrs.org/Current-Projects/IASB-Projects/
IFRS-15-Implementation/Pages/IFRS-15-Revenue-from-Contracts-with-Customers-
Implementation.aspx
IASB and IFRS Foundation. (2016). IASB shines light on leases by bringing them onto the
balance sheet. 13 January 2016. Retrieved from
http://www.ifrs.org/Alerts/PressRelease/Pages/IASB-shines-light-on-leases-by-bringing-
them-onto-the-balance-sheet.aspx
IASB publishes proposed amendments to IAS 16 regarding proceeds before intended use.
(2017). Iasplus.com. Retrieved 19 August 2017, from
https://www.iasplus.com/en/news/2017/06/ias-16-proceeds
Moldovan, R. (2014). Post-Implementation Reviews for IASB and FASB Standards: A

14CONTEMPORARY ACCOUNTING THEORY
Comparison of the Process and Findings for the Operating Segments Standards. Accounting
in Europe, 11(February 2015), 113–137. https://doi.org/10.1080/17449480.2014.901588
Morais dos Santos, O., & dos Santos, A. (2014). Lobbying na Regulação Contábil : Evidências
do Setor Petrolífero * Lobbying on Accounting Regulation : Evidence from the Oil
Industry. Revista Contabilidade & Finanças, 25(65), 124–144.
https://doi.org/10.1590/S1519-70772014000200004
Nguyen, T., & Molinari, P. (2013). Accounting for ``Insurance Contracts{’’} According to IASB
Exposure Draft-Is the Information Useful? Geneva Papers on Risk and Insurance-Issues
and Practice, 38(2, SI), 376–398. https://doi.org/10.1057/gpp.2012.11
Pacter, P. (2014). Global Accounting Standards - From Vision to Reality. The CPA Journal,
84(February 2012), 6–10. https://doi.org/0732-8435
Ruhl, J. M., & Smith, O. M. (2013). ISSUES IN ACCOUNTING EDUCATION The Accounting
Entity, Relevance, and Faithful Representation: Linking Financial Statement Notes to the
FASB and IASB Conceptual Frameworks. American Accounting Association, 28(4), 1009–
1029. https://doi.org/10.2308/iace-50522
Satin, D., & Huffman, T. (2015). FASB and IASB convergence: Asymptotic relationship or
transmogrification? Academy of Accounting and Financial Studies Journal, 19(2), 239–250.
The standard-setting process . (2017). Aasb.gov.au. Retrieved 19 August 2017, from
http://www.aasb.gov.au/About-the-AASB/The-standard-setting-process.aspx#d
Xu, W., Davidson, R. A., & Cheong, C. S. (2017). Converting financial statements: operating to
capitalised leases. Pacific Accounting Review, 29(1), 34–54. https://doi.org/10.1108/PAR-

15CONTEMPORARY ACCOUNTING THEORY
01-2016-0003