It is vital for all the companies to attain all the qualitative aspects within their financial statements in order to attain the overall value of their financial information are enhanced (Beams, Brozovsky and Shoulders 2017). The qualitative aspect of financial reporting serves as major important qualitative characteristics along with improving qualitative characteristics. With major qualitative characteristics, certain important aspects encompass relevance as well as faithful representation. On the other hand, improving qualitative characteristics include comparability, verifiability, timeliness along with understandability. The mentioned article explained the opinion of numerous individuals concerning implementation of “International Financial Reporting Standards (IFRS)”. All the statement indicates that some qualitative characteristics of financial reporting are not present in alignment with the viewpoints of related people and these are explained under:
As per the given viewpoint, the finance head of AXA, Geoff Roberts indicated that the investors put increased focus on the investors report along with the details of the organization management (Carter and Warren 2018). This is for developing an increased knowledge concerning the financial position along with the performance of the companies within operating markets. This particular aspect indicates a specific qualitative aspect of financial reporting that includes understandability. This serves as considerable qualitative characteristics of improvement by means of which quality of financial reporting might be enhanced. Considering the same, with support of this specific aspects, the users of the financial statement consider it simple to categorise, characterise along with indicating financial statements in a situation here the users might attain detailed accounts for the financial situations of the business firms (Jacobs and Kerry 2016). It is also important to explain that the implementation of IFRS standard that is enhancing the difficulty of certain considerable financial aspects as understand ability is not offered for financial statements. For this reason, based on the viewpoint of Mr Roberts, the implementation of IFRS do not offer the investors with increased understandability focussed on financial reporting of the business firm by means of investor report along with management viewpoint.
As per the statement offered by the finance director of the Wesfarmers Company that is Terry Bowen, it might be gathered that there is an increased opportunity for the financial analysts to misinterpret the financial information associated with the business firms. This is case they intend to explain the notes within the financial statements of company in compliance with the IFRS standards (Kahng 2015). Such particular statement indicates that the qualitative aspects associate with financial reporting that is not present that includes understandibility along with comparability. In account for the comparability, it turns out to be simple for the users in order to compare the differences along with similarities existing within financial items. Within its absence this might restrict the understanding of the investors. This might not be capable to contrast the financial statements of the business firms with support of financial notes because of the absence in technical knowledge. For this reason, it is necessary for the need of the users in attaining suitable technical knowledge considering several financial factors for attaining financial statements understanding implemented by IFRS.
As pr the commonwealth bank’s chief financial officer, David Craig, enough attention is not paid from the behalf of the investors in order to attain detailed knowledge regarding the financial information explained within the IFRS (Macve 2015). For this reason, the real financial situations of the companies are not disclosed adequately. This indicates that faithful indication is not made sure in a better manner within the financial statements of the business firms following IFRS. This indicates that faithful representation is not made sure properly within the company. This also indicates IFRS failure for offering detailed account of every vital financial item in order to offer its users with suitable financial information. In addition, the financial statements that are considered in adherence with IFRS does not offer numerical elaboration associated with economic process of the organizations. In addition to that, this indicates an increased likability that distortions might be conducted within the financial statements for the reason that IFRS framework has numerous loopholes (Laux 2016). In consideration to such reasons, such statement has been conducted.
With such consideration, it must be indicated that the financial reporting intends to offer the users with constructive along with accurate financial information which might facilitate the users to develop judgements regarding the real financial situation of the companies (Scott 2015). Conversely, there are numerous important and better qualitative aspects that are not there in IFRS structure and the major objective of the financial reporting might not be addressed. For this reason, suitable corrective decisions might be undertaken in order to addresses the loopholes within IFRS framework can be decreased respectively.
The discussion made under indicates government decisions to encompass no specific regulation in consideration to three important theories that includes capture theory, public interest theory along with economic interest group theory associated with the regulation.
The pubic interest theory principles indicate that the market regulators look for market solutions at every time that is effective from the perspective of economy. In alignment with such theory, considerable focus requires being placed on the regulators for dealing with any issue (Hansen and Bowe 2014). For this reason, it indicates that the objective of such theory is to make sure of common good for the public through enforcing distinct type of regulations. In consideration to such theory, it might also be indicated that the government requires following regulations within the Corporations Act 2001 that encompass both the environmental along with social responsibilities. This indicates that it is not likely for the market forces to work all the time for enforcing social along with environmental responsibilities. The specific regulations might mention obligations on the consumers along with companies in order to address social as well as environmental duties considerably. Few regulations are observed to place obligations on the customers along with the companies focussed on Corporations Act 2001 in order to make sure regarding the project success.
Several types of regulations are enforced for making sure of the common good for the public along with the total community (Hoyle and Joe 2017). Conversely, the capture theory indicates that the regulators often make distortions within the regulations in order addressing the self-interest. This indicates that the regulations those are implemented in order to address the regulators interest after a particular period. There exist several motives in order to introduce regulations that might be recognised with support of the capture theory. Particularly, such theory recognises the individual sharing direct effect in case the regulations are implemented. In consideration to the offered scenario, it might also indicate the government has taken correct decisions through not enforcing any regulations for encouraging the social as well as environmental duties.
Such theory does not have any resemblance with any of the above mentioned theories. Several types of policies along with the dead and supply forces are present in the regulations having direct impact on them in compliance with the theory. In this particular theory, the government is placed within the supplier side and the demand side is observed to encompass the interest group. Such regulations are developed with an intention so that several industries might attain maximum benefits from them. Therefore, it can also be explained that the industries develop the regulators thereby indicating the market to implement the same.
