According to the four articles, it was discovered that being an Australia government agency, the AASB (Australian Accounting Standards Board) is responsible for developing and maintaining the financial reporting standards. These standards are applied in both the private and public entities. The AASB helps to facilitate the participation of the Australian community in standard setting globally.
The global financial standards are contributed by different bodies and AASB being one of them. The AASB plays an important role in Australian Accounting Standards, which include Interpretations that are applied by governments in preparation of financial statements for the whole of government and the General Government Sector (GGS).
The Australian Accounting Standards has incorporated requirements which are specifically applicable to the Australian entities. These requirements are designed in such a way that, they are either restricted to the non-profit or the public sectors. (Robb, Rohde and Green, 2014)
Originally, the Australian Accounting Standards was not applicable to the bodies which are regulated under the Corporation Law while the Australian Accounting Standards Board was applicable to those sectors which were regulated under the Corporations Law.
The accessibility of information related to financial reports has been made more available in the IFRS compared to the Australian accounting system. It has also reduced the cost of information processes since most of the processing is done by the IFRS. According to most of the research findings, the adoption of IFRS in Australia is very appropriate and has been of benefit to Australian economy and it creates a friendly environment to the foreign investors and analysts who in turn boosts its economy.
The Monitoring Board, International Financial Reporting Standards (IFRS) Foundation, International Accounting Standards Board (IASB), IFRS Advisory, and IFRS Interpretations Committee work together to ensure that there is quality in accounting in Australia. The IRFS acts as an oversight body of several existing boards that include the IRFS interpretations committee.
The IFRS foundation works independently and it is not-for-profit private sector organization that works for the benefit of the public. The main objectives of this body are to focus on high quality, and to come up with understandable globally accepted international financial reporting standards. It also enhances the application of the set-up standards, and also accounting on the financial needs of upcoming economies which includes the small and medium-sized entities (SMEs). This foundation also ensures the facilitation of IFRSs. (Sims and Cullis, 2009)
The IFRS adoption has been reported as positive by the researches done. It has been said to have improved the value of importance of accounting reports. It has also been proved to have reduced the number of firms engaging in earning management roles. There is also evidence that has supported the IFRS adoption and has reported that this type of regime has improved the quality of accounting in Australia however some studies state that the measure of accounting quality has continued to adopt the Australian accounting standards.
Most of the studies have reported the positive results of IFRS stating that it enhances the comparability of Australian Financial Reporting practices that are practiced globally.
The investors and analysts have also benefited from the IFRS adoption by the Australian companies since the body is geared towards improving the analyst forecast accuracy and even the dispersion.
Other studies have found out that the adoption of IFRS by the Australian companies has the benefits of the accounting convergence. The studies have tried to examine all the possible impacts of IFRS adoption in Australia and on the financial statements. The IFRS is preferred compared to the Australian General Accepted Accounting Principles (AGAAP). The IFRS can easily and consistently predict bankruptcy for the bankrupt firms compared to AGAAP. The Altman’s (1968) model under IFRS has adopted the conservative accounting rules to improve the bankruptcy prediction.
It has also been proven that the there is an improvement on the quality of information that are contained in the financial statements for bankruptcy prediction. The adoption of the IFRS has benefited the Australian government in that the Australian government can be able to apply the accounting standards which are also applied by other countries worldwide. (Standish, 2009)
The IFRS adoption in Australia is associated with an important paradigm shift. The way of doing things changed and also with the development of technologies and merging of financial accounting standards. These principles are very helpful in making sound financial and economic decisions while considering the investors. The IFRS has been associated with achievement of higher degree of disclosure and accountability.
The investors and analysts have benefited from the adoption of IFRS by the Australian government in various ways. The IFRS acts as an umbrella to the companies. Under this umbrella the companies are able to follow the standards and principles which have been stated in the IFRS protocol. According to the recent studies, there is a cost-benefit advantage to the investors because they are been protected by the IFRS principles.
The graph below represents the total number of articles publicized in different years. The number of publication increases yearly.
Since accounting is shaped by the political and economic patterns, harmonization of accounting principles can have consequences on the investors and the analysts. The guidelines and rules in the four articles especially IFRS govern the companies so that they can provide services while considering equality in service provision. The adoption of IFRS has been significant in Australian economy since it has led to attraction of investors and analysts.
The Australian government has merged its accounting principles with the IFRS and through this, it has enabled the government to move away from the traditional way of accounting to the modern accounting standards which has been proven to be more accountable and transparent to the companies and also the investors.
The IFRS implementation has encouraged responsibility by the companies under these particular rules. Sharing of rules with other countries under IFRS has created a common business language between the Australian government and other countries that are under the IFRS regulations.
Moving away from the Australian traditional way of accounting has resulted to positive outcomes and one of the being the ability to trigger investors’ ability to make informed choices on matters to do with financial decisions. As a result, this has led to reduced risk for investors and it has also lower the cost of capital for companies.
