Qualitative features of an organisations need to be produced in the financial statement so as to extend the benefit of the overall financial performance information of the firm. These features basically made of fundamental qualitative features which are aimed to enhance the qualitative topographies of the financial report (Barth 2015). Major components that comes under the basic qualitative features are made of faithful depiction and relevance of the same. Similarly, there are certain parts that are inherent in extending the qualitative features as well as the comparability, timeliness, understand ability and verifiability. As per the given content it provides light on the different individuals and opinions of the International Financial Reporting Standards (IFRS) in order to enforcing the general principles (Tsalavoutas and Dionysiou 2014). All the declarations in this report provides stress on the fact that there are certain parts in the qualitative characteristics incorporated in the financial reporting section are not inherent according to the individual decisions. Brief overview of the same are mentioned below:
Geoff Roberts, the previous head of AXA Finance, has pronounced that no inquiries are developed from the fund managers and the economic investigators for adjusting the financial statements in order to have precise financial picture of the firms that are accompanied as per the IFRS norms (Critique 2006). Due to this, they have no longer skilled any problems while differentiating the financial articulations of diverse institutions along with acquiring reviewing their money related performance in the market. Therefore, fundamental affirmation are given through these perspectives, which recommend that financial proclamations of the organization along with the IFRS have understandability and equivalence. On this way, those two subjective highlights empower to improve the estimation of financial information of the firms. However, it has been watched at present that the IFRS-created economic articulations do not give in depth comprehension and volume of correlation in them. Because of this, the inadequacy can be seen in IFRS in the form of similarity and understandability (Tsalavoutas and Dionysiou 2014).
As per the sentiment of Terry Brown, the finance director of Wesfarmers Limited confined, the financial statement notes of the firms might be misunderstood, if the financial analysts target to enlighten to them when they have no technical information about the IFRS customary (Gattorna 2015). Verifiability is one more important qualitative feature of financial reporting, which upsurges the financial reporting quality by sourcing possibility to the customers in smearing their financial knowledge and observation in order to gain information regarding the firm. The evaluation of the references to the cash associated proclamations is a crucial angle as regards to the customers to realize the budgetary exhibitions of the commercial enterprise associations. This indicates the ability of the customers to assess the substance portrayed in the notes via the use of their notion and gaining knowledge of, because the cash related explanations organized under IFRS wishes extra distinguished specialised information. In view of the above appraisal, irrefutability and understandability components of the subjective highlights are absent within the IFRS announcing structure.
As per the point of view of the Commonwealth Bank CFO David Craig, the investors, investors do not provide necessary amount of focus on the IFRS cherished financial statements, as they are used to believe that, financial statements are acknowledged for providing false information about the financial position and financial position of the corporate entities (Skinner 2017). Under this scenario, it is necessary to ensure the faithful showcasing and ensure relevancy of the financial information highlighted in the annual report of the firm so as to produce positive impact on the investor. This will aid them to take proper investment decisions and make their endeavours in the financial market accurate. If these topographies are not present, then there will be no understanding about the financial conditions of the firm that could be proved to be devastating. As of now, it is identifies that the firms representing the financial information by producing the financial statement as per the IFRS standards seem to be lacing in faithfulness and relevancy representations. Under this context, the investors deliberately considers not to follow the represented financial statements by the firm.
Government of Australia undertook essential decision back in 2006 through the amendments in the Corporation Act 2001, where introduction of the regulation to enhance the social as well as environmental responsibilities were missing (Hansmann and Kraakman 2001). Rather than initiation of the regulation, Australian government has allowed the market forces to work in this purpose through assisting by three well known theories of regulation. Detailed regarding the decision of the Australian government is mentioned below:
This speculation bolsters the start of guidelines for looking after the general open demand. As in step with the rule of thumb of the speculation, the started standards have an important element to guarantee the welfare of humans in fashionable. Inside the period in-between, the authorization of controls guarantees that they don't income just a single collecting of partners (Watts and Zuo 2016). As in step with this hypothesis, exceptional importance isn't given ok criticalness, on account that their element isn't always vital in addressing the requirements of the general population
Public interest theory:
This speculation will be related in the given situation of the choice identified with the Australian government. In view that this hypothesis offers assist to the start of guidelines, the Australian authorities could have applied unique controls within the corporations Act to guarantee herbal and social obligations. This is due to the fact when such controls are available, the advantage of anybody of the general population may be assured. Moreover, if the Australian government mediates in the market, no market flaw or disappointment could be guaranteed (Fisch 2015). On this way, the Australian authorities could improve natural and social responsibilities among people in widespread.
