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HA 3011Advanced Financial Accounting Assessment item 2 — Assignment Due date: 11.59 pm Friday Week 10 Weighting: 20% Assessment Task Part A (6 Marks) In an article entitled ‘Unwieldy rules useless for...

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HA 3011Advanced Financial Accounting

Assessment item 2 — Assignment

Due date: 11.59 pm Friday Week 10

Weighting: 20%

Assessment Task Part A (6 Marks)

In an article entitled ‘Unwieldy rules useless for investors’ that appeared in theAustralian Financial Reviewon 6 February 2012 (by Agnes King), the following extract appeared. Read the extract and then answer the question that follows.

Millions of dollars have been spent adopting international financial reporting standards to help investors make like-for-like comparisons between companies in global capital markets. But CFOs say they are useless and have driven financial disclosures to unmanageable levels. The criticism comes as the United States, the world’s largest capital market, decides whether to retire its domestic accounting standard (US GAAP) and adopt IFRS.

“In seven years I never got one question from fund managers or investment analysts about IFRS adjustments,” former AXA head of finance Geoff Roberts said. “Investors...rely on investor reports and management briefings to understand companies’numbers.”

If analysts did delve into IFRS accounts, they would most probably misinterpret them, according to Wesfarmers finance director Terry Bowen. “Once you get into the notes you have to be technically trained. If you’re not, lot of it could be misleading,” Mr Bowen said.

Commonwealth Bank chief financial officer David Craig said IFRS numbers were disregarded by investors because they could actually obscure an institution’s true position.

Required:

You are required to explain which qualitative characteristics of financial reporting, as per the conceptual framework, do not, in the opinion of the above quoted individuals, appear to be satisfied by current reporting practices pursuant to IFRS. Also, you are required to consider whether the views are consistent with the view that corporate financial reports satisfy the central objective of financial reporting as identified in the Conceptual Framework.

Assessment Task Part B (6 Marks)

In 2006 the Australian Government established an inquiry into corporate social responsibilities with the aim of deciding whether theCorporations Actshould be amended so as to specifically include particular social and environmental responsibilities within the Act. At the completion of the inquiry it was decided that no specific regulations would be added to the legislation, and that instead, ‘market forces’ would be relied upon to encourage companies to dothe‘right thing’ (that is, the view was expressed that if companies did not look after the environment, or did not act in a socially responsible manner, then people would not want to consume the organisations’ products, and people would not want to invest in the organisation, work for them, and so forth. Because companies were aware of such market forces they would do the ‘right thing’ even in the absence of legislation).

Required:

You are required to explain the decision of the government that no specific regulation be introduced from the perspective of:

(a)Public Interest Theory

(b)Capture Theory

(c)Economic Interest Group Theory of regulation

Assessment Task Part C (4 Marks)

The US Financial Accounting Standards Board does not allow revaluation of non-current assets to fair value, but it does make it compulsory to account for the impairment costs associated with non-current assets as per FASB Statement No. 144Accounting fortheImpairment or Disposal of Long-Lived Assets.

Required:

What implications do you think these rules have for the relevance and representational faithfulness of US corporate financial statements?

Assessment Task Part D (4 Marks)

Many organisations elect not to measure their property, plant and equipment at fair value, but rather, prefer to use the ‘cost model’. This will provide lower total assets and lower measures, such as net asset backing per share.

Required

You are required to answer the following questions:

(a)What might motivate directors not to revalue the property, plant and equipment?

(b)What are some of the effects the decision not to revalue might have on the firm’s financial statements?

(c)Would the decision not to revalue adversely affect the wealth of the shareholders?

Answered Same Day May 17, 2020 HA3011

Solution

Akansha answered on May 20 2020
153 Votes
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Contents
Assessment Task Part A    2
Assessment Task Part B    3
Assessment Task Part C    5
Assessment Task Part D    5
References    7
Assessment Task Part A
A company’s financial statement can be designed with the assistance of financial reporting framework which could also help in IFRS’s rectification. For preparing financial statements the financial reporting also provides the methods those could be used by the organizations operating various industry sectors. The estimations and perceptions of accounting which are not explained in the bookkeeping standards can be developed with the assistance of the financial reporting (Singleton-Green, 2012).
Sometimes when monetary statement framework is unavailable or apt accounting standards are not present, the administration of the entity can design the accounting policies by utilizing the rationality while preparing the financial reports.
The financial statements are the requirement of the managers of the business as they are considered to be the primary user of the business’s financial statements. The making of financial reports righteously is also the responsibility of these primary users which they achieve by gaining complete knowledge or hiring professional for the process. To establish prospective strategies for the unit, financial reporting is necessary as no future plans could be complete without the use of the financial statements prepared by the business managers. These primary users also ensure effectiveness in the working of the entity with efficient availability and utilization of resources (Easton, 2016).
IFRS believes that these framework reports are not adaptable and as these reports fail to provide fuller information which is needed for co
ect decision making, the users cannot make settlement on the basis of these statements. The financial reports which are prepared according to the financial reporting framework can be used for the distinctive market modulators, in the viewpoint of IFRS groundwork.
The suppliers and the investors use financial instructions contributed by the monetary reporting groundwork to develop the entity’s scope of the precedent and the later.
The qualitative temperament of financial reporting also helps in identifying the differentiated information. With the guidance and requirement of the qualitative temperament of financial statements the company prepares the financial statements for the usual purpose (Staszkiewicz, 2011).
Relevance- The aim of preparing the financial description is to give precise information about the company’s working to the users. If the financial reports provide appropriate and relevant information, it can affect the decisions made by the employees of the company. This will help in co
ect decision-making in the organization while developing policies to attain the organizational goals and objectives (Wagenhofer, 2016).
Faithful representation-The monetary statement presented to the various users of the organization should not only be apt but also faithful to the users which means that the report provides complete information to the management of the company which helps them in accurate decision making.
Comparability- If any comparable information is available, future decisions can...
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