HI6025 Accounting Theory: Analyzing IFRS Implications in Australia

This report examines the implications of adopting International Financial Reporting Standards (IFRS) in Australia, focusing on its impact on accounting quality. It reviews the article "The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia" by Chua, Cheong, and Gould (2012) and discusses the changes in financial statement presentation, comparability of financial reports, and the effects on the investment sector. While some reluctance existed initially, the report concludes that IFRS adoption has generally improved accounting quality, reduced earnings management, and enhanced business forecast accuracy, benefiting investors and the Australian economy. The Financial Reporting Standards Council (FRC) continues to oversee IFRS implementation, reinforcing its importance for global business activities. Despite mixed results, the report suggests further research is needed, particularly from those involved in financial statement preparation. Desklib provides access to similar reports and solved assignments for students.

Implications Of International Accounting In Australia 1
IMPLICATIONS OF INTERNATIONAL ACCOUNTING IN AUSTRALIA
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Implications Of International Accounting In Australia 2
Executive summary
Following the adoption of the international accounting standards in Australia, this step
has also had different implications for the Australian economy. After the incorporation of the
system, there was a need for a report to be established to evaluate the extent to which the
implementation of international financial reporting standards has benefited Australia. As a result,
reports have been generated by different sources comparing the suitability of incorporation of
international accounting standards into Australia. The impacts of the global financial reporting
standards on Australia’s public listed companies and other business firms existing in the market
has been established since IFRS has been used in Australia for a significant period.
Introduction
The paper is based on the article “The impact of mandatory IFRS adoption on accounting
quality: Evidence from Australia” published by Chua, Cheong and Gould in 2012. It examines
the impact of the compulsory IFRS adoption on the quality of accounting in Australia. Since part
of the primary objective of international accounting standards to all the global market players
was to promote comparability regarding financial reporting, this report also looks into finding
out whether or not the IFRS has improved the level of quality regarding financial reporting in
Australia. This is done in comparison to other market players implementing the new world
accounting system globally. A review of the implications in the findings reveals that the
outcomes of the implementations of the range from the improved comparability of financial
reports, a boost to investors and also acting as an essential aspect in ensuring business forest
accuracy.
Implications of international accounting in Australia’s context

Implications Of International Accounting In Australia 3
Since the taking of effect of Australia’s decision to adopt International financial
reporting standards in 2005, a decision made in July 2002, there came up many implications to
the Australian market players and its economy at large. At the beginning of adoption of IFRS in
Australia, there were reported cases of pessimism by some business management on whether to
consider adoption or not since the idea of implications had not been experienced yet? The
repercussions were still just pure ideology. Firstly, the earliest impact of approval of
international accounting standards was regarding fundamental changes regarding how the
companies that adopted IFRS were supposed to present their financial statements. Moreover,
there were also changes regarding the conversion rates for respective affected companies to bring
about the easiness needed in case a business enterprise is necessary to have across border
transactions.
The issue of promotion of comparability of financial reports has been dramatically stepped
up. Studies also indicate evidence of positive outcomes regarding comparability of financial
statements since the IFRS adoption in 2005. For instance, the approval set out with several
significant modifications, the necessary changes at the beginning of the implementation of IFRS
included a change in the format of presentation of financial reports which was meant to ensure a
sense of uniformity. This uniformity was supposed to show up across all the market players
associated with adoption of the international accounting standards. With the homogeneity in the
presentation of financial statements and reports, this serves as a vital aspect in terms of ensuring
that a party interested in making an economic comparison between different companies in
Australia and other peers globally is in a better position due to the level of comparability
achieved by adoption of international accounting standards. However, there is stress on the
aspect of financial reporting regarding the level of effect the international financial reporting

