The report is based on the review of the two chosen articles namely “IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase” and “Implications of the IFRS goodwill accounting treatment”. The first article describes that how the accounting for contingent assets, that is plant, property and equipment to be done so that proper consideration for the assets to be purchased can be calculated for payment following the guide lines of the accounting standards of IFRS 3, IAS 16 and IAS 37
This paper is being published by IFRS discussion group of the Canada wing in order to describe that how the business organization of the countries like Canada ,Australia that are following the guidelines of accounting standards of IFRS & IAS should account the consideration payable for the contingent properties acquired by them.
The second paper describes the impact of conflict that arises due to the differences in requirements of Australian accounting standards and IFRS regarding goodwill accounting over the accounting regulators, professional and external investors of Australia (Wines et al., 2007).
Two research articles are being chosen for describing the report. The first research article is “IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase” is an article released by “IFRS group of Canada wing” and the article makes a detailed analysis regarding how the appropriateness of the accounting standard that will help the business owners to account the consideration for accounted contingent assets in best possible way and what role the accounting professionals should play in case of limitations of the accounting standards (Wines et al., 2007).
Another article that has been used in this report is “Implications of the IFRS goodwill accounting treatment” and; this is peer reviewed articles that critically examine the impact of change in accounting treatment for goodwill in Australian companies following the international financial reporting standards (IFRSs)().
Thus the first article describes that to what extent the different accounting standards are helping the accountants in evaluating the acquired contingent assets while complying with the accounting standards of IFRS 3, IAS 16 and IAS 37().
The second research paper focuses upon the fact that how the International Financial Reporting Standards or IFRS has influenced the method of goodwill accounting with in Australian accounting regime.
The question that has been addressed in the article “IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase” is that to what extent the accounting standards of IFRS and IAS are helping the accountants to properly account the cost of the contingent assets being acquired the business. More precisely, the selected paper addresses the issue or question that how an entity should account for the contingent consideration payable. There are several views as well as ambiguity regarding the process that should be followed for accounting the contingent assets (Cairns et al.,2011). One of the views regarding the accounting of contingent asset is that the accounting professionals must follow the view is that the contingent consideration to be paid should be measured at fair value and should be recorded as part of the cost of the purchase. Another view regarding the accounting process of contingent asset is that Contingent consideration that has to be paid should be considered and recorded at some other point especially when the conditions associated with the contingencies are being met. (Kvaal and Nobes, 2010). Another important issue or question that has been addressed by the paper is that what the accounting professionals should do while conducting accounting for contingent asset following the IFRS guideline where IFRS guidance is unclear. (Choi and Mueller, 1992).
This research paper “Implications of the IFRS goodwill accounting treatment” asks a specific question how the international financial reporting standards (IFRSs) has influenced and changed the Goodwill accounting g treatment in Australia. The accounting treatment for goodwill in Australia has challenged financial report preparers and standard setters for decades as there are several issues related to the valuation of goodwill in the context of a business organization (Ampofo and Sellani, 2005).
This paper focuses on the various aspects of the recognition, measurement and valuation of goodwill and the issues related to preparing and assessing the “fair values” to assets and liabilities(Street and Larson, 2004). The paper also discusses the former Australian and new IFRS policies for goodwill, particularly in relation to the subjective aspects of the new standard. The paper also raises questions regarding the various implications for financial report preparers, auditors and corporate governance who are engaged in goodwill accounting (Pacter, 2005).
The paper “IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase” and “Implications of the IFRS goodwill accounting treatment” is similar in this respect that both of them are reviewing the issues and problems related to the accounting standards practice in Australia by the accounting professionals. The difference between the papers is that the first paper is reviewing the issues related to the accounting of contingent assets being acquired by the business following the relevant accounting standards under IFRS & IAS ; where the second paper is only addressing the issues related to accounting policies of Goodwill in Australia (Cortese and Irvine, 2010).
The article “IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase” has the following two major implications with respect to the Australian Accounting Standards (Albu and Albu, 2012).
An important finding of the research paper reveals that there are different views regarding the valuation of the contingent assets that must be taken into consideration by the accounting professional while accounting for the contingent asset.
The IAS 16 requires that while accounting the contingent assets the items property must be initially recognized at cost where Cost is defined as the cash equivalent price at the time of ,acquiring the assets.
This is also being argued that the valuation of the assets to be included in the contractual arrangement for making payment for the contingent consideration.
Another, important findings of the paper are that contingent consideration should be measured at fair value and should be considered as the part of purchase.
Another important revelation of the paper is that those contingent consideration payments that are dependent on actions of the buyer will not meet the definition of a financial liability until those actions are being actually being performed by the buyers and sellers of the asset.
The another important findings of the paper is that due to insufficient guidelines provided by the IFRS accounting standard the accounting professionals has to apply their own judgments while accounting for the contingent properties acquired by the business.
