Contemporary Issues in Accounting: Analysis of IASB Amendments on AASB

This report delves into the dynamic relationship between the International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB). It examines how the AASB incorporates IASB pronouncements, providing a detailed literature review of the evolving accounting standards. The report is divided into two parts: the first part discusses the incorporation of IASB standards into the AASB framework, highlighting key strategic decisions and the process of identifying and addressing accounting issues. The second part analyzes specific instances where the AASB either aligns with or diverges from IASB recommendations, particularly regarding amendments related to property, plant, and equipment, intangible assets, and employee benefits. The report concludes with recommendations on the 'one size fits all' approach for reporting entities.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary issues in accounting
Name of the University
Name of the student
Authors note

1
CONTEMPORARY ISSUES IN ACCOUNTING
Executive summary:
The report is prepared to understand the changes that have been incorporated to AASB due to
several amendments introduced by IASB. It consist of two parts, in first part deal with
discussion on literature review about how the accounting standards are changing and how the
Australian standard are incorporating issues into their own accounting standards. Second part
of report deals with the impact of amendments introduced by IASB on company accounting.
Furthermore, recommendations are provided whether the one size fits all approach will be
beneficial for reporting entities.

2
CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Part A:........................................................................................................................................3
Incorporation of IASB into AASB:............................................................................................3
Part B:.........................................................................................................................................8
Specific instances depicting whether accounting standard should change or not as recommend
by IASB:.....................................................................................................................................8
Recommendation:....................................................................................................................10
Conclusion:..............................................................................................................................11
Reference:................................................................................................................................12

3
CONTEMPORARY ISSUES IN ACCOUNTING
Introduction:
The study takes insight into the changing relationship between the standard setter that
is International accounting standard boards (IASB) and Australian accounting standard board
(AASB).Pronouncements issued by International accounting standard boards are incorporated
in the Australian accounting standards. Relationship between the domestic standard setter and
IASB is changing for establishing more formal link between the regional and domestic group
of standard setters that is move currently motivated by trustees and IASB (Carey et al., 2014).
Original strategic model of IASB was mainly developed for creating strong relationship with
key standard setters and in this regard, Australia was one of the key standard setters.
Australia was at IASB gathering from the start of operations of IASB.
Discussion:
Part A:
Incorporation of IASB into AASB:
AASB has the responsibility of issuing and developing accounting standards that are
applicable to Australian entities along with maintenance and care of the body of standards. A
strategic decision was provided to the board for working towards those issued by
International accounting standard board. The Australian that is equivalent to IASB comprise
of accounting standards that are equivalent to Australian standards. Some of them can be
listed as AASB 1-99 corresponded to AASB 101-199. Furthermore, interpretations that are
issued by AASB are corresponds to the interpretations that has been adopted by IASB. In the
absence of any IASB equivalent such as standards like AASB 1039 and AASB 1031, the
accounting standards of AASB and IASB were retained (He et al., 2016).

4
CONTEMPORARY ISSUES IN ACCOUNTING
The several issues were proposed by IASB. Process of identifying such issues by
Australian accounting standard is as follows:
 Assessment of proposal of issues by AASB is done against the criteria that such issues
have practical relevant and are widespread.
 Divergent interpretations are significant in such issues
 Reduction or elimination of methods of diverse reporting would be reduced by
improving financial reporting by way of addressing such issues.
 Such issue represents application issue and narrow implementation that is possible to
resolve efficiently within the existing Australian accounting standards.
 Matter would be referred to IASB based on improvement and that will help them in
reaching consensus (Harmon & Ntseh, 2016).
 It is required to provide guidance on timely basis when the issues are related to
current and planned AASB.
On July, 2004 the AASB was made equivalent to IASB. Concerning this, AASB has
acted in accordance with strategic direction of financial reporting council. The overall
approach of AASB for adopting the IASB standards is adopting the working and contents of
IASB. In need of adopting the environment of Australia legislation, words are being
changed. It leads to inclusion of application paragraph of Australia that is mentioned in
Corporation Act. Substances of requirement are not affected by such changes. AASB has the
responsibility of setting accounting standards for all types of reporting entities and IASB on
other hand is mainly focuses on adopting standards for profit entities. When there is
requirement for not for profit entities, there are additional texts that are included in the
AASB. Requirements in relation to profit entities are not impacted by the addition made to
this standard. Under certain circumstances, non-profit entities that comply with the Australian
standards to IASB will not be able to simultaneously comply with the standard because the

