Conceptual framework Australian Government

Question: Describe about the Conceptual framework for Australian Government? Answer: Introduction. Due to development of cross-border capital markets, it is imperative that the financial statement in various countries follows a single, high quality accounting standards that are being accepted worldwide. So the emerging economies have adopted the International Standards (IFRS) issued by the International Board (IASB) which controls the overall system of standards implementation around the world..(Maheswari, 2014) At their meet in the city of Norwalk located in Connecticut, USA on the 18th day of September2002, the (FASB) and the International Accounting Standards Board(IASB) gave their commitment to develop the standards in such a manner that they might be high in quality, also compatible with the accounting standards as it will be used internationally as well as self country financial reporting. here, the two bodies namely FASB and IASB made joined efforts towards such implementation (a) Implement the present accounting standards into the system of implementation of the new standards and (b) The future work programs that it could be maintained in the long run by the IASB and FASB together. To achieve compatibility, the FASB and IASB (together, the Boards) agree, as a matter of high priority to: 1) to have a program to remove the differences between U.S. GAAP and IFRS which are the International reporting standers for the financial reporting as followed by the company like Glaxo Plc, which include International Accounting Standards, IAS as well to be followed 2) Remove the various other differences between the operation of the US GAAP and IFRSs which would be sorted out by January 1, 2005, by coordination between both the Boards 3) Continue progress on the joint projects that they are currently undertaking, and 4) Also encourage the other bodies to form the part of this exercise to reduce the differences between these two accounting principles. These differences could be only reconciled from the support of the supporting bodies as discussed above. Most of the Asian countries like Malaysia India, Colombia as well as Russian and American countries like US, Japan and Russia have moved forward his step in the convergence to International Financial Reporting System to maintain the uniformity in the accounting system. Further, the Adaption of IFRS has also reduced the worries of the stakeholders regarding the True and fair reporting of the Accounts. Further, this will bring account ability and transparency to the reported figures of the financial statements of the Multi - national companies having Branches over India. So the branch accounts could be reconciled easily and there could be a proper analyses of the results by the users of the information in a proper way/ Issues Adressed In the recent figures and estimates it is suggested that much of US money is invested in the shares of the foreign companies. The investors in US also await opportunities for investment in the non-US based companies who often can use the International Reporting standards to prepare their financial statements. There are many companies around the world that follow IFRS and present their balance sheets accordingly with no scope for the reconciliation of US GAAAP to the IFRS and here is the area where the role of this article comes in to play and the challenge arises for the investors as well as the companies. (Tulsian, 2008) To assist investors and preparers in obtaining the skills to read multiple reports, this article would help to understand the differences between these two broad concepts and how to reconcile them and understand it as per the needs of the investors. In this article mainly the areas of differences that had caught enough of light and are significant for the investors are being dealt into so that these areas dont go uncovered. After the emergence of IFRS many companies had been instructed to follow the reconciliation principle with the IFRS standards so that they might help the user to compare the reports with ease. Apart from that there are many differences in the way the annual reports are prepared and they are presented to the stakeholders of the organization. The other areas of differences are the accounting principles that are followed for treatment of various items in the financial statements of the company under which alternative accounting treatments is possible. (FASB, 2013) IFRS 13 Fair Value Measurement: IFRS 13: (a) explains fair value (b) develops a framework that would help in finding the fair value (c) The required disclosures that are needed while measuring the fair value are also stated. IFRS 13 says that the fair value as the price at which an asset could be sold or a liability in an orderly transaction. It is just a market based measurement and helps to find the value of the asset, and never a measurement that deals with the valuation in accordance with the enterprise. There are some assumptions based on which whereby it considers the risks within the value of the asset calculated. This means that the value of the items would not be affected by time period for which an asset is held or liability is being held before payment and it would not affect the standard in any manner. These things needed to be kept in mind while measuring the fair value of the asset as per IFRS 13. (Tulsian, 2008) (a) the nature of the asset or liability that is measured (b) if the asset is a non financial one how can it be linked with other