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Considerations IASB Recent Issued Standards

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Question:

Discuss About The Considerations IASB Recent Issued Standards?

 

Answer:

Introducation

The new proposition of International Accounting Standard Board (IASB) is concerned with the effective communication of financial information of the companies (Burc? & Cotle?, 2014). Regarding this, I have decided to make a submission on this matter. For this reason, I have taken into consideration investing in two of the renowned banks; they are ANZ Westpac. The preparation of accounting and financial statements of the companies is a complex process as this information helps the inventors to depict the financial position of the companies. Many times poor presentation affects the organization of financial data. Poor presentation and organization of financial data affects the financial position of the companies. Thus, the investors suffer in taking effective investment decisions. From the observation of the annual report of both the banks, I have realized it is essential to increase the effectiveness of the communication of financial statements. There is a need of more standardized system for financial disclosure.

After going through the set of principles of effective communication, I have seen that there are crucial factors in this. They are to be simple and clear; to be entity specific; to provide the relevant information; to highlight the important matters; no presence of any duplication; to present information in the appropriate format so that they become comparable and others. After the analysis of the 2016 annual reports of ANZ and Westpac, I have seen that both the companies lack in complying with communication principles while both of them have complied with some of the principles. It is the responsibility of the reputed banks to provide their investors with correct financial information so that it can be helpful in their investment decision-making process. In addition, banks are required provide segment analysis along with analysis of credit and liquidity risks (Craig & Michaela, 2014).

The analysis of both the banks has made me aware the fact that both the banks have not made the necessary financial and accounting disclosures. Westpac has conducted the segment analysis separately along with each segment definition (westpac.com.au, 2017). On the contrary, ANZ has not conducted any separate segment analysis as per the segmentation approach (iguana2.com, 2017). They have mentioned some of these facts in financial notes rather than showing them separately. The regulations of Basel are related with the banking industry regulations. The analysis of ANZ annual report has also shown the fact that ANZ has not disclose any information regarding Basel requirements separately (iguana2.com, 2017). The separate disclosure of liquidity and credit risk was also missing. These facts have been mentioned in financial notes. On the other hand, Westpac has all the necessary disclosures regarding the Basel requirements along with the analysis of credit and liquidity risks of the bank (westpac.com.au, 2017). However, there was not anything mentioned regarding Tier I and Tier II in the annual report of Westpac. Moreover, Westpac has measured their divisional performance that is missing in the annual reports of ANZ (iguana2.com, 2017).

In addition, it has been seen that both the banks have not use graphical presentation. Graphical presentation helps the investors to compare and analyze the performance of the companies (iasplus.com, 2017). Thus, in spite of the presence of narrative disclosure, the importance of graphical presentation cannot be ignored. Apart from the above, there is also a need for effective communication of financial information. Thus, there is a need for the improvements in the process of financial combination. In this situation, I would like to recommend some of effective communication related principles of IASB for making the financial statements comparable (Deegan, 2013). Companies need to follow the principle of entry specific. Financial information needs to be relevant with the financial situation of the companies rather than just to be generic. There is nothing special in generic information as they can be obtained from annual reports of the companies. Thus, entry specific information needs to be there in the financial statements. Furthermore, financial information need to be mentioned in such a way so that they can become comparable based on several financial years. This can be done with the help of graphical presentation of financial information.

 


The draft disclosure of IASB also includes the principles and guidelines related to formatting of financial information (iasplus.com, 2017). The stakeholders and investors of the companies believe that communication effusiveness can be increased with the help of proper formatting. The main reason is that proper formatting helps to compare the financial information of companies for several financial years. Thus, I would like to recommended the board of director of companies for adopting the strategies of proper formatting. It can be seen that there are many banks that publish the guidelines to use graphs and tables in the annual reports of the companies. In the financial reports of the companies, uncertainty regarding formats of the presentation of financial reports can be seen. Communication with the company stakeholders can be improved with the help of proper formatting. Based on the above discussion, I have realized the fact that both ANZ and Westpac needs to implement the strategy of formatting of financial report in order to improve the communication of financial information with the stakeholders (iguana2.com, 2017). I strongly feel that the use of appropriate formatting for the presentation of financial information will lead to effective decision-making of the investors.

In addition, the development of formatting is highly related with the concept of entry specific as some situations demand the disclosure of financials information of the companies in the tabular form. Thus, there is a need for necessary guidance for the formatting process of financial statements (ey.com, 2017). Thus, the disclosure of financial information with the help of notes can be improved with the help of formatting. Different methods of formatting need to be applied based on the nature of business of the entities so that it become entry specific. These types of formatting needs to be developed based on specific circumstances. These types of disclosures need to have connection with the inventors and the preparation of financial statements. Apart from this, there is a need to develop the non-monetary guidelines also (aasb.gov.au, 2017).

As an investor, I would like to make the recommendation to IASB for the inclusion of the above-discussed principles related to the effective communication of financial information. In this case, companies need to consider the concept of entry specific as assists the investors to compare the financial performance of the companies for many financial years. In addition, companies need to consider the principles of graphical presentation and formation for the communication of financial information.

 

References

2016 ANNUAL REPORT. (2017). News.iguana2.com. Retrieved 20 September 2017, from https://news.iguana2.com/anz/ASX/ANZ/459865

Annual Report 2016. (2017). Westpac.com.au. Retrieved 20 September 2017, from https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/2016_Westpac_Annual_Report

Burc?, V., & Cotle?, D. (2014). Considerations on IASB Recent Issued Standards.

Craig, D., & Michaela, R. (2014). Financial Accounting Theory.

Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.

Disclosure Initiative – Principles of Disclosure. (2017). aasb.gov.au. Retrieved 13 September 2017, from https://www.aasb.gov.au/admin/file/content105/c9/ITC35_04-17.pdf

Disclosure Initiative – Principles of Disclosure. (2017). ey.com. Retrieved 13 September 2017, from https://www.ey.com/Publication/vwLUAssets/ey-disclosure-initiative-principles-of-disclosure-april/$FILE/ey-disclosure-initiative-principles-of-disclosure-april.pdf

Disclosure initiative — Principles of disclosure. (2017). Iasplus.com. Retrieved 13 September 2017, from https://www.iasplus.com/en/projects/major/principles-of-disclosure

IASB publishes discussion paper on disclosure principles. (2017). Iasplus.com. Retrieved 13 September 2017, from https://www.iasplus.com/en/news/2017/03/dp-pod

INVITATION TO COMMENT ON IASB DISCUSSION PAPER DP/2017/1 Disclosure Initiative – Principles of Disclosure. (2017). hkicpa.org.hk. Retrieved 13 September 2017, from https://www.hkicpa.org.hk/file/media/section6_standards/standards/FinancialReporting/ed-pdf-2017/i2c_di.pdf

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