Investors and analysts find it easier working in environments that are under the IFRS standards compared to working under the local accounting system (Pan and Perera, 2012). Australia has gone a step forward by incorporating the IFRS standards in its system so that it can guard against fraud and irresponsibility by the companies.
Many journals have argued that IFRS adoption positively affects information comparability. Further arguments have shown that information is more comparable in an IFRS environment compared to when the local accounting standards are applied.
Since the financial reports are prepared by the IFRS according to the already sets of standards, the costs that are related to the preparation of capital information is automatically reduced. The allocation of resources in Australia and worldwide has also been made easier by the IFRS. (Palm and Bisman, 2010)
The Australian accounting system is significantly influenced by the political and fiscal issues but the fact that its system is anchored on the IFRS, its economic transactions and economic gains and losses are detected in a more timely and appropriate manner allowing for adjustments.
The IFRS provides better accounting information that are beneficial in reducing amount of losses and discretion that the tradition Australian accounting system had. (Njaala, 2015) the setbacks that companies faced in the Australian accounting system manipulated provisions, exaggerated outcomes and also obscured losses.
When you compare the IFRS and the Australian accounting system, there has been improvement in information use, the quality of information and the accounting standards. Before any major financial decisions are made, the government must consider so many factors including the IFRS standards (Jackson, 2018)
The set of the standards of IFRS uses a measurement that reflects on the economic reality of the companies allowing increased quality and comparability of financial statements in accounting. The IFRS increases access to accounting standardization that has not been set up in Australia.
The local standards differ from the IFRS in terms of information transparency and comparability which hugely affects the companies which are based in countries whose accounting standards greatly differ from those of the IFRS. (Islam, Khan, Hughes and Ali, 2017) the difference between the Australian accounting systems differ from the IFRS depending on the enforcement level. The adoption of IFRS by Australian companies have had a positive impact on credit market in terms of cost and the way they give out loans to attract the foreign investors and creditors.
The effect of IFRS on Australian financial reporting and its companies is greater on companies with lower risk of litigation, companies with higher risk of non-compliance with debts covenants and companies that are less frequently monitored by analysts (Hanif, 2013)
The IFRS has focused on coming up with strategies that increase transparency and accountability. The differences between the Australian traditional accounting system and IFRS; the information quality and comparability have been a reported as a setback to the analysts. The analysts’ find it difficult to predict any future financial activities. However, the adoption of IFRS has had a positive outcome on the foreign analysts in prediction hence attracting new analysts in Australian economy (Dinh, Kang, Morris and Schultze, 2018)
Most findings have discovered that investors are more positive to IFRS adoption due to convergence benefits. However, there has been a report on less positive market reaction for companies with higher litigation risk. This is consistent with investors’ perception towards higher percentage of discretion and less implementation guidance under IFRS.
Under IFRS has come up with standards that cut across the borders despite the geographic boundaries.
References:
Dinh, T., Kang, H., Morris, R. and Schultze, W., 2018. Evolution of intangible asset accounting: Evidence from Australia. Journal of International Financial Management & Accounting,.
Hanif, M., 2013. Ijarah Accounting: A Comparison of International Accounting Standard-17 & Financial Accounting Standard-8. SSRN Electronic Journal,.
Islam, J., Khan, H., Hughes, M. and Ali, M., 2017. Politicization of the accounting standard-setting process and the influence of key-players: An investigation into the withdrawal of the mandatory status of the Statement of Accounting Concepts No. 4 (SAC 4) in Australia. Accounting History, 23(3), pp.296-313.
Jackson, D., 2018. Accounting and Finance Graduate Employment Outcomes: Underemployment, Self-employment and Managing Diversity. Australian Accounting Review,.
Njaala, P., 2015. Comparative Analysis of International Public Sector Accounting Standard 23 and International Accounting Standard 20. SSRN Electronic Journal,.
Palm, C. and Bisman, J., 2010. Benchmarking Introductory Accounting Curricula: Experience from Australia. Accounting Education, 19(1-2), pp.179-201.
Pan, P. and Perera, H., 2012. Market relevance of university accounting programs: Evidence from Australia. Accounting Forum, 36(2), pp.91-108.
Robb, D., Rohde, F. and Green, P., 2014. Standard Business Reporting in Australia: efficiency, effectiveness, or both?. Accounting & Finance, 56(2), pp.509-544.
Sims, M. and Cullis, K., 2009. USING A PROPORTIONAL ODDS MODEL TO ANALYSE THE FACTORS THAT INFLUENCE ACCOUNTING STANDARD SETTING LOBBYING IN AUSTRALIA. Accounting & Finance, 35(2), pp.175-195.
Standish, P., 2009. ACCOUNTING EDUCATION IN AUSTRALIA: 1982-83. Accounting & Finance, 23(2), pp.1-30.
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