After evaluating the article ‘Unwieldy rules useless for investors’, the problems related to the International Financial Reporting Standards is a relatively identified. The article Directly indicates the problems that is faced by organisations in implementing the International Financial Reporting Standards doing the preparation of financial report. Moreover, the article also states the problems that Australian organisation face when listing in US market, as they need Generally Accepted principles (GAAP) from which the financial report needs to be prepared. Australian organisations have endured high level of expenses in accumulating the International Financial Reporting Standards for preparing the annual report. The article also supports different statement from company’s high authority who indicate the uselessness of International Financial Reporting Standards in delivering the basic requirements of adequate financial report. The statement relatively indicates and state that the financial report prepared under International Financial Reporting Standards is relatively technical, while the investors with non-technical abilities are not able to identify and detect the actual financial capability of the organisation. Furthermore, the rules and regulations laid down by AASB forces the organisation to portray accurate financial transaction in their annual report, which indicates the current financial position (Beams, Brozovsky and Shoulders 2017).
The first statement was from Terry Brown who relatively evaluated that mis-interpretation can be conducted for the annual reports prepared under International Financial Reporting Standards. There is high chance of misinterpretation for the annual reports that is prepared under International Financial Reporting Standards, due to the incapability of the investors to understand the technical terms laid down in IFRS. Therefore, relevant misinterpretation of the overall financial progress of an organisation is a viable approach which will directly impact share price valuation of the company. The director of Wesfarmers Further stated that the technical jargons that is implemented in International Financial Reporting Standards is not understood by the normal investors whereas the actual need for the financial report is not being fulfilled. adequate interpretation of the annual report is not being conducted where only handful of analyst and investors are able to understand the technical terms such as notes to financial accounts. Hence, International Financial Reporting Standards has an absence of verifiability and understandability in its system, which needs to be implemented to support individual and small investors investing needs (Callen 2015).
Further confirmation of the statement depicted in the article came from David Craig the Chief Finance officer, who evaluates annual report for clients. David Craig relevantly portrayed a statement indicates the problem related to International Financial Reporting Standards, which is hampering capability of the investors to understand the actual financial performance of the company. The statement indicates the complex nature of International Financial Reporting Standards, which can only be understood by Chief financial officer and technical analysis who are able to decode the financial notes provided in the annual report. Chief financial officer also indicated that normal investors are not technical analyst who are able to understand the technicality of the annual report to identify the actual financial performance of an organisation. Hence, the incapability of the investors to evaluate the actual financial performance of an organisation will lead to misconception and hamper share price of the organisation which will directly impact the company’s ability to conduct its operations (Churyk, Reinstein and Smith 2018). Therefore, it could be identified that International Financial Reporting Standard does not comply with the relevance and faithful representation of the annual report that is needed by AASB.
The incapability of International Financial Reporting Standard was further elaborated by the statement provided by Mr Roberts who indicated that none of the investors ever is any kind of questions regarding the preparation of annual report in accordance with IFRS. moreover he also stated that the investors were waiting for the management briefing and investor reports rather than the annual report which is prepared in accordance with International Financial Reporting Standard. This relatively indicated the problems that investor faces in understanding the financial report and detecting the financial capability of the organisation. However, the interpretation that is conducted by the financial report is relatively viable as it portrays all the relevant information that is needed by the stakeholders. Nevertheless, the complexity of the information does not allow the investors to understand the viability and technicality of the notes depicted in the annual report (Dutta and Patatoukas 2016). Hence, it could be identified that the International Financial Reporting Standard is not able to provide adequate clarity to the investors which is needed under AASB regulations.
Therefore, it could be understood that relevant changes in the current IFRS financial reporting system need to be conducted, which might allow the investors to understand the actual financial capability of the company, investors do not lose the actual information on technicality.
a:
The decision made by the Australian government for not accommodating any kind of environmental and social responsibilities in the Corporation Act is relatively evaluated under the public interest theory. In accordance with the public interest theory, the regulations imposed by the government needs to be in line with Public Interest, where all the relevant information need to help only the countries citizens and not handful of Corporate groups. The public interest theory relatively disagrees with the decision made by the Australian government for not accommodating any kind of environmental and Social Responsibility in the Corporation Act. This directly violates the Public Interest theory, which indicates that governments conduct regulations on the basis of equality and do not favour some groups over the citizens of the organisation. Hence, it could be understood that the Australian government is under manipulation and corruption which led to the Precision for not considering environmental and social responsibilities on the Corporation Act. This relatively indicates the decisions that has been made by the Australian government in supporting the corporations rather than the citizens (Horton 2018).
b:
The decision of the Australian government is also evaluated under the captured theory, which helps in detecting the fraud and corruption that is embedded within a government. According to the captured theory, governments that rely on corruption relatively chooses regulations that only support and full of corporates and regulators, while ignoring majority of the citizens of the country. The capture theory directly indicates that all the relevant information that is produced by the government is mainly corrupted where the decisions are made to help only handful of police persons and increased the income inequality within the country. Moreover, the capture today also indicates the level of corruption that is present within a government by evaluating different decisions that has been made by the government in past to support economic growth. With the help of capture theory individuals are able to understand the level of trustworthiness that government portrays to the citizens and whether the economy is viable for Investments. Evaluating the decision made by the Australian government under the captured theory it could be identified that the government has been captured. the celebrity indicates that the gov corrupt officials within the Australian government has violated the essential rule of not accommodating all this benefits to the people rather than specific group. The non-accommodation of social and environmental laws in the Corporation Act directly help the corporations to minimise the expenses for following the new laws. Hence, the government helped handful of the corporations, while ignoring the environmental and social impact will have on its people (Hoyle, Schaefer and Doupnik 2015).
c:
The evaluation of economic interest group theory of regulation relatively indicates the benefits that is provided by the government to the corporation, which helps in improving the economy of the country. Moreover, the decision of the government is relatively evaluated on the basis of economic interest group theory of regulations which helps in understanding the level of regulations, which could be imposed on the citizens to benefit the economic conditions of the country. The decision made by the Australian government is relatively evaluated on the basis of economic interest group theory of regulations, which indicates the positive viability of the decision. Hence, under the evaluation of economic interest group theory it could be identified that the Australian government has taken an adequate decision for boosting their economic condition. Therefore, under the theory the decision made by the Australian government is considered viable, which would help in improving the economic condition of the country (Libby 2017).
