...Introduction It is a requirement that, if an entity is defined as a reporting entity, it is required to release financial reports that comply with the Australian Accounting Standards Board (AASB) (Deegan 2008:83). Two companies have been chosen to analyse their reports, in particular the disclosures made in their respective reports. The two companies chosen to analyse are Commonwealth Bank of Australia (CBA) and Macquarie Bank Limited (MBL). CBA The Commonwealth Bank is one of Australia’s leading providers of integrated financial services including retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. It is one of the largest listed companies on the Australian Stock Exchange (ASX:CBA). MBL On 13 November 2007, Macquarie Bank Limited was restructured to form the newly created Macquarie Group Limited. It businesses comprise a range of investment, commercial and selected retail financial services. It is a global provider of banking, financial, advisory, investment and funds management services. Macquarie Group Limited is listed in Australia (ASX:MQG) Both companies have subsidiaries and associated entities. The three disclosures that will be discussed and compared are 1) Foreign Currency transactions – AASB 121 2) Joint Ventures AASB 131 3) Segment Reporting AASB 114 Foreign Currency transactions AASB 121 governs foreign currency transactions. The disclosure requirements are: 1) Method used...
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...Question 1: Case analysis There are many similarities between IFRS and pre-IFRS Canadian GAAP, however there are also significant differences. They are both similar in terms of style and the form of the individual standards because they are based on similar conceptual frameworks. The main objective of both IFRS and pre-IFRS Canadian GAAP is for financial statements to give a fair presentation. When there is a choice of accounting policies, the one that can reflect the most accurate economic portrait should be selected. Since Extract Tar Sands it traded publicly, included in its stakeholders are international investors. It’s compliance with IFRS is necessary to be a global competitor. IFRS will allow easier financial performance benchmarking amongst competing companies. This in turn will provide better access to capital. With the adoption of IFRS it will also eliminate Extract’s need to reconcile information reported under different national standards while providing consistent information for decision making purposes. The two areas with IFRS that represent the greatest change for Extract tar sands are: 1. Impairment: With IFRS impairments are usually triggered more frequently and unlike pre-IFRS Canadian GAAP, impairments under IFRS can be reversed. 2. Revaluations: Some IFRS including Property, Plant and Equipment, Investment Property and Intangibles allow the revaluation of assets under certain circumstances. This is quite a change from pre-IFRS Canadian GAAP which...
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...ADVANCED FINANCIAL ACCOUNTING 260 IMPAIRMENT QUIZ QUESTIONS 1. When should an entity conduct an impairment test? (2 Marks) The following assets require an impairment test every year: • Intangible assets with indefinite useful lives • Intangible assets not yet available for use • Goodwill acquired in a business combination The impairment test is undertaken when there is indication that an asset may be impaired. This means that, at the end of each reporting period, an entity has to test for the probability that an asset has been impaired. An entity, therefore, has to determine after analysing certain sources of information whether there is sufficient evidence to suspect that an asset may be impaired. It is not automatically undertaken at the end of each reporting period or at the end of any set of period of time. 2. How is an impairment test undertaken? (2 Marks) The first step is to determine the fair value, costs of disposal, and value in use. Having determined the fair value less costs of disposal and the value in use, these two amounts are compared and the recoverable amount is the higher of these two amounts. The second step is then to compare the recoverable amount with the carrying amount of the asset as recorded by the entity. The second step is then to compare the recoverable amount with the carrying amount of the asset as recorded by the entity. If the recoverable amount is less than the carrying amount, an...
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...1) From the consolidation perspective, what would be the likely overall effect of adopting IFRS on the company’s financial statements? From the consolidation perspective, the likely overall effect of adopting IFRS on the company’s financial statements would preserve and strengthen the company’s global financial competitiveness. Moreover, it will simplify the accounting and consolidation process significantly and reduce financial reporting costs. 2) What potential effect would arise if Klugen were to select the option under IFRS 3 to value non-controlling interest at the proportionate share of its subsidiaries’ net identifiable assets? For business combination, the buyer can control without buying all of the equity, the remaining , so-called the non-controlling, equity interests are measure either at fair value or at the non-controlling interests’ proportionate share of its subsidiaries’ net identifiable assets. Under IFRS 3, the potential effect would arise is that it will result in benefits for users by improving comparability and will increase the relevance of information provided. Moreover, it identifies and evaluates the main costs and benefits for users. 3) Do you believe that an impairment of goodwill would be more likely under IFRS or under U.S. GAAP? Why or why not? There is a difference in goodwill impairment measurement. Under U.S GAAP, two-step approach is used. It looks to the reporting unit. However, under IFRS, one-step approach is used. It is based...
