Implications of IFRS in general financial report

The study paper focusing on international accounting: published at AASB center in October 2006. Various Implications of adoption of IFRS in Australia. The evidence of the reported study can be retrieved in the below link.

https://www.aasb.gov.au/admin/file/content102/c3/aasb_rr-12_10_16_ifrs_lit_review.pdf.

The group discussion aims at focusing the effects of the financial standard in different financial reports regarding the financial statements which include financial analysis and the audit reports. The aim of adopting the financial standards was to have transparent, comparable and quality financial information which is an efficient tool in the global market. Below is an outline of various implications of the adoption of IFRS in Australian companies.

Implications of IFRS in general financial report (Cairns, Massoudi, Taplin and Tarca 2011).

The adoption of the financial standard has led to easy and effective financial reporting in institutions. The outcome of the IFRS was concerned in three commercial aspects namely; the collaboration of financial experts and investors.

The enactment of international financial reporting standard (IFRS) has caused the effectiveness of accounting quality as well as improvement. The impacts of the adoption of IFRS in financial statements has led to the development of quality accounting in Australian companies. The implications on accounting quality of financial reports mainly entail the evaluation of revenues and expenses, conservatism, impairment recognition, earnings, report reliability and accrual reliability.

The impacts of the fiscal accounts target on the commercial implications of the change to the conduct goodwill and the way in which different budgetary firms has an account on various firm’s consolidation. The disparities of the value of statements in the financial reports range from the difference in separate standards to conversion in tardy taxes in the association and the incorporeal assets. The study, therefore, can assume that many administrations have the goodwill in the implementation of the IRFS procedures in accomplishing quality accounting in several commercial entities. The study also has concluded that the changes play a vital role in increasing tangible assets of the firm which results in an increase in actual holdings concerning the proportions of the buying price. Previously, the percentage or the portion of the buying price regarding the intangible assets which were considered as identifiable by the firm did not fetch an increase in actual assets. Regarding the outcome, various companies were required to find evidence of post-acquisition act of the intangible assets in the current economy (Chalmers, Clinch and Godfrey 2011).

In the aspect of asset impairment, most of the firms have not yet recognized the idea. Under the standards of the IFRS there exist the recognition of assets impairment is a requirement.

The implication of IRFS on conservatism

Decision making is one of the many implications of IFRS adoption quality accounting of the financial reporting. The standards require the managers to rely on the financial statements in the making of sound decisions. The directors ought to appreciate the importance of the financial statements thus being keen while preparing them. The preparation of the reports should include all the attributes of the company thus making the process of decision making more comfortable and practical. The choices are reliable since they were made base on the evidence of the statements.

The stability of the earning management has been improved on adoption of the standards. The balance has emerged as a result of the requirement of the rule. These requirements are excellence in ethical behaviors of management which also demands the quality performance of the directors. Accountability of the director’s results in an increase in the earnings since an account can be done on them. The quality of the earning therefore relies on the adoption of IFRS standards which demands that the directors ought to be ethically accountable (Chua, Cheong and Gould 2012).

Adoption of the standards has resulted in legibility based on the accounting policies such as financial gadgets, a summary of accounting procedure and also the intangible assets. The Australian accounting has improved from the IFRS implementation. This is due to various methods put in place to advance the accounting quality hence enhancing the credibility of firms.

Currently, in the Australian companies, the accrual reliability has declined after a mandatory adoption of the IFRS standards hence a voluntary implementation. Financial institutions should voluntarily embrace the change and the approval of the economic measure to attain the benefits in achieving their set goals and objective. The worth of the intangibles has also reduced significantly (Henderson,  Peirson, Herbohn and Howieson 2015).

Conservatism can be denoted as the disposition of administrations to identify unscrupulous news in the proceeds in the appropriate way than the gratefulness of the profits. By this, it means that the corporations tend to recognize losses before the appreciation of the actual benefits. In bookkeeping, conservatism can be designated as an error of opportune failures from the financial statement at the precise time. IFRS regulation and the anticipations are that, for a corporate entity to achieve control it has to identify itself with the book value of the liabilities and the assets. The achievement of conservatism is influenced by the scheming of both under and over measured original book value of both the assets and liabilities in all the administrations. Financial reports in Australian companies have become more conservative (AASB 2011). The adoption of the standards has led to a decrease in conditional conservatism with an increase in unconditional conservatism. The economic statement users should embrace the changes of conservatism in financial analysis (Deegan 2013).

Effects on earning management.

