In 2004, Australia became one of the first countries to impose IFRS on local government with full compliance taking place for the 2005/2006 financial year (Pilcher & Dean, 2009; Wee, Tarca & Chang, 2007). As the transition happen, AASB 9 was issued to replace AASB 139 as it applies to financial assets (Locke, 2013). The objective of AASB 139 is to establish principles for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items (Locke, 2013). While, AASB 9 Financial Instruments is equivalent to IFRS 9 of the same name as issued by the International Accounting Standards Board and the objective of AASB 9 is to establish principles for the financial reporting of financial assets and financial liabilities that will provide relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty’s future cash flows (Institute of Chartered Accountant Australia, 2012; Locke, 2013). AASB 9 has been issued on 7 December 2009 where companies are allowed to adopt the standard straight away or before January 2015 (Locke, 2013; Wee et al, 2007). AASB 9 is applicable for annual reporting periods beginning on or after 1 January 2015, with early adoption permitted and it will supersede AASB 139 from 1 January 2015 (Institute of Chartered Accountant Australia, 2012). So, we will be wondering what is wrong with the AASB 139 which has given rise to AASB 9. And, how the future application of AASB 9 will impact on the accounting for financial instruments in financial statements? One of the shortcomings of AASB 139 is the consequence of the technically complex nature of the hedge accounting provisions. The specific concern is whether the h... ... middle of paper ... ...arket through profit and loss. However, a leeway is given in the case of inability to measure the fair value of the embedded derivative solely, where a fair value election is allowed to designate the entire contract at fair value. The two opposite classification for a same instrument distorts the financial performance and position of the entity (Mensah, Nguyen, & Prattipati, 2006). For example, when a preference share is labelled as a debt, periodic payments are classified as interest expense downgrading profits and increasing the leverage of the company. Conversely, a part of the instrument would be classified as an equity whereby dividend income would enhance profits and improve the gearing of the company. Overall, the financial position of the company is somewhat blurred in the distinction between the proportion of the effects of equity and debt classification
Dodd-Frank and Sarbanes-Oxley Acts are important legislations in the corporate world because of their link to public and privately held companies. Sarbanes-Oxley Act was enacted to enhance transparency and accountability in publicly traded companies. On the contrary, Dodd-Frank Act was enacted to disentangle the confused web of financial service company valuations. Actually, these valuations are usually hidden by complex and unclear financial instruments. The introduction of Sarbanes-Oxley Act was fueled by recent incidents of accounting frauds by top executives of major corporations such as Enron. In contrast, Dodd-Frank Act was enacted as a response to the tendency by banks, insurance companies, hedge funds, rating agencies, and accounting companies to serve up harmful offer of ruined assets and liabilities brought by systemic non-disclosure (Anand, 2011, p.1). While these regulations have some similarities and differences, they have a strong relationship with the financial markets.
It has been a decade since the Sarbanes-Oxley Act became in effect. Obviously, the SOX Act which aimed at increasing the confidence in the US capital market really has had a profound influence on public companies and public accounting firms. However, after Enron scandal which triggered the issue of SOX Act, public company lawsuits due to fraud still emerged one after another. As such, the efficacy of the 11-year-old Act has continually been questioned by professionals and public. In addition, the controversy about the cost and benefit of Sarbanes-Oxley Act has never stopped.
The majorities of financial advisers do not have a formal accounting or tax background and thus have some challenges to overcome when reading tax returns of their clients. However they are still asked to help their clients in future planning. Since most accounting is to be done based on compliance with GAAP it would make sense to think that tax accounting should also be done this way, however both the IRS and the courts have stated that compliance with GAAP is of little significance when dealing with the objectives of tax accounting. The objectives of both accounting methods are simply different, because the primary goal of financial accounting is to provide useful information to all stakeholders and the primary goal of the income tax system is the equitable collection of revenue. Because of these differences it can be said that the users of accounting information are different for both methods. The assumption for financial accounting is the going-concern and the tax accounting system ignores this assumption. These differences give us the concept of timing differences and permanent differences. Understanding...
Financial Accounting Standards Board (FASB). Accounting Standards Codification TM. Financial Accounting Standards Board (FASB), 2010. Web. 16 May 2014.
