1. Find a newspaper article or web page report of an item of accounting news, i.e. it refers to a current event, consideration, comment or decision that has been published after June 2016?
2. Explain the article that you have found in your own words and clearly relate the concepts, ideas and facts within the article to one or more of the theories or topics that you have studied this session?
The following discussion is based on the article of how 76 well-known companies in Australia left Australian taxpayers with $ 5.6 billion out of pocket. The various types of concepts of this article has been related to the topics of financial accounting in variety of ethical approaches, legal behavior and the state the rational whether the tax regulation has been developed as per public interest and captured by the big business (ABC News, 2016).
The following section of the study has been able to discuss on exposure draft for insurance contracts. The various nuances of the study has been able to include respondents ranging from companies, corporate bodies, accounting bodies and industry. The study has been further provided the description of the issues provided in insurance contracts and state whether there is any agreement among the various groups along with relevant examples. The insurance industry has been seen to be of increasingly exposing of contracts associated to long-term and certain obligations. In the recent time, accounting for the insurance contracts are not seem to provide the users with information which are seen to be meaningfully understood by the insurer’s financial position, risk exposure and performance as it is necessary to consequently diversify the various types of accounting practices and improve the present IFRS standards. The study is aimed to explain the exposure of insurance contracts, which was published by IASB on 27 November 2013 (Ifrs.org, 2017).
Based on the discourse of the article it has not observed that the multinational giants in Australia have been accounted for paying half of 30% of the corporate tax on an average and the budget has been expected to show some instances of multinational tax dodging (ABC News, 2016). In addition to this, based on the “Australian National University ANU” polling research there is an increasing matter of interest for inequality in income and wealth in Australia. The main technique for tax avoidance was identified as thin capitalization or debt loading. This is referred to as a situation where a company’s level of debt is much higher in compared to the equities. The Australian subsidiaries are affected with large amount of interest bills for the various types of offshore divisions and this is seen as a way of artificially lowering the total taxable amount and profit alienation. In case of profit alienation and Australian divisions are compelled to pay for large intellectual property fees which are based on tax havens and places of lower taxes (Aston, 2016).
Based on the report multinational pharmaceutical companies are seen with lowest effective tax rate of 5.7% of the local profits. Several multinational pharmaceutical companies such as Pfizer, Procter & Gamble and Glaxosmithkline have been scrutinized for tax avoidance on the strong (Butt, 2015).Multinational tax avoidance is acting as a key election battleground with the league post on advertisements group suggesting that the present government will announce a tax avoidance crackdown, which has the potential to save billions. Based on the Panama papers various types of leaks and exposures have been seen with some people to avoid and evade taxes, which have been able to fire up public opinion across the globe. In March 2016, the labor was seen to announce its first taxation policy, which was identified as a package, aimed to limit the profit and shift the claw back $ 2 million for the budget (ABC News, 2016).
The Australian tax commissioner Chris Jordan on a special hearing stated about the Senate tax avoidance enquiry for his response on Panama Papers scandal. The UTS report has been further able to identify that multinationals in the tech sector has paid an average of 7.5% of the overall tax rate. Some of these companies have been identified in form of Apple, Google and Microsoft has been seen to be severely criticised for appearing in front of the Senate enquiry The (Sydney Morning Herald, 2015). The senior campaigner named Daney Faddoul further stated that each citizen are paying taxes higher than the linear corporations such as Google, Chevron and Apple. These foreign multinationals are seen to be inflating the losses to shift their own profit and deprive Australia of the crucial investments in the local hospitals and schools (Huffington Post Australia, 2017).
The direct association of financial accounting theory has been has been related to tax avoidance. The main technique for tax avoidance was identified as thin capitalization or debt loading. This is referred to as a situation where a company’s level of debt is much higher in compared to the equities. In this particular case of companies are seen to maintain a high amount of trade in compared to its equity capital, that is the gearing or the leverages are too high. The tax regulation, has not been able to be captured by the big businesses as the process of following up feeling involve some time. It has been further identified that the big multinationals are taking undue advantage of the tax relaxations based on thin capitalization. The following trend of tax evasion has been seen to be evident in form of various types of pharmaceutical companies, technological giants and various types of other multinationals. Although the tax regulation are seen to be developing terms of public interest and limit the profit and shift the claw back $ 2 million for the budget, there has been several other loopholes which has provided the opportunity for the aforementioned companies to evade tax. Therefore, it cannot be said that the businesses have been able to efficiently capture the development of the public interest theory.
Some of the main types of the issue stated in the exposure drafts have been associated with the various types of comment letters. The first comment letter has been associated to the “IASB Exposure Draft ED/2013/7 Insurance Contracts”. This has been able to be related to considering the constituents associated to unlocking of contractual service margin and re measuring of the fulfillment of cash flow by using present information. The main principle of the exposure draft has been further seen in terms of measurement model for insurance contract liabilities and reasonable approximation is associated to measurement of the same. The various changes proposed and been seen to be to changes in the discount rate during initial recognition of the contract. The second comment letter is based on the comments on the “ED of IFRS4 Insurance Contract” (Ifrs.org, 2017). The investment component has been seen to be excluded from the various findings of the insurance contract and the single premium is to be deferred and the subsequent periods. The various types of consent issue has been stated based on increasing difficulty of the explanation of the users to reduce the usability of the statement of comprehensive income. As per this exposure draft the insurance contract will depend on the future claims, absorption of contract service margin, changes in the basic absorption and amortization. The various additions based on the exposure draft have been seen with consideration for the capacity of insurance industry, simplifying the operation and avoiding the challenges for complex requirements. The third exposure draft seem to be related to “ED 2013/7: Insurance”. This particular exposure draft has been able to take into consideration for the mandatory use of comprehensive income to recognize some of the impacts of interest rates or the insurance contracts on the associated assets (Ifrs.org, 2017). The exposure draft is for the recommended the IASB gram and a model, which will allow the various types of changes, associated to carrying amount of the insurance contract and fair value for supporting the reflections of the profit or losses. Some of the other considerations of the exposure draft have been seen with key terms, which are in response to the feedbacks on specific proposals, effect of the standard and description of the issues which were raised but not targeted by IASB.