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...basic cause of international difference in financial reporting practice is the different degree of interference by governments in accounting. It is understood that “International Financial Reporting Standards (IFRS)” has been adopted in many countries around the world, as a minimum for the companies that are obliged for financial reporting. IFRS has been implemented in nearly one hundred and fifteen countries around the world, whilst phasing out the previous standard of rules of Generally Accepted Accounting Practice or more commonly known as GAAP. The United States is the only large major country to holdout and not adopt IFRS. IFRS is increasing its widespread backing from all over the world. All United States established companies are obliged to use the “Financial Accounting Standards Board FASB” (Wikipedia, 2012) many companies use these set of standards as they are “detailed and comprehensive” (Media Wiley) compared to the “International Accounting Standards Board IASB” (Wikipedia, 2012) which are more set in stone and less rule based. What the United States need is a set of high quality accounting standards improves comparability. “It is generally believed that IFRS has the best potential to provide a common platform on which companies can report and investors can compare financial information.” (Media Wiley) It is expected that if all countries adopt IFRS it will be beneficial for investors and others who use financial statements by reducing costs and increasing...
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...Accounting Standards Boards Accounting Standards Boards The International Accounting Standards Board is an organization that is based out of London in which it seeks to set as well as enforce accounting standards procedures. The SEC chairman William Douglas disagreed with, the SEC decided to allow the reporting of this to be filed with the SEC in 1938. The first to be influenced by the AICPA was the Committee on Accounting Procedures followed by the Accounting Standards Board. The Financial Accounting Standards Board is an independent agency which establishes accounting principles as well as accounting procedures. The Financial Accounting Standards Board is an independent agency which establishes accounting principles as well as accounting procedures. The Master of Science Accountancy is an advanced accounting degree that is designed to deal with the objectives of the American Institute of Certified Public Accountants. This degree allows one to see the professional values, communication, leadership skills, strategic, critical thinking, and technology skills that are needed in an accounting position. International Accounting Standards Board (IASB) The International Accounting Standards Board is an organization that is based out of London in which it seeks to set as well as enforce accounting standards procedures. As stated by the Business Dictionary (2012) “Over 100 countries currently require or permit companies to comply...
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...Codification System Orientation Paper Janet Osegueda University of Phoenix Advanced Topics in Accounting Research ACC/497 Raymond Clark, Instructor July 3, 2014 FASB Codification System Orientation Paper The FASB Codification System is a database and research system that was developed by the financial Accounting Standards Board. It authentically pulls together many different resources about the accounting standards and it puts it into a single searchable system. The main purport of the FASB Codification System is to have a more preponderant organization of the accounting principles and laws. Another main purport is to have everything simplified for reduce the research time and it avails the accounting professionals do their work more efficiently and efficaciously. The nine content areas located in the FASB are the following General Principles, Presentations, Assets, Liabilities, Equity, Revenue, Expenses, Broad transactions and Industry. The general principles cover the Generally Accepted Accounting Principles which identifies the transmutations to the accounting standards updates. Each subtopic covers the updates to the GAAP guidelines, modifications done to the guidelines, content grandfathered in after the engenderment of the Codification system. The presentation section gives guidance on the income verbal expression preparations, the notes for financial verbalizations, withal for calculating earnings per share. The assets section...