The first implication of the discussion of this research paper is that accounting of contingent asset is quite complicated as there are several views regarding the accounting of the contingent assets and the accounting process to a great extent is dependent over the situation in which the properties has been acquired.
The second implication that can be drawn from this research paper is that that there is a great deal of proper application of the judgement of the accountants are being required as the guideline given for accounting of the contingent assets are unclear(Bradbury and van, 2006).
Thus this implication-1 and implication-2 is important for the accounting Australian regulators is that as they always have to try to develop new accounting standards so that the ambiguity regarding the procedure of accounting can be reduced (Brüggemann et al.,2013).
Thus this implication-1 and implication-2 is important for the accounting professionals as they always have to stay alert while accounting the contingent properties as it demands a grated deal of proper application of the judgement of the accounting professionals
The above mentioned implications are also important for the investors as the valuation of the assets of the company may change with a change in the accounting policies which definitely will influence the investment decisions of the external investors with respect to a company.
The article “Implications of the IFRS goodwill accounting treatment” has the following two major implications with respect to the Australian Accounting Standards.
Accounting of goodwill was a controversial issue for the Australian accountants since January, 2005 since when the country has adopted the requirements following the international accounting standards for goodwill accounting. As per the new requirements of the international accounting standards when the goodwill to be assessed is coming from a combination of assets is longer will be amortised but only will be tested for impairment annually. The requirement to comply with the new international accounting standard requires that for estimating the fair value, value in use and recoverable amount the valuation process of the cash generating units will be based on numerous assumptions for the estimation of the fait value of the goodwill which is an intangible asset. Thus as the cash generating units are not actively related to the capital market so there is every possibility that a considerable amount of ambiguity and subjectivity may take place while valuing the intangible assets. Thus it can be concluded that the paper describes that major implication for the Australian accounting standard is that Austrian accounting polices related to the accounting of goodwill is falling under a great deal of ambiguity while fulfilling the requirements of international accounting standards(Kilcullen et al.,2007).
The second implication that the paper has conveyed regarding the Australian accounting process in relation to goodwill is that the accountants has to follow the path of creative accounting where factors of professional judgment and management’ capabilities and integrity, and strong corporate governance mechanisms are to be used for generating a proper valuation of the goodwill while fulfilling the requirements of international accounting standards
The above two implications are important for the accounting regulators as well as accounting professionals as they have to address.
Reference:
Albu, N. and Albu, C.N., 2012. International Financial Reporting Standards in an emerging economy: lessons from Romania. Australian Accounting Review, 22(4), pp.341-352.
Ampofo, A.A. and Sellani, R.J., 2005, June. Examining the differences between United States Generally Accepted Accounting Principles (US GAAP) and International Accounting Standards (IAS): implications for the harmonization of accounting standards. In Accounting forum(Vol. 29, No. 2, pp. 219-231). Elsevier.
Bradbury, M. and van Zijl, T., 2006. Due process and the adoption of IFRS in New Zealand. Australian Accounting Review, 16(39), pp.86-94.
Brüggemann, U., Hitz, J.M. and Sellhorn, T., 2013. Intended and unintended consequences of mandatory IFRS adoption: A review of extant evidence and suggestions for future research. European Accounting Review, 22(1), pp.1-37.
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.
Choi, F.D. and Mueller, G.G., 1992. International accounting(Vol. 2). Englewood Cliffs, NJ: Prentice-Hall.
Cortese, C. and Irvine, H., 2010. Investigating international accounting standard setting: The black box of IFRS 6. Research in Accounting Regulation, 22(2), pp.87-95.
Horton, J., Serafeim, G. and Serafeim, I., 2013. Does mandatory IFRS adoption improve the information environment?. Contemporary accounting research, 30(1), pp.388-423.
Kilcullen, L., Hancock, P. and Izan, H.Y., 2007. User requirements for not?for?profit entity financial reporting: an international comparison. Australian Accounting Review, 17(41), pp.26-37.
Kvaal, E. and Nobes, C., 2010. International differences in IFRS policy choice: a research note.
Nobes, C.W. and Zeff, S.A., 2008. Auditors’ affirmations of compliance with IFRS around the world: An exploratory study. Accounting Perspectives, 7(4), pp.279-292.
Pacter, P., 2005. What exactly is convergence?. International Journal of Accounting, Auditing and Performance Evaluation, 2(1-2), pp.67-83.
Street, D.L. and Larson, R.K., 2004. LARGE ACCOUNTING FIRMS’SURVEY REVEALS EMERGENCE OF “TWO STANDARD” SYSTEM IN THE EUROPEAN UNION. Advances in International Accounting, 17, pp.1-29.
Wines, G., Dagwell, R. and Windsor, C., 2007. Implications of the IFRS goodwill accounting treatment. Managerial Auditing Journal, 22(9), pp.862-880.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download