5
CONTEMPORARY ISSUES IN ACCOUNTING
additional requirements mentioned in the AASB are not consistent with requirements of
IASB (Steenkamp et al., 2016).
A highest quality of financial reporting is aimed by AASB in adopting the IASB
standards. Some of the optional treatments in IASB standard are used only few times by
AASB. AASB already requires some of the additional disclosures that are sometimes
required by IASB. For achieving compliance with standards of IASB, the capacity of
Australian entity is not impacted by removing the requirement of additional disclosures and
optional treatments. There are some helpful commentary mentioned in AASB and this is not
present in equivalent IASB standards. Such commentaries are considered beneficial for users
of AASB standard and such commentary is not part of IASB standard. This helps in handling
situations that are particular to and are encountered by Australian entities. For performing the
functions in relation to standards of IASB, object of part 12 of Australian securities and
investment commission act, 2001 are required. Adoption of IASB needs to be consistent with
objective part 12 resulting from the inclusive advantage that is associated with the adoption
of the same (Spencer, 2014). Some of the object of part 12 of Australian commission that
needs to be involved in the Australian standards are as follows:
 The directors should be assisted in discharging obligations concerning financial
reporting.
 It should help in facilitating the economy of Australia by reducing the required rate of
return or cost of capital and adoption of standards that are easy to understand and are
clear.
 Adoption of standards should be relevant for assessment of financial performance,
investment and position.

6
CONTEMPORARY ISSUES IN ACCOUNTING
The standards adopted by AASB is relevant to situation of environment of Australia
in which entities operate that particularly deal with non-profit entities and does not have
equivalent to IASB board. IASB Framework (paragraph 29 and 30) are consistent with
AASB 1031. Framework of IASB has been adopted by AASB and in order to ensure that
meaning of materiality is concise and clear, AASB 1031 has been retained. Standard AASB
1039 is applicable to entities preparing financial reports that has registered schemes and
sending concise report to members instead of annual report. Amendment to AASB 1039 has
been made resulting from changes that has been announced due to adoption of AASB
standard (Morais & Curto, 2014).
IASB 126 deals with Accounting and reporting by Retirement benefits funds.
Domestic regulations impacts the superannuation plan that are considered not for profit
entities and as a part of strategy of adopting IASB, AASB has not dealt with this particular
fact. In this particular regard, AAS 25 Financial reporting by Superannuation plans would be
retained by AASB and a fundamental review of requirements would be undertaken by
standard. Requirement of AASB concerning superannuation plan is overcome other
international standard (Chandramohan et al., 2013).
The AASB is associated with limited number of accounting policies particular for
small enterprise enterprises and the implication is mainly on transition and comparability.
Amendments to be made to the reporting standards particular to Australian small entities
come with a number of concerns on proposal.
Public accountability definition- IASH has proposed that no clarification is required
to be provided for judiciary term used in public accountability. This particular proposal of
IASB is not accepted by AASB and it calls for clarifying the definition. Term contains some

7
CONTEMPORARY ISSUES IN ACCOUNTING
common legal meaning that is seemed to be not consistent with the way Judiciary term is
used by IASB.
Section 29 of Income tax: It has been proposed by IASB that income tax should be
based on section 29 of IAS 12 to which AASB agrees. It is intended by IASB to reduce the
reporting gap between public accountable entities and entities that are non-publicly
accountable. This would be done by aligning with the principles of measurement and
recognition of deferred tax in section 29 (Eisenschmidt & Schmidt, 2016). Some of the other
propositions concerning the Australian entities are given. While most of the proposal of IASB
was agreed by IASB due to clarification that are provided in existing section and because of
their minimal nature. Some of the concerns of AASB in this regard are given below:
 Requirement for disclosing accounting policies in terms of termination benefits
should be removed.
 Other concern is related to exempting the intangible assets requirements in business
combination in event when it is not possible to measure fair value without considering
undue costs or efforts.
 Acquisition of subsidiaries in relation to disposal or with the intention of sale within
one year and its clarification and needs to be excluded from consolidation.
Standards created by IASB for small Australian entities are acknowledged by AASB
and they have the stand-alone vision. It has been considered by AASB that in order for small
entities in Australia to avail the benefits, they should take full advantage of improvement
made to the standard. There was disagreement on part of Australian accounting standard
board on part of proposal of IASB relating to amendment made in contribution of sale of
assets between joint venture and investors in IAS 28. This is so because it is thought by board
that such amendment helps in reducing diversity in practice and addresses the existing