Discovery of the overdue taxes is essential if they occur into one necessary and beneficial element. This is as a result of the effects from proceeds. Consequently, it refers to a reassessment of balance sheet constituent is not imperative or value pertinent (Guthrie and Pang 2013). The extensive equilibriums are the overdue taxes with more than one element, and modules include, reassessment of PPE and impartiality accounted proceeds. The IFRS enables a firm to conduct a deferred tax assessment on values of a balance sheet. The overdue tax procedure is mainly favored by the replicating investors who outlook it as a factual liability on asset readjustment, and thus as shareholders, they authorize the assessment of both liabilities afore choosing a firm to capitalize in.

Accounts have engaged in the essential responsibility of offering a precise study on financial endings. Therefore, the IFRS has come up with reports more understandable by accruing three bookkeeping policies. The policies can be outlined as intangible assets, commercial appliances as well as a summary of accounting procedure. These resulted in readability by describing exhaustive information and extending findings to the stakeholders (Schaltegger and Burritt 2017).

IFRS adoption facilitated in achieving constant statistics on the intangible and concrete assets. Australian company assets were exploited thus the IFRS was implemented to pinpoint the potential resource that will outline the assets that in favor to their value and implication. Most of the Australia companies have adopted IFRS to ration the readability of monetarist statement. This was accomplished by calculating the length of financial report. The gauging elegances included the gunning fox index that measured the compactness of the account and the sum of words resulting in the range of the financial statement (Weil, R.L, Schipper and Francis 2013).

The overdue taxes in AASB have worth relevance in Australian companies which are compatible with the IFRS standards (AASB C.A.S 2014). This means that most of these companies embraced the valuation of the balance sheet with fewer problems. With these reasons, accounting in Australia has dramatically improved (Horngren et al. 2012).

In many of the Australian companies, intangible assets are capitalized to understand the likely assets that will be of help in defining holdings according to their value and relevance. With the assets worth, it will be easier to obtain reliable information on tangible as well as the intangible assets.  

The IFRS adoption in goodwill result has brought about benefits in the necessary commercial qualities. The relationship existing between investment gaps and goodwill impairment has become stronger under the standard financial regulation. Under the IFRS regulation, Australian organizations have achieved the trust of accountancy compared to the previous board, the GAAP which has improved financial accounts that call for more potential investors (Iatridis and Rouvolis 2010).

The audit committee and accounting value

Conclusion

In summary, the Australian accounting has dramatically progressed on improvement from the IFRS operation. This is due to the processes put in place to advance the accounting value thus refining on the credibility of firms. The results of IFRS are thus discovered on the advancement of value relevance financial accounts and comparability of Australian entity., the truth is that not all companies have benefited on the same (Schaltegger and Burritt 2017). The enactment of IFRS has caused the effectiveness of accounting quality as well as its improvement. The impacts of the adoption of IFRS in financial statements has led to growth in quality accounting in Australian companies. The accounting quality has advanced the comparability of the Australian entities to financial practices internationally. The quality is regarding stock exchange and shares which puts Australian firms much ahead of other competing firms. The adoption of IFRS helped in achieving consistent information on the intangible and tangible assets. Since most of the Australian company assets were exploited, the IFRS was instigated to recognize the potential resource that will define the holdings that regarding their value and significance. The authorization of the IFRS by the accounting culture in Australia boosted its financial statement thus appealing more investors. This is as a result of a healthy relationship between the goodwill impairment and the investment opportunity. This laid an essential economic feature that made the Australian build the trust of accountancy throughout the new management than the prior GAAP. Although the article and some of the research findings have focused on the proceeds of the adoption of IFRS in all companies. Despite most studies and research applauding on the benefits of the IFRS adoption by all firms, fact bears that not all companies have benefited on the same.

References.

Cairns, D., Massoudi, D., Taplin, R. and Tarca, A., 2011. IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia. The British Accounting Review, 43(1), pp.1-21.

Chalmers, K., Clinch, G. and Godfrey, J.M., 2011. Changes in value relevance of accounting information upon IFRS adoption: Evidence from Australia. Australian Journal of Management, 36(2), pp.151-173.

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 Research, 11(1), pp.119-146.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., 2012. Financial accounting. Pearson Higher Education AU.

Iatridis, G. and Rouvolis, S., 2010. The post-adoption effects of the implementation of International Financial Reporting Standards in Greece. Journal of international accounting, auditing, and taxation, 19(1), pp.55-65.

Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts, and practice. Routledge.

Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods, and uses. Cengage Learning.

Guthrie, J. and Pang, T.T., 2013. Disclosure of Goodwill Impairment under AASB 136 from 2005–2010. Australian Accounting Review, 23(3), pp.216-231.

AASB, C.A.S., 2014. Business Combinations. Disclosure, 66, p.77.

AASB, 2011. Enhancing the Value of Auditor Reporting: Exploring Options for Change.