Federation is the joining of states to become one nation. The Australian government first considered federation in 1890 when premier Henry Parkes convinced other premiers to discuss federation in the Australasian Federation Convention. Australia finally federated in 1901 after many failed attempts at doing so. Australia finally federated because
The goal of the Codification is to simplify the organization of thousands of authoritative U.S. accounting pronouncements issued by multiple standard-setters. To achieve this goal, the FASB initiated a project to integrate and topically organize all relevant accounting pronouncements issued by the U.S. standard-setters including those of the FASB, the American Institute of Certified Public Accountants (AICPA), and the Emerging Issues Task Force (EITF)
Australia was originally a collection of six independent colonies and due to many reasons discussed in this essay, they drew together and became a Federation. Although the States still retain their own identities, it is as Australian's that we are united and identified against the rest of the world. Australia has become a recognized nation with political and military standing.
When you think of the “land down under” you don’t really think of the kind of government they have. I chose to write about the Australian government because I really don’t hear much about Australia. It currently has a pretty interesting story to tell when it comes to their government. I became a bit interested in Australian politics when I saw a political animated cartoon on the internet that depicted Kevin Rudd, the last Prime Minister, on a news television show and it was quite humorous. I am going to give a quick history lesson on Australia then go into how the government formed and came to be. Then I will talk about the Australian constitution, the Australian arms of government, their federal system, political parties and Australia’s current Prime Minister.
Financial Accounting Standards Board. (1985). Statement of Financial Accounting Standards No. 86. Norwalk. Retrieved April 7, 2014, from http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175820922177&blobheader=application%2Fpdf&blobheadername2=Content-Length&blobheadername1=Content-Disposition&blobheadervalue2=189998&blobheadervalue1=filename%3Dfas86.pdf&blobcol=url
Brealey, Richard A., and Myers, Stewart C. Principles of Corporate Finance. Sixth ed. McGraw Hill, New York, © 2000.
In conclusion, we have realized the significance of including just the netted plan assets and the PBO and not including the full amount of the plan assets and the PBO on the balance sheet. This type of accounting flexibility by the FASB helps companies and ultimately hurts investors who are unaware of the consequences. Usually, the estimated PBO and plan assets are very large in relation to the debt and equity capitalization of the company. The financial situation is therefore skewed and is not represented correctly on the company’s balance sheet which then in turn distorts financial ratios. Investors who are unaware of these accounting rules will end up making erroneous conclusions. Also, this accounting flexibility allows managers to manipulate financial statements whether intentionally or unintentionally by influencing their actuarial assumptions.
Private and public accounting has long been discussed and disputed in regards to financial reporting. Since the Financial Accounting Standards Board (FASB) was created in 1973, accountants have called for different accounting regulations for private and public accounting sectors, as private companies do not have the resources to meet the complex requirements of public companies. Private companies currently are not required by law to issue annual or quarterly financial statements (James, 2012). Private companies do, however, have the option to apply the U.S. Generally Accepted Accounting Principles (GAAP), cash basis, or accrual accounting to their financial statements (James, 2012).
In a significant step towards convergence, the FASB and IASB (“the Boards”) issued the Exposure Draft, Revenue from Contracts with Customers in 2010. The goal was to create a single joint revenue recognition standard that companies could apply consistently across industries and capital markets thereby improve financial reporting. The Boards highlighted a number of improvements in the proposed standard - removing inconsistencies, improving comparability, requiring enhanced disclosures and clarifying the accounting for contract costs. Instead of focusing on “realized/realizable” and “earned” the Exposure D...
4) . One of the largest bankruptcies in history was enabled by accountants hiding debt and destroying the evidence to avoid implication (Buckstein, part 2 pgs. 1, 2, and 3). These unfortunate events led to the need for increased scrutiny and regulations, including the Sarbanes-Oxley Act (Buckstein, part 3 pg 1). This legislation inspired the creation of the Canadian Public Accountability Board (CPAB) (Buckstein, part 3 pg 1). These changes have led to an increased awareness of the need for auditor independence as well as higher standards for accounting and business in general (Buckstein, part 3 pg 1). While these measures have helped to reassure the public, there is still the question of why Accountancy is not a protected
GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a company's financial statements. And even though variations might exist, one can make realistically confident conclusions when comparing one company to another, or when comparing one company's financial statistics to the statistics for the industry as a whole. Over the years the generally accepted accounting principles have become more multifaceted because financial transactions have become more intricate (Accounting Principles, 2011).