8
CONTEMPORARY ISSUES IN ACCOUNTING
inconsistency between requirement of IAS 28 and financial reporting standard 10. The board
continued proposal by IASB and board should expedite the equity method of accounting
research (Bond et al., 2016).
Part B:
Specific instances depicting whether accounting standard should change or not as
recommend by IASB:
Some of the instances that would depict whether AASB agrees with IASB on certain
issues or not are as follows:
Amendment made by IASB to AASB 116 would prohibit deducting cost of property,
equipment and plant from the proceeds of selling items. Proceeds from sales of asset would
be recognized as loss or profit. As per the amendment, Australian entities should recognize
sales from proceeds in terms of loss or profit. Company accounting would be positively
effected as this will help in reducing the diversity gap in a manner that will help improving
financial reporting of reporting entities. Recognizing sales as income from the sales of such
assets would help users of financial statement by providing them relevant information. As per
the existing IAS 116 requirements, the sale from proceeds might be offset against the cost,
property and equipment that do not give users a clear picture (Deegan, 2013). There would be
change in method of depreciation and its process as the amendment would not involve
depreciation in their costs. Entities would not be required to identify costs in relation to
before items are sold and produced and property, plant and equipment are available for use.
Identification of cost would lead the entities to apply judgements. Costs of inventories would
be required to recognize as an expense and costs that are directly attributable to equipment,
property and plant needs to be included in cost of assets (Chandler, 2014).

9
CONTEMPORARY ISSUES IN ACCOUNTING
Proposed amendment by IASB on section 18 that deals with intangible assets other
than good will. It says that recognition of intangible asset in business combination should be
exempted. This is done when the fair value without including costs cannot be measured.
Adding this particular line is not agreed by AASB. It is considered by Australia board that
there are many circumstances when reliable fair value of intangible assets are required and it
is not possible to know the value of business combination when the value of intangible assets
are not known. In such circumstances, a reliable fair value for measuring intangible assets is
required. AASB perceives that recognition of intangible assets in business combination
should be done based on same requirement as those of IAS 38 Intangible assets (Pacter,
2017).
Another proposed amendment is section 28 concerning employees’ benefits that deals
with eliminating the need for disclosing accounting policy for benefits attributable from
termination. This particular proposed amendment is not agreed by Australian board because
the decision to disclose accounting policy or not needs to take into consideration that whether
the users of financial statements would be assisted in understanding conditions and
transactions are reflected in such transactions. General principles as stated in paragraph 117-
121 stated in IAS 1 should form the basis whether the disclosure of accounting policy should
be done or not (Henderson et al., 2015).
While AASB amending Australian equivalents, it should also consider the
amendments proposed by IASB. It is considered by AASB that are needs of some unique
domestic interpretations that is equivalent to requirements of IASB and such requirement is
needed in some exceptional and rare circumstances.
Considering the discussion above, it can be said that there are ambiguity within the
components of accounting standards of several countries. Different components and

10
CONTEMPORARY ISSUES IN ACCOUNTING
transitions would have influence on transactions of developing countries. It is mainly
essential for such countries to adapt to the international standards. On the other hand,
countries for not complying with the internal reporting standard would have certain political
and economic sanctions (Zeff et al., 2013). International standards help in providing more
detailed financial reports and this leads to increased level of comparability and transparency.
Optimal presentation of provided by the adoption of such standards, as this helps investors in
giving proper insight about the transactions included in financial report. It has been perceived
by investors that countries aligning their reporting standards with the international standards
offer a sense of security and this helps inn attracting international investments. Nonetheless,
it has been continuously recognized that the approach of one size fits all often lack relevance
for the users of the financial statements of private companies. Not all reporting entities would
fit under the one size approach and the need for reporting standard should be provide ease to
prepare as well as users of financial statements in every aspect (Nobes, 2015). Therefore, it
can be said that adopting the international standards would help in standardizing the reporting
standards of respective entities operating in different countries.
Recommendation:
Some of amendments introduced by International accounting standard board has been
incorporated in the Australian accounting standard board. Any such arrangement that would
interfere with the standard setter independence and good due prices would should not be
considered by Australian standard. Furthermore, it is highly considered by Australian
counting board that there should be consistency between sectors as it will help in facilitating
economic decision-making. Some of reason that would lead Australian standards not to
comply with the international reporting standard is use of different due process, different
times and different resources.