financial assets based on which it can be measured. (c) the place where the asset or the liability could be traded with ease should be identified as the market (d) the technique that should be used for valuation of the same (Tulsian, 2008) To increase consistency and comparability in fair value measurements and disclosures the standards create a hierarchy of 3 levels which consists of the inputs to the valuation of the assets as per the fair value principle. The hierarchy gives the highest priority to the price of the assets in the open market at which they can be or the identical assets or liabilities can be traded at which are called observable inputs and the least priority is to the unobservable inputs. . (Lefebrve, 2009) An enterprise should present information that would help the of its fair value information so that it can be assessed that (a) for liabilities and assets that are measured at fair value on a timely and regular basis . (b) for those assets which are being valued as per the unobservable inputs named as level 3 inputs and how they are uses to value the items should also be there. (Accountants, 2013) Fair Value v/s Historical Cost: Fair value accounting (FVA) is a method of valuing the assets on a market based rates according to IFRS 13 at the regular intervals whereas the current prices are given much importance for the valuation of the assets of the enterprise. (Tulsian, 2008) Accounting as per the fair value methodology is a concept that helps the companies to use fait value method for the purpose of accounting The fair value concept says that as soon as the value of the asset decrease or liabilities increase, it will be recognized as gains or losses under the head comprehensive income of the enterprise and will be treated as such. (Lefebrve, 2009) As the historical costs of the assets dont possess any value for the investors in the future decisions they are willing to take as they have no relevance to the buy, sell, hold decisions and are not useful for any decisions to be taken. So the concept of fiat value came in due to the relevancy of such information to the investors of the enterprise who can think after seeing the fair values and not the cost values. At the times of growth and deflation this method makes the annual reports much volatile than ever before and changes the picture of the financial statements(Lefebrve, 2009) Historical Cost Accounting: Shortcomings There are large number of issues in the historical accounting concept but one of the primary issue is that the true value of the asset is not demonstrated under this method as the assets are shown at irrelevant costs and the no comparability with the true market value could be achieved. Other issues are as under: (robins, 2001) The method is insensitive to changes in purchasing power of the currency, overstating earnings in periods of rising prices and understating the degree to which capital assets maintain their value. It assumes a concept of going concern which is impractical. Its not able to deal with complex accounting transactions as such as interest rate swaps obligations are there on the assets but it cannot be covered u under the historical costs method there. (F, 2006). The historical cost methods uses the subjective measures to account fall for the transactions and some judgments such as life of the asset, bad debt reserves, warranties etc. (AASB, AASB has approved four new Standards, 2014) Conclusion: Some of the factors, particularly the rules for taxation, make it difficult for some of the countries to wholly shift to the IFRS. It follows that when nations find IFRS concepts attractive, their approach towards IFRS implementation would be different from others because they are unable to change current rules to reflect the various provisions of IFRSs,or they are not willing to give up the basic local accounting rules to a privately controlled enterprise over which very little or no So it could be said that the implementation of IFRS would bring about lots of changes to the presenting accounting differences that are existing in the financial statements of the company as a whole which effects the decision making process of the country around the world. The impanation of the Global accounting standards will reduce the needed for the reconciliation of the information provided in the statement as per rule of accountancy. The convergence would rather remove the cultural differences in the accounting concepts and the users around the world are being treated at par. Therefore the countries adoption of IFRS would be a great change and positive change also towards the accounting world where the investors would be able to choose correctly by proper comparison of the financial statements This will be a more problematic case when economies mature as there will be a need of more information and such issues will arise and needs to be sorted out with ease. As both of the methods namely the fair value method and the historical method. As the financial problems asks for the clarity in the accounting principles so it is needed that the boards try to increase efficiency and transparency to the assumption and the disclosures that need to be implemented for accurate information to be provided to the investors.. The market and the accounting behavior is needed so that the desired clarity may be brought in the principles of accounting.(F, 2006). References AASB. (2014). AASB has approved four new Standards. Australia Government , 1-1. AASB. (2013). 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