Considering the viewpoint of this theory, the government requires introducing specific regulations for making sure industrial welfare along with the customer welfare. Most of these companies take into consideration these consumers to be their major stakeholders. For this reason, it is necessary that the need for the government must encompass the consumers along with developing regulations. This is due to the reason that this process might lead to developing laws that might be beneficial for the consumers and the industry. For such causes, the government requires to maintain a balance between the industries and the customers.
Focussed on the given situation it might be observed that there is less regulation in order to revalue the non-current assets focussed on the fair value in accordance with “Financial Accounting Standards Board (FASB)”. Moreover, it is also vital for the companies to take into consideration the impairment expense related with niin0-current assets in compliance with “FASB Statement Number 144 Accounting for Disposal or Impairment of Long-Lived Assets” (Horton 2018). Conversely, it is important to explain that there are certain positive implications present within the changes with relation to faithful representation and importance to the financial statements of business firms in US. Therefore, these changes are developed with having an objective to enhance the financial statements of the business firms in US. In addition, these changes have also resulted in preparing an individual accounting model for accounting treatment associated with sale or disposal of the non-current assets.
Such assets might be acquired in the past as well as employed and they have been acquired in a recent date. Therefore at the time this standard is implemented, indication of the discontinued business operations is made broader in order to encompass additional disposal along with sales based transactions (Wong and Yeung 2014). Considering these reasons, less differences can be recognised in consideration to the accounting transactions of such similar situations and events. Additionally, this feature is increasingly valuable in attaining improvements within the financial statements reporting technique. Along with that, such aspects have considerable limitations as well.
Certain changes can be important in order to resolve several types of implementation concerns that might result in improvements in consideration to the required accounting principles along with standards (Hoyle, Schaefer and Doupnik 2015). Conversely, such aspects might be highly valuable to promote reliable representation along with financial information comparability. In addition, one of such standards are enforced and all the perceived inconsistencies might get decreased from having two different accounting models for better noncurrent asset accounting treatment that are to be disposed within the process of selling. In addition, it is also elaborated that the accounting information differences can facilitate the users if the financial statements for recognising the differences and similarities among both groups of economic events. This is associated with the company’s noncurrent assets. Therefore, with reference to the analysis it might be observed that the previously mentioned FASB norms facilitates in enhancing financial statements of the companies This can be done through improving the accounting treatment of non-current assets.
There are several cause those persuaders the company’s directors in the process of asset revaluation that is explained under:
The process of asset revaluation facilitates in indicating the real return rate along with making sure that the management of the company can develop effective financial strategies. In addition, the process of asset revaluation facilitates the company’s directors in attaining knowledge on the fair value as appreciated at the time of acquiring period (García and Félix 2014).
Such process offers a chance for the company’s directors with a chance to negotiate regarding fair asset value at the time of merger and acquisition decision. The revaluation of asset has a chance to the directors to consider the overall value of the organizational resources (Weygandt, Kimmel and Kieso 2015).
At the time there is lack of asset revaluation process; there might not be any increase or decrease in the book values of the assets that are associated with the business firms. Due to such reasons, the companies might experience abnormal loss or profit at the asset disposal time within fair market value. Along with that the strategy of asset revaluation might lead to decrease in the company’s income. Most importantly, the overall asset value of the company might decrease that might have direct effect on the company’s financial situation (Dutta and Patatoukas 2016).
The decision regarding the revaluation might be driven by through capital market efficiency. In case the market is not deemed to be highly effective, the share process might indicate such information that is explained within the financial statements. The lower assets along with lower net asset backing for each share can be incorporate within the share prices (Dutta 2016). Conversely, certain minimization of the share prices can be offset because of increased reported profit. The decision of not revaluing the assets is deemed to have a drastic effect on the shareholders wealth of the company. With constant drop in the company’s profit, the return percentage might be decreased for the share for the reason that the price fir each share of the company has decreased. Therefore, it might not be likely for the company’s shareholders to attain increased returns for their investments.
References:
Beams, F.A., Brozovsky, J.A. and Shoulders, C.D., 2017. Advanced accounting. Pearson.
Carter, D. and Warren, R., 2018. Accounting for indebtedness: geopolitics, technocracy and advanced financial capital. Innovation: The European Journal of Social Science Research, 31(1), pp.83-104.
Dutta, S., 2016. Identifying Conditional Conservatism in Financial Accounting Data: Theory and Evidence. The Accounting Review, 92(4), pp.191-216.
Dutta, S. and Patatoukas, P.N., 2016. Identifying Conditional Conservatism in Financial Accounting Data: Theory and Evidence. The Accounting Review, 92(4), pp.191-216.
García and Félix M, 2014. Developments And Challenges In Public Sector Accounting” (2014) 26(2) Journal of Public Budgeting, Accounting & Financial Management
Hansen and Bowe, 2014. Advanced Financial Accounting (McGraw Hill Create, 2014)
Horton, J., 2018. Advanced Financial Accounting and Reporting: Theory, Practice and Evidence. Routledge.
Hoyle and Joe B, 2017. Thomas F Schaefer and Timothy S Doupnik, Advanced Accounting (McGraw-Hill Education, 2017)
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Jacobs and Kerry, 2016. Theorising Interdisciplinary Public Sector Accounting Research” (2016) 32(4) Financial Accountability & Management
Kahng, L., 2015. Perspectives on the Relationship between Tax and Financial Accounting.
Laux, C., 2016. The economic consequences of extending the use of fair value accounting in regulatory capital calculations: A discussion. Journal of Accounting and Economics, 62(2-3), pp.204-208.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John Wiley & Sons.
Wong, S.T. and Yeung, C.S., 2014. Advanced Financial Accounting. Pearson Education Asia Limited.
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