11
CONTEMPORARY ISSUES IN ACCOUNTING
Conclusion:
Considering several aspects of the International accounting standard board, the
Australian accounting standard board supports and agrees with the arrangement. However,
there are some instances to which the Australian standard is not agreeing. Regardless of the
model adopted by the Australian entities complying with the reporting standards, the main
concern of AASB is adequate level of funding concerning accounting standard setting of
public sector entities. Furthermore, the adoption of one size approach would partially assist
prepares of financial statements. Adopting the amendments offered by IASB would help in
improving the company accounting in several ways.

12
CONTEMPORARY ISSUES IN ACCOUNTING
Reference:
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), 259-288.
Carey, P., Potter, B., & Tanewski, G. (2014). AASB Research Report No.
Chandler, R. A. (2014). Recurring Issues in Auditing (RLE Accounting): Professional Debate
1875-1900. Routledge.
Chandramohan, A., Agrawal, A., Subramani, P., & Munipalle, P. (2015). The Impact of
Globalization ACIS 5034 Global Issues in Accounting and Information Systems
Spring 2015.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Eisenschmidt, K., & Schmidt, M. (2016). Responsiveness as a Challenge for the Legitimacy
of the IASB-An Evaluation of Current International Accounting Regulation and of
Alternative Approaches.
Guthrie, J., & Pang, T. T. (2013). Disclosure of Goodwill Impairment under AASB 136 from
2005–2010. Australian Accounting Review, 23(3), 216-231.
Harmon, F., & Ntseh, D. (2016). The New FASB & IASB Revenue Recognition Standards;
Implementation and Effects.
He, L., Evans, E., & He, R. (2016). The Impact of AASB 8 Operating Segments on Analysts’
Earnings Forecasts: Australian Evidence. Australian Accounting Review, 26(4), 330-
340.

13
CONTEMPORARY ISSUES IN ACCOUNTING
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Jorissen, A., Lybaert, N., Orens, R., & Van der Tas, L. (2014). A longitudinal analysis of
Corporate political activity towards the IASB: An analysis of context and firm-level
antecedents as well as adopted strategies.
Laing, G. K., & Perrin, R. W. (2014). Deconstructing an accounting paradigm shift: AASB
116 non-current asset measurement models. International Journal of Critical
Accounting, 6(5-6), 509-519.
Morais, A. I., & Curto, J. D. (2014). Accounting quality and the adoption of IASB standards:
portuguese evidence. Revista Contabilidade & Finanças, 19(48), 103-111.
Nobes, C. (2015). IFRS Ten Years on: Has the IASB Imposed Extensive Use of Fair Value?
Has the EU Learnt to Love IFRS? And Does the Use of Fair Value make IFRS Illegal
in the EU?. Accounting in Europe, 12(2), 153-170.
Pacter, P. (2017). IASB Corner. The International Journal of Accounting.
Spencer, J. (2014). AASB Staff Paper: To Disclose or Not to Disclose: Materiality is the
Question.
Steenkamp, N., Steenkamp, N., Steenkamp, S., & Steenkamp, S. (2016). AASB 138: catalyst
for managerial decisions reducing R&D spending?. Journal of Financial Reporting
and Accounting, 14(1), 116-130.
Tan‐Kantor, A., Abbott, M., & Jubb, C. (2017). Accounting Choice and Theory in Crisis: The
Case of the Victorian Desalination Plant. Australian Accounting Review.

14
CONTEMPORARY ISSUES IN ACCOUNTING
Warren, C. M. (2016). The impact of International Accounting Standards Board
(IASB)/International Financial Reporting Standard 16 (IFRS 16). Property
Management, 34(3).
Zeff, S. A. (2013). “Political” lobbying on proposed standards: A challenge to the IASB.
Accounting Horizons, 16(1), 43-54.