IMPACT of International Accounting Standards in Australia
Reasons for implementation:
Cross boarder comparison will become easier hence increasing the comparability
of Australian financial reports with an overseas one.
Will increase the ability of Australian companies to access capital in the global
International standards will contribute to increasing the standards in Australian
Transitional effect of IFRS
Every reporting and disclosing company will require planning and preparation,
Training AND education in IFRS
I. Dividend distribution
II. Financial instruments
III. Impairment testing
IV. Presentation of financial statements
V. Restructuring provisions
IMPLEMENTATION of IFRS will result in a fundamental change in the reporting
model. This is because of the following:
a) Greater emphasis on fair values
b) Potential for more volatility
c) Increased disclosure and data collection
d) Different expertise and resource required
a) Emphasis on fair values: there will be a greater emphasis on fair values.
Valuation of financial and non-financial assets will be required for the purpose of
reporting. This is going to effect
i. Financial assets
iii. Business acquisitions (takeover)
iv. Share based payments
As a result new assets and liabilities will be created in the financial statements and
values will change frequently
b) Potential for more volatility: there will be less opportunity for companies to
smoothen accounting profits. Changes in the fair value of assets will have to be
reported as they occur. Goodwill amortization for accounting purpose will no
longer be allowed and hedge accounting will become harder to achieve. The
results and profits of a company will reflect market conditions making it very
hard to predict earnings.
c) Increased disclosure: Use of IFRS means greater transparency in the reports of
companies. Financial information has to be provided in more details compared to
what has been done currently. There will be a difference between cost of assets
and valuation of assets for reporting purposes.
As a result the shareholders and potential investors and stakeholders will be able
to access more financial information about the company.
d) Different expertise and resources required: because fair value becomes
important under IFRS, there will be an ongoing need for valuation expertise.
Extensive training and education has to be provided to employees responsible for
preparing the financial reports.
IFRS will have a major impact on financial services sector. Intangible assets such as
copyright, patents, goodwill etc will be impacted because they have to present at fair or
current market values. As a result there will be a continuous jumping around of figures