Adoption of Ifrs in Australia

The first benefit of the conversion is comparability. Switching to IFRS would allow people to see various companies from different parts of world on the same plane. As willingness to trade increases, cross-border investment and integration of capital markets are easier with greater market liquidity and lower cost of capital. Investor bases would increase as the financial reports are becoming comparable. With better information, companies would be able to more effectively allocate their capital. Having one standard, however, does not guarantee comparability. With the same standard, practices and enforcement can differ considerably across firms and countries.

The issue of adoption of international financial reporting standards (IFRSS) in Australia has been controversial issue since the first time Australian Financial Reporting council (FRC) announced the policy in 2002. Many believe that IFRSS adoption will lead to great advantages such as enhance financial report comparability, improve quality of financial reporting, attract more foreign investor, and other significant advantages. However, some also believe that the adoption merely result in disadvantages and cost for Australian business, accounting profession and even Australian government.

As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.

Access to capital markets in United Kingdom is easy after the adoption of IFRs. Public capital markets play an important role in financing the activities of non-financial companies in the United Kingdom, providing them with the main option to bank loans and private sources of finance. These set of international accounting standards helped reduce the information processing and auditing costs to the UK’s market participants. With the help of adoption of IFRS it is expected to lower information costs to capital markets, and the UK

We now want to look into the International Accounting Standards Board and framework for the preparation and presentation of financial statements. The conceptual frameworks are split into five categories and are in the following order: the objective of financial statements; underlying assumptions; the qualitative characteristics that determine the usefulness of information in financial statements; the definition, recognition, and measurement of the elements from which financial statements are constructed; and the concepts of capital and capital maintenance (Ankarath 11). The standards under IFRS are beginning to become much more popular across the world for several different reasons. The International Financial Reporting Standards are currently being used by at the very least 100 countries and “[was] expected that by 2011, more than 150 countries [would] have adopted them” (Ankarath 1). We happen to find this important because it seems that a lot of countries are starting to adopt IFRS to report their financial statements. One of the reasons why many countries made the switch over to IFRS is because “the decision of the U.S. SEC to allow foreign private issuers to list their securities on U.S.

As stated earlier, the IASB arose from specific needs of the accounting industry and the public. As international trade has increased, the need for transnational accounting information has increased as well. This sparked the demand for development of international accounting standards to make financial data between countries more comparable. In 1973, the International Accounting Standards Committee (IASC) was formed to develop these international standards. The standards issued by the IASC, prior to 2001, were called International Accounting Standards (IASs). In 2001, the IASC made the International Accounting Standards Board (IASB) the official international standard-setting body. The standards issued by the IASB are called International Financial Reporting Standards (IFRSs) (Schroeder, Clark, & Cathey, 2011, p. 82-87).

The IFRS is basically a set of accounting rules which are issued by the IASB based in London, UK. These accounting standards have originated from its predecessor IASC defining the term IAS, which occurred in the 70’s. it was only after 2000’s that the IASB took a strong hold under the label IFRS claiming to be a lot more independent even though pertaining to its predecessor, efficiently staffed and better funded. Caffermen and zeff (2006) discuss about the gradual spread of accounting has made a considerable progress over time, and with the adoption of IFRS worldwide, accounting procedures could be smoothened.

With the growth of international business there is a need to standardize financial statements globally. Presently there are “approximately 120 foreign private issuers currently that report to the Commission using IFRS financial statements.” By standardizing accounting practices investors will be able to make informed decisions based on comparability and accuracy of financial statements. The SEC released this statement in 2008, “We believe that IFRS has the potential to best provide the common platform on which companies can report and investors can compare financial information.” The SEC has created a “Roadmap” or plan to convert US GAAP over to IFRS. According to The Committee of

Accounting has been playing a very important role in many places such as Australian accounting standards. Australian accounting standards is also developed by the Australian Accounting Standards Board (AASB). This essay will firstly discuss what AASB is, the role and the functions of AASB. And then, following this, the other projects’ role such as Financial Reporting Council (FRC) and International Accounting Standards Board (IASB) and the relationship between AASB, FRC and IASB.

3.1 How quality is measured in relation to IFRS. The adoption of IFRS and why the change?................................................................................

For nearly half a century, a movement has been underway to establish a high-quality, comprehensive set of international accounting standards, with the goal of facilitating international trade and investment. In the global capital market, differences in the rules of accounting for the purposes of recognition, measurement, and reporting of financial results have impaired the smooth transfer of information across borders. Given that it accounts for nearly a third of the global market, there is considerable pressure for the United States to conform to the International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board (IASB). While moving to a single set of accounting standards could create

global standard allows them to operate in a single accounting environment worldwide (PricewaterhouseCoopers 2007). The globally positive attitude towards an convergence to IFRS is exemplified by an IFAC survey among

According to the research, Accounting standards exist to facilitate the preparation of high-quality and consistent general purpose financial statements to convey the useful information about the general financial condition and results related to reporting entities, such as companies, non-profit corporations and governments. And Australia adopted International Financial Reporting Standards (IFRS) in 2005, as directed by the Financial Reporting Council in its 2002 directive to the AASB. The Australian Accounting Standards Board has published AASB 15 Revenue from Contracts and Customers, the Australian equivalent of its international namesake, IFRS 15. And the purpose of the new Standards is to provide (except in relation to some specific exceptions, such as lease contracts and insurance contracts) a single source of accounting requirements for all contracts with customers, thereby replacing all current accounting pronouncements on revenue.

The International Financial Reporting Standards (IFRS) is the accounting framework used by the European Union, Japan, Canada, and other world economic leaders. The IFRS is based on the tenets of understandability, reliability, and comparability. It is based off the International Accounting Standards (IAS) and had the opportunity to be built from accounting ideas and principles used across the world. In recent years it also has had the chance to look at the United States Generally Accepted Accounting Principles (GAAP) and modify the rules to enhance clarity and consistency, intentionally setting itself apart from U.S.

With complete notion and awareness of how each country has their set of rules, “the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements” (Rouse, 2011). This view is meant to provide general guidelines, as well as international comparisons through conventional and edifying means. To bring broader and vivid objectives, IFRS replaced IAS, the older standards, in order to bring a more comprehensive and simplified accounting procedures.