Critical Analysis of Pioneer Credit's Accounting Practices

This report analyzes a newspaper article regarding ASIC's concerns about Pioneer Credit's accounting practices, specifically focusing on potential violations of AASB 13 and AASB 9. The article highlights the company's valuation methods and whether they adhere to fair value measurement principles. It delves into accounting theories, particularly private interest theory, and discusses the roles of regulatory bodies like ASIC and ASX, along with the auditor, PwC, in ensuring compliance. The analysis suggests a potential conflict of interest and unethical accounting practices, emphasizing the importance of regulatory oversight to protect stakeholders. The report concludes that strict compliance and timely regulatory action are crucial for the company's sustainable existence and to maintain the integrity of financial reporting.

Accounting Thoughts
1 | P a g e

Table of Contents
Introduction.............................................................................................................................................3
Violation of Accounting Standards..............................................................................................................3
Accounting theories.....................................................................................................................................4
Politics and Accounting regulation..........................................................................................................4
Process of accounting Standard setting...................................................................................................4
Professional approach and ethics in accounting......................................................................................4
Summary.....................................................................................................................................................5
Bibliography................................................................................................................................................6
2 | P a g e

Introduction
This article emphasizes on the newspaper information: ASIC kept watch on Pioneer Credit for 12
months, by James Frost, printed in Australian Financial Review on 3rd April, 2019. (Frost, 2019)
This published report highlighted the matters of concerned standard of accounting by ASIC for
accounting presentation of financial servicing organizations. The report focused on discussion by
the regulator with Pioneer Credit since November, 2017. Latest update is that the regulator had
not contacted the company to discuss about the concerned subject as per newspaper review.
(Aubin, 2019)
An agent of ASIC had told that organizing of meeting is planned with Pioneer Credit after
disclosure of their annual report for 2017-18. The report highlighted that Pioneer Credit had not
changed their adopted valuation method deliberately. This method is not transparent. Later on
this issue was brought to the notice of ASX and PwC by ASIC. (Soderlin, 2012)
ASIC told that the worries about practiced valuation method of the company and enquired about
this as a part of their regular work practice related to surveillance of the accounting presentation
and waited for required reply from them on this issue.
AFR had recovered some documents on the issue, which disclosed that ASIC was not ignorant of
this issue regarding disputed valuation method and accounting practice since last year with the
recommendation for a whistle-blower for more information in November 2017.
Violation of Accounting Standards
AASB prescribes AASB 13- Fair Value Measurement for evaluation of any liabilities or assets.
This measurement process is fixed with market-based data and AASB does not allow self-
declared method for this purpose. The base of this standard is retrieved from market through
recent transactions with allied information from market. (Standard, 2015) The valuation method
followed by the company is considered as measurement by fair value method, but the company
only ignored the data available in market related to the debts they procure from financial
institutions including banks. There is alternative process of evaluating such financial instruments
named amortised cost method and is endorsed by AASB with authenticity for practical and
3 | P a g e

logical purpose. (AASB, Financial Isntruments AASB 9, 2010) This valuation process is
endorsed by Deegan with emphasizing on valuation process by fair value concept to avoid the
impact of inflation effect. (Deegan, 2014)
Accounting theories
Politics and Accounting regulation
Three regulation theories are dominant in accounting standard setting- public interest theory,
capture theory and private interest theory. The case study endorses the understanding of private
interest theory to enhance their self-benefit by the practice of valuation. The regulator in this case
study is ASX and ASIC, the company is regulated, and the auditor is PwC. (ASIC, 2013)
(Commission, 2019) ASIC and ASX have the right to enquire about the business practice of the
company to protect stakeholders’ interest. PwC is assigned to emphasize compliance with the
issues raised by regulators.
Process of accounting Standard setting
AASB is the parental body to set and imply accounting standards and ASIC is the watcher of
compliance of different accounting standards in business practices as per Corporation Act 2001.
The company ignored AASB 13 and AASB 9 for evaluation process. ASX would imply penalty
for this deliberate ignorance by the company.
Professional approach and ethics in accounting
The professional opinion issued by PwC in the subject is to respect their profession as
accountant. (APESB, 2010) Basic objective of the company is to deceive the stakeholders with
unethical accounting practice (Resources, 2018) not following IFRS. (IFRS, 2019) The
company’s hired tax consultant had given a certificate, which they prefer to use during difference
of opinion between the regulators and the company. Unethical approach of the company was
showed by pampering substantial conflict of interest by paying MD’s wife for some jobs, which
was ambiguous in nature. (Credit, 2019)
4 | P a g e

Summary
This above research highlighted the issues of non-maintenance of standard accounting practices
with serious and deliberate attempt to pamper private interest theory. Ultimate losers are the
stakeholders. To safeguard their interest, the regulators have to prove their ability to force the
company for change of accounting practice and respective valuation method. Potential scope of
conflict of interest is to be mitigated, as this company runs with the share capital of public. If the
regulators take proper and timely action, and if the auditor is strict in compliance, the company
has to obey the regulations for its sustainable existence. To ensure those steps, the regulators
have to enquire about the old and current business practices of the company and their financial
reporting
5 | P a g e

Bibliography
AASB. (2019). About the AASB. Retrieved May 11, 2019, from AASB: https://www.aasb.gov.au/About-
the-AASB.aspx
AASB. (2010, December). Financial Isntruments AASB 9. Retrieved May 11, 2019, from AASB website:
https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-10.pdf
APESB. (2010, December). APES 110 Code of Ethics for Professional Accounting. Retrieved May 11, 2019,
from APESB website:
https://www.apesb.org.au/uploads/standards/apesb_standards/standardc1.pdf
ASIC. (2013). ASIC 2013. Retrieved may 11, 2019, from Australian Security and Invewstment Commission
website: https://asic.gov.au/regulatory-resources/markets/market-structure/equity-market-
data/2013/
Aubin, D. (2019, April 12). Pioneer Credit must face lawsuit over student loan collections-ruling. West
Law News .
Commission, A. S. (2019). ASICAnnual Forum 2019. Retrieved May 11, 2019, from ASIC:
https://asic.gov.au/about-asic/asic-events/asic-annual-forum-2019/
Credit, P. (2019). Leadership Principles. Retrieved May 11, 2019, from Pioneer:
http://corporate.pioneercredit.com.au/about-us/leadership-principles/
Deegan, C. (2014). Financial Accounting Theory (4th Edition ed.). McGraw Hill.
Frost, J. (2019, April 3). ASIC kept watch on Pioneer Credit for 12 months. Australian Financial Review .
IFRS. (2019). IFRS 2019. Retrieved May 11, 2019, from IFRS: https://www.ifrs.org/
Resources, P. (2018). Fianncial report 2018. Retrieved May 11, 2019, from pioneerresources:
http://www.pioneerresources.com.au/downloads/reports/annual/piofr2018.pdf
Soderlin, B. (2012). IRS: Pioneer Credit official owes $1.3 million. Rapid City Journal.
Standard, A. (2015, August). Fair Value Managment- AASB 13. Retrieved May 11, 2019, from aasvb
website: https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf
6 | P a g e

.
7 | P a g e