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...FA S B L E A R N I N G G U I D E For the Codification Research System Professional View March 1, 2012 Financial Accounting Standards Board of the Financial Accounting Foundation Acknowledgements Bruce Pounder, CMA, CFM, DipIFR (ACCA), was the lead contributor for the Lessons included in the FASB Learning Guide For the Codification Research System. Special thanks to Karen Guasp of the FASB, Mary Nassef of the FAF, and numerous other FASB and FAF staff members for their editorial contributions. Copyright © 2012 by Financial Accounting Foundation, Norwalk, Connecticut. All rights reserved. This publication is for informational purposes only and the content herein is not a substitute for legal, accounting or other professional advice. As such, users should not rely on this publication for instruction, opinions, guidance, advice, or strategies on the interpretation or application of accounting or accounting standards of the Financial Accounting Standard Boards, specifically or generally, and should always consult his or her own professional advisors and discuss the facts and circumstances that apply to the user. While every effort has been made to make the information presented here as complete and accurate as possible, it may contain errors, omissions or misinformation. Neither Financial Accounting Foundation nor the Financial Accounting Standard Boards accepts any liability or responsibility to any person or entity with respect to any loss or damage alleged to have...
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...Accounting Standards Boards DeAnn Scroggins ACC/541 June 1, 2015 Leslie Crews Accounting Standards Boards People from the beginning of time to current have engaged in commerce in one sort or another. Rudimentary skills in accounting was necessary to determine profit or loss in the early years. As the history of commerce have advanced, so had the theory and methodology of accounting. In 1934 the Securities Exchange Commission (SEC) started writing accounting principles, and in 1973 the Financial Accounting Standards Board (FASB) began issuing accounting standards. Now, FASB is working in conjunction with the International Accounting Standards Board (IASB) to standardize international accounting. The following will address a joint venture, past, present, and future relationships, and how the Master in Science Accounting (MSA) program compliments the accounting vocation. Relationship between FASB and IASB Shortly after the depression the government found the need to impart direction in accounting, and preparing financial statements. The Securities and Exchange Committee was formed, eventually producing The Financial Accounting Standards Board (FASB) . 1990 global markets started to expand, bringing light to the necessity in addressing accounting standards in international markets. In 1973 the International Accounting Standards Committee (AISC) was formed to develop international accounting standards. In 2001, the IASC was replaced by the International Accounting...
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...its products or assets. While the need for valuation or accounting of goodwill does not arise in the normal course of a business or in its growth on a periodic basis, (because of the absence of physical assets to back it up), it becomes an extremely important aspect when a running business goes up for sale, or changes ownership, through mechanisms like mergers, or acquisitions. Goodwill can be considered from two different points of view: an economic and an accounting approach. The economic approach regards goodwill as the present value of the additional profits the acquiring company is expecting to gain in the future resulting from the acquisition. These additional profits arise from a “favourable attitude towards the firm” and from synergies. From an accounting perspective, goodwill is the difference in valuation between the purchase price and the book value of the acquired firm. (Lycklama, 2006) The dilemma faced by accountants in valuing goodwill is best illustrated by the sign Albert Einstein had in his Princeton office that stated, “Not everything that counts can be counted, and not everything that can be counted counts.” (Bullen and Cafini, 2006) Businesses with strong goodwill are valued at prices much higher than the value of their net assets, the differentials being asked and paid because of the intrinsic ability of these businesses to earn profits higher than what their assets would warrant. The accounting of goodwill thus arises at the time of change of ownership...
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...Part: 1 Social Relevance of Accounting Information 1.1. Accounting Standards 1.2. Need for Accounting Standards Part 2: Types of Accounting Standards Rules Based Accounting Principle Based Accounting System Part: 3 Comparisons of Principle and Rules Based Accounting Standards Conceptual Framework Flexibility of Rules and Principles International Accounting Platform Comparability of Financial Statements Realistic Representation of Accounting Information Part:4 Findings of the Research Study Part :5 Conclusion Reference Appendix Appendix 1: Narration on Figure 1 - Qualities of Accounting Information Abstract The proposed research paper attempts to illustrate the importance of a global accounting system and the impact of standards on the global market, as well as, providing the means for comparable financial reporting for decision making by both investors and corporations. This research provides understanding about the major differences of a Rules-based and Principal Based Accounting Systems, including the benefits and drawbacks of such a shift. Proponents of principles-based accounting blame the Rules-Based Accounting System for the major accounting scandals. They believe that the Rules-Based system encourages the use of financial structuring to achieve desired accounting results, which will undermine the quality of financial reporting. Supporters of rules-based accounting argue that principles-based accounting relies heavily on judgment...