Part C:
The Accounting for the Impairment or Disposal of Long-Lived Assets, as per the FASB statement No. 144 relevantly indicates the use of revaluation method that is conducted by companies in US for their noncurrent assets. This would eventually help in understanding the value of their assets as per the market price. This could eventually help in understanding the impairment loss, which is used by the companies in their annual report to portray the loss incurred in their noncurrent assets. The counting regulations used by the US government relatively helps in identifying the treatment behind the non-current assets, which helps in depicting the actual financial position of an organisation. The measures taken by FASB mainly portrays the faithfulness in the annual report projected by companies in US, as the organisations revalue their Assets on daily basis to depict the actual financial position to the investors. This revaluation method also helps in minimising any kind of abnormal loss or gain that might generate after the sale of an asset, due to the non-accommodation of revaluation method. Therefore, the accounting treatment used by the single framework of FASB helps in improving the financial reporting system of the organisation and allow the investors to detect the actual financial position of a company before investment (Macve 2015).
a:
There is different level of motivation that could force the directors of the organisation to the value the property plant and equipment for during the fiscal year. According to the accounting rules, it is essential for all the relevant organisations to revalue their assets before preparing the annual report. Without the revaluation process the company is not putting the actual financial position of the organisation for the fiscal year and is violating the regulations late by FASB. This would eventually motivate the directors to the value that noncurrent assets before preparing the annual report. During the acquisition and Merger process the directors need to identify the actual valuation of the non-current assets that is been achieved by the organisation. This process directly allows the director to identify the benefits that could be obtained from their merger and acquisition. Hence, the proposition of evaluating the non-current assets would eventually motivate the directors during the merger and acquisition process. Moreover, the directors are also able to identify the actual returns that is generated from the used by the company. This is only possible if continuous revaluation process is conducted on non-current assets, which helps in deriving the actual capability of the company to derive returns from investment (Nilsson 2017).
b:
This decision for not revaluing the non-current assets would directly affect financial statement of the organisation, as it might hamper viability of the financial report. Moreover, non-adoption of the revaluation process would also hamper fair value presentation of the non-current assets in the annual report, while any kind of sales of the SS would result in abnormal gains or loss. Hence, using the revaluation model would eventually allow the organisation to put the actual financial position of the company while reducing any kind of abnormality in the annual report.
c:
Yes, the decision for not revaluing would directly impact the wealth of shareholders, as the company would provide abnormal gains or losses in the annual report, which will reduce the trust of the investors. This would directly impact the overall share value of the organisation over the period and reduce their share price. Hence, the reduction in share value would directly hamper profitability and wealth of shareholders. Therefore, using the revaluation method in the non-current assets is essential to safeguard the shareholders wealth of the organisation. Moreover, the revaluation model would eventually pottery and accurate financial position to the investors which would help them to detect the actual fair value of the company and maintained adequate share price level (Scott 2015).
References:
Abdel-Maksoud, A., Cheffi, W. and Ghoudi, K., 2016. The mediating effect of shop-floor involvement on relations between advanced management accounting practices and operational non-financial performance indicators. The British Accounting Review, 48(2), pp.169-184.
Beams, F.A., Brozovsky, J.A. and Shoulders, C.D., 2017. Advanced accounting. Pearson.
Callen, J.L., 2015. A selective critical review of financial accounting research. Critical Perspectives on Accounting, 26, pp.157-167.
Cascino, S., Clatworthy, M., Garcia Osma, B., Gassen, J. and Imam, S., 2017. The Usefulness of Financial Accounting Information: Evidence from the Field.
Churyk, N.T., Reinstein, A. and Smith, L., 2018. Jones Enterprises Real Estate Investment Trust: Comparing US and Canadian Acquisition Accounting, Balance Sheet and Security Commission Reporting, and Initial Public Offering Location. Issues in Accounting Education, 33(2), pp.35-42.
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.
Horton, J., 2018. Advanced Financial Accounting and Reporting: Theory, Practice and Evidence. Routledge.
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Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Miller, W.F. and Shawver, T.J., 2016. The Potential Impact of Education on Whistleblowing Behavior: Benefits of an Intervention in Advanced Financial Accounting. Journal of Business Ethics Education, 13, pp.67-90.
Nilsson, F., 2017. The Relationship Between Financial Accounting and Management Control Systems: Preliminary Findings From a Case Study of a Swedish Bank. In European Network for Research in Organisational and Accounting Change (ENROAC), 2017, 29-30 June, University of Naples” Federico II”, Italy..
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Warren Jr, J.D., Moffitt, K.C. and Byrnes, P., 2015. How Big Data will change accounting. Accounting Horizons, 29(2), pp.397-407.
Weirich, T.R., Pearson, T.C. and Churyk, N.T., 2017. Accounting and Auditing Research: Tools and Strategies. Wiley Global Education.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John Wiley & Sons.
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