The agreements with the various groups are discussed with the following:
Accounting bodies:- The main form of accounting bodies are seen in terms of implementing the various procedures for the exposure drafts. The accounting bodies are also expected to follow the relevant amendments made in the exposure drafts. Some of the main examples of the accounting bodies are seen in terms of Institute of Public accountants (IPA), CPA Australia (CPA) and Chartered Accountants Australia. These accounting entities are expected to abide by the rulings made in the exposure draft.
Corporate bodies: The corporate bodies are also expected to disclose the necessary financial information associated with insurance declaration and the use of newly amended exposure drafts based on the comment letters. The corporate bodies needs to make the necessary changes as per stated by the new rules of the exposure drafts. For instance, in case of definition of portfolio is required, the corporate bodies needs to make sure that the contract is able to take into consideration how the business is able to manage these portfolio.
Industry: The industry as a whole is also identified to be a major user of the various types of amendments made in the exposure draft. For instance, in a diary manufacturing company if the companies are stated to produce the insurance of the shipment in a certain way then all the companies under this needs to follow the exposure draft for that particular industry.
Companies: The various types of companies based in Australia are also seen to be acting as a major user of these exposure drafts.
Based on the several types of consideration it in the comment letter it can be stated that the various amendments made in these cannot be interpreted as being against the regulation. This is mainly due to the fact of standardization of norms for all the accounting bodies, companies and industry associated to a particular business.
The opinions based on public interest-based experience the regulation of the exposure drafts. It has been seen that the main purpose of the comment letters on the exposure drafts is able to provide the main rationale for the companies to follow the newer form of regulation and this is applicable to all the companies, industry and accounting bodies.
Conclusion
Based on the several types of the discussions it has been seen contractual service margin and re measuring of the fulfillment of cash flow has been done by using present information. The main principle of the exposure draft has been further seen in terms of measurement model for insurance contract liabilities and reasonable approximation is associated to measurement of the same. The rationale for the description of the issues in the various agreements has been seen to be made in terms of the companies, which are identified as the direct users of these exposure drafts.
The discussion based on the study has been able to provide various types of ethical approaches, legal behaviour and the state the rational whether the tax regulation has been developed as per public interest and captured by the big business. The main company the exhibition has been identified in form of pharmaceutical companies such as Pfizer, Procter & Gamble and Glaxosmithkline. The technological companies has been seen in terms of Google, Chevron and Apple. It has been further depicted that the companies are seen to avoid the taxes by application of thin capitalization or debt loading. It is an further seen that the general people of Australia are the main sufferers as they are seen to be paying taxes higher than multinational corporations. In turn , the multinational organisations are criticised for inflating the overall losses and shifting profits to tax haven locations for robbing the crucial investment in the hospitals and schools.
References
ABC News. (2016). 98 private companies earning over $200m pay no tax: ATO. [online] Available at: https://www.abc.net.au/news/2016-03-22/ato-30pc-of-large-private-companies-pay-no-tax/7266454 [Accessed 29 Apr. 2017].
ABC News. (2016). No tax paid by more than a third of large companies. [online] Available at: https://www.abc.net.au/news/2016-12-09/corporate-taxes-not-paid-by-more-than-one-third-of-companies/8106480 [Accessed 29 Apr. 2017].
ABC News. (2016). Which companies pay no tax? Search the database. [online] Available at: https://www.abc.net.au/news/2016-12-09/tax-data-transparency-ato/8106178 [Accessed 29 Apr. 2017].
Aston, H. (2016). How 76 profitable companies left Australian taxpayers $5.6 billion out of pocket. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/federal-budget/how-76-profitable-companies-left-australian-taxpayers-56-billion-out-of-pocket-20160419-goa6o2.html [Accessed 29 Apr. 2017].
Butt, N. (2015). Which companies are not paying tax. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/the-economy/which-of-australias-biggest-companies-are-not-paying-tax-20151216-glpl3a.html [Accessed 29 Apr. 2017].
Huffington Post Australia. (2017). A Third Of Australia’s Largest Companies Paid No Tax In 2014/2015. [online] Available at: https://www.huffingtonpost.com.au/2016/12/08/a-third-of-australias-largest-companies-paid-no-tax-in-2014-201/ [Accessed 29 Apr. 2017].
Ifrs.org. (2017). [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Exposure-Draft-June-2013/Documents/ED-Insurance-Contracts-June-2013.pdf [Accessed 29 Apr. 2017].
Ifrs.org. (2017). IFRS – Insurance Contracts. [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Pages/Insurance-Contracts.aspx [Accessed 29 Apr. 2017].
Ifrs.org. (2017). IFRS – Insurance Contracts: Exposure Draft & Comment letters (ED/2015/11) . [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Exposure-Draft-December-2015/Pages/default.aspx [Accessed 29 Apr. 2017].
The Sydney Morning Herald. (2015). Top ten Australian companies paying no tax. [online] Available at: https://www.smh.com.au/business/the-economy/top-ten-australian-companies-paying-no-tax-20151217-glpr80.html [Accessed 29 Apr. 2017].
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