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...Accounting Standards for Business Combinations Heather Blanchette Ashford University ACC407: Advanced Accounting Rick Kwan October 27, 2014 Accounting Standards for Business Combinations In the competitive world that exists today, it is only natural for the market to be just as competitive. It is all too common for businesses to merge with other businesses in order to succeed and gain more control of their existing markets. Because of the distinctive rivalry between known companies within these competitive markets, such as Coca-Cola Company and Pepsi Co., these companies need to expand business to the most amount of profit possible. This method of thinking applies to all companies within any market. The largest reason to think about expansion to extension of ownership is to seek additional profit. The Financial Accounting Standards Board (FASB) is one of the leading officials that represent the accounting concepts and regulations related with business combinations in the United States. Business Combinations are an essential part of expansion. Businesses may find that entering into new product areas or branching out into new potential sales areas can be a bit daunting when these products and new areas are virtually inaccessible without the right tools or accessibility. However, by acquiring or combining with other companies, more opportunities may arise if these other companies have knowledge of these new product areas or sales areas. For example, telecommunications...
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...At present, financial accounting standards are established and propagated on the basis of two key conceptual structures, namely, Financial Accounting Standards Board (FASB) and International Accounting Standards Boards (IASB) (Cong 2013). This essay will discuss and justify that accounting theory played a role in setting of accounting practices but it played no significant role in setting of accounting standards. Rather, several accounting standards were set by the conceptual frameworks formulated by the accounting standards-setting groups. Several examples will be presented for supporting the arguments. There is need to analyze and justify the evolution of accounting theory to conceptual structures because accounting standards play a vital...
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...1 Luca Pacioli: Father Of Modern Accounting ...................................................................................... 2 1.2 19th Century – The Beginnings of Modern Accounting in Europe and America ............................... 3 1.3 20th Century – The Development of Modern Accounting Standards................................................. 4 1.4 21st Century – Accounting Regulation in Modern Commerce ........................................................... 4 2. DEVELOPMENT OF ACCOUNTING .................................................................................. 4 3. EVOLUTION OF ACCOUNTING ......................................................................................... 5 4. THE CONSEQUENCE OF DOUBLE ENTRY ..................................................................... 6 5. RECENT GROWTHS AND DEVELOPMENTS IN ACCOUNTING ............................... 7 6. LOOKING TO THE FUTURE ............................................................................................... 8 REFERENCES .............................................................................................................................. 9 1. INTRODUCTION The main objective of this study is to critically review the Origin, Growth and Development of accounting theories and their impacts on financial reporting. Other objectives are to explore accounting theory in resolving areas of diversities among users of financial statements. It further examines...
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...needed to be reported versus what has been posted to the corporations’ books. The “temporary difference is the difference between the tax basis of an asset or liability and its reported (carrying or book) amount in the financial statements, which will result in taxable amounts or deductible amounts in future years” (Kieso, el. 2007, Ch. 19). The corporation has taken the balance sheet approach to account for this timing issue and SFAS 109 guidelines have been followed. • The procedures for reporting accounting changes and error corrections. According to Kieso, Weygandt, and Warfield (2007, Ch. 22), and the Financial Accounting Standards Board [FASB], reporting accounting changes should be done using the retrospective approach. The retrospective approach reflects the changes done in previous financial statements so that they are more comparable. To report these changes first the corporation adjusts each prior period financial statements and then the corporation “adjusts the carrying amounts of assets and liabilities as of the beginning of the first year presented” (Kieso, el. 2007, Ch. 22). Reporting an error correction is similar to reporting an accounting change. First the corporation makes the necessary adjustments to the prior period financial statements and then the corporation discloses the error as a restatement. • The rationale behind establishing the subsidiary as a corporation. There are several reasons that the subsidiary...
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