HI6025 - IFRS Impact on Public Sector Financial Reporting

This report examines the impact of International Financial Reporting Standards (IFRS) adoption on the Australian public sector, focusing on a research paper by Kathryn Trewava. It discusses the practical application of IFRS, highlighting its implications on decision-making processes, particularly the shift from a single-tier accounting system to the need for separate internal and external reporting. The report also explores the impact of IFRS on accounting ethical standards, noting improvements in accountability and a reduction in corruption but also acknowledging challenges in asset valuation and resource allocation. Furthermore, it addresses the difficulties faced by rural public sector entities in accessing qualified accounting professionals and the necessary investments in infrastructure and technology for IFRS implementation. The report concludes that while IFRS has enhanced ethical standards and accountability, it has also led to slowed growth due to the time and resources required for compliance.

IMPACT OF IRFS
ON PUBLIC
SECTOR

INTRODUCTION
The article used for this assignment is
The Impact of IFRS Adoption on Public Sector Financial
Statement Kathryn Trewava November 2015.
https://www.massey.ac.nz/massey/fms/Colleges/College%20of
%20Business/School%20of%20Accountancy/Documents/
Seminars/Palmerston%20North/2010/Draft%20paper_Kathryn
%20Trewavas.pdf
The adoption of the IRFS is applicable to all sectors of the
economy. The public sector being part of the Australian
economy has to adopt 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.

PRACTICAL APPLICATION OF THE
IRFS ON PUBLIC SECTOR
• Implication of the IRFS on decision making
• The public sector had only one tire of accounting decision to
make in relation to the AASB.
• The public sector directors only operated to make accounting
decisions that were in cash flow forms.
• The same decisions would be used when presenting the
accounting financial statements to the national sector

• Previous from 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 decision making
processes
• They too develop a superior information system
which are specifically designed to incorporate
both the AASB standards and the new IRFS.

Impact of IRFS on accounting ethical standards of the public
sectorentities.
• With the previous implementation of accounting standards,
there were certain misquoted margins on profits and losses by
the council’s public managers.
• Many audit report had shown accountants who interfered with
the balance sheet in order to affect the external presentation.

• The report 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.

• 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 recommends that there are
sustainability of the market value of the assets.

• This implications of the accounting standards can be
neglected by the public sector entities.
• The assets of the public sector can be difficult to analyze.
• Such infrastructure therefore difficult to use as assets as they
cannot be sold to produce profits.

The public sector are currently forced to hire accounting staff that are
capable to understand without a doubt the new standards of
accounting.
The most advantageous public sector authorities are the ones situated
in urban locations.

• 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.

• The public sector has also been forced to invest in
infrastructure that favors the implementation of the IRFS.
• Some public sectors have employed technological
machineries and software that can do financial accounting
operations.

• 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

• The accountants have also learnt to become even more
responsible in the public sector entities.
• This standards have had a positive impacts by increasing the
ethics of accountants therefore reducing corrupt cases.

• It is now easier to do audits in the public
sectorentities.
• As the level of accountability has increased, the
public sectorentities authorities do not have to
worry about corrupt cases anymore

• These accounting standards have led to the slowed growth of
these entities.
• A lot of time is taken balancing the interest required by the
standards that creatively thinking on how to develop projects.
• Projects have to be delayed so the accounting balance meet the
standards expected.