Implications Of International Accounting In Australia 4
standards have had on financial reporting. Reviews also indicate that IFRS has had a limited
impetus on financial reporting. This is caused by reasons like cases where some countries persist
in using the national accounting standards that they feel are more comfortable with; also there
are some cases of significant non-compliance with the international accounting standards. The
absence of proper means and ways to maintain the desired level of transparency concerning the
methods of measurement of the degree of comparability. There was also an indication that, in
most cases, the level of macroeconomic benefits was higher when it came to mandatory
International financial standards adoption than in the case of voluntary IFRS (Kenny and Larson
2018).
A close review into the topic also indicates that, due to the adoption of international
accounting standards, Australian market players associated with the adoption have been able to
raise the benchmark point concerning the quality of financial reports. This has been appreciated
as one of the positive outcomes. Studies have also revealed that since the adoption of IFRS, there
has been a significant reduction concerning the companies associated with earnings management.
Besides, other outcomes were also visible concerning improvements in the value and
significance of accounting reports; post-IFRS adoption (Mintz 2016). Despite some reports
having established that measures of accounting quality have not experienced in positive changes
but have remained stable ever since the adoption of international accounting standards, Findings
indicate that the adoption of international financial reporting standards in Australia, IFRS has
played a significant role in ensuring there is a notable improvement in the accounting quality. In
most cases, the accounting quality across market players globally has been one of the benefits
that help in eradicating confusion and misunderstandings for individuals trying to understand
different financial reports (Vesty, Sridharan, Northcott and Dellaportas 2018).

Implications Of International Accounting In Australia 5
There is also evidence that the adoption of international financial reporting standards has
brought up positive outcomes to the Australian investment sector. This is so because of the
research indicating the improvement in levels of accuracy when it comes to making business
forecasts; the ability of an investor to be able to picture the trends in the market and make future
predictions regarding operations of the business and market gap exploration. This has been made
possible by the adoption of the international accounting standards. Apart from the introduction of
the improved forecast accuracy, the investors will also benefit concerning the reduced cost of
capital when seeking an investment across the border. The decreasing costs are brought about by
the use of harmonized accounting standards (Cavusgil, Knight, Riesenberger, Rammal and Rose
2014).
Conclusion
Finally, despite the fact that there was some level of reluctance by the management of
most Australian companies to implement international accounting standards into their business
processes, there exist reasons to adopt the rules currently concerning the benefits or implications
the implementation of the accounting standards can have to market players. Furthermore,
according to proponents of IFRS. There is still a primary emphasis that the diversity of the
accounting standards in the world are the most significant obstruction to the growth of world
business activities, in this case, the implementation of the international financial reporting
standards is viewed as an impelling idea towards achieving the increase in global business. As a
result of the implications, the Financial Reporting Standards (FRC) aims to oversee
implementation of International financial reporting standards by Australian market players
(Blackmore, Gribble and Rahimi 2017). This bold step by FRC is still seen as useful and
appropriate for the Australian economy. The review of the reports also creates a clear indication

Implications Of International Accounting In Australia 6
that the implementation of International Financial standards reporting into Australia’s economy
has been beneficial and vital to Australia’s market players and the country’s economy basing on
the positive implications that IFRS has brought forward (Bamber and McMeeking 2016).
Furthermore, the review of the findings of the implications report indicates that, due to the
impact of IFRS, there are no significant traces of evidence brought to the table by any of the
members regarding matters of reconsideration the adoption of the international accounting
standards in Australia. Given the mixture of results concerning implications of the international
accounting, Reports also show the need for more reports and research on the matter with
emphasis on information from individuals in charge of financial statements preparation.

Implications Of International Accounting In Australia 7
References
Bamber, M. and McMeeking, K., 2016. An examination of international accounting standard-
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Blackmore, J., Gribble, C. and Rahimi, M., 2017. International education, the formation of
capital and graduate employment: Chinese accounting graduates’ experiences of the Australian
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Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L.,
2014. International business. Pearson Australia.
Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS adoption on
accounting quality: Evidence from Australia. Journal of International Accounting
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Kenny, S.Y. and Larson, R.K., 2018. A review and analysis of Advances in International
Accounting research. Journal of International Accounting, Auditing and Taxation, 30, pp.117-
126.
Mintz, S., 2016. Accounting for the public interest. Springer,.
Vesty, G., Sridharan, V.G., Northcott, D. and Dellaportas, S., 2018. Burnout among university
accounting educators in Australia and New Zealand: determinants and implications. Accounting
& Finance, 58(1), pp.255-277.