It is the reverse of the public interest theory due to the fact that the principle of the same allows no regulation are required for ensuring the benefits of the common individuals. Rather, introducing regulations, this theory emphasis on the performance of the forces of the market in order to cope up with the overall interests of the customers. In addition to this, the principles of the theory argues that the regulatory authority could manipulate with the norms in order to assuring their self-interest. Thus, regulations may not be ideal. Moreover, with the aid of this theory, parties, those could be identified to be enforced with the regulation would produce direct influence on the parties associated with the norms (Oliveira and 2017). Under this situation, adequate amount of dependence need to be made on the forces of the market so as to meet the requirements of the widespread individuals. When the idea of this theory was introduced in the Australian environment, proper steps were taken by the Australian government by not imposing regulations for indorsing ecological and communal responsibilities in the Corporations Act. As rules are not there, chance for the controllers to influence the same in order to meet self-interests was also absent.
Economic interest group theory:
it is one of the fundamental theory in the industry that motivate the regulators to formulate those norms that are potential for growing the firm’s opportunity for better financial performance as well as for the common individuals too. Considering this, Australian government has introduced regulation like Corporations Act (Skinner 2017). Through this, responsibilities were transferred from the firms to the common individuals and in order to adhere with the norms, both parties become crucial.
Post careful assessment of the given scenario, it can be seen that, there are certain now in the Financial Accounting Standards Board (FASB) of US. As per the regulations, there is no requirement for the business firms in the US to perform asset revaluation (Börner 2015). Rather, they are focused to consider the account those impairment charges which are associated with the non-current assets. in this manner, it is noteworthy to point out some relevant effect are obvious on the faithful showcasing and relevance of the financial report owing to the regulation of asset revelation that are elucidated as mentioned below:
- The FASB regulation for the non-current assets revaluation has provided assistance to a large extent in the formation of a unified framework in relation to the accounting functions. Such aspect ensure in the maintain acceptance and accuracy of the financial reports.
- when it comes to the associated accounting functions with the enforcement of the non-current asset revaluation, then the accountants off the firms face issues and these scenarios have outsources inappropriate showcasing of the financial reports of the firms. However, as per the FASB regulation of present date, the business organisation are entitled to adhere to all the norms and regulations regarding the fixed assets (Michels 2017). As the outcome, it helps in producing contributions towards the obedient showcasing of the values of fixed assets mentioned in the financial statements.
- There are various models of accounting which are related with the revaluation of the fixed assets resulting to complexities and hardness for the firms while revelation of the account of fixed assets. When it comes to the present FASB regulation, then it has fetched a single framework so as to provide unified ground for the revaluation of the fixed assets, which is highly valuable for minimising the issues faced in accounting (Idowu 2017).
- All the financial statements users like suppliers, customers, stockholders and creditors are need to have some level of understanding regarding the accounting statements. One such feature is finding out the relevance, difference and similarities in the treatments of accounting required for revaluating the fixed assets that could be ensured with the aid of the revamped FASB regulations.
There are plethora of reasons for which influence of the directors of an organisations enhance so as to revalue the property, equipment, plant. Some of these various influential factors are mentioned below:
- Throughout the revaluation mechanism of the fixed asset, it is essential for the directors to revalue their assets frequently. Through the frequent revaluation directors would be able to have ideal knowledge of all the asset fair values.
- Adequate amount of knowledge regarding the property fair value, equipment value and the value of the plant aids the directors to negotiate prices of those assets at the point of time of the acquisition and merger (Tsalavoutas and Dionysiou 2014). This, knowledge is of high importance for the directors as it smoothen the process of acquisition and merger.
- Finally, the mechanism of asset revaluation would make the directors capable to have insight of the actual return on capital that would guide them in undertaking the funding decisions.
If the firms are not indulged in the producing the decision of revaluating their property, equipment, plant, it would provide drastic impact on their financial statements as well. If the mechanism of the revaluation is not existing, then plant, property, equipment are expected to enhance or diminish so does they might not be valued correctly. Due to this, there would be realisation of anomalous improvement or damage when the properties would be sold at a later point of time in forthcoming (Lim, Macias and Moeller 2014). Furthermore, the commercial organisations could assume to face fall in their total incomes. With the reduction in the level of remunerations, influence would come on profit level, thus the business enactment of the firm might not be wanted or acceptable.
Efficiency of the capital market assist in driving the decision associated with the revaluation. However, if there lack of efficiency is in the market, then the price of the stock would depict the information that is disclosed in the annual reports of the firm. Reduction in the assets per share would be held in the stock price. Nevertheless, the higher reported income may aid in counterweighing the minimised share price (Hansmann and Kraakman 2001). This decision of abstaining from the asset revaluation will provide repercussion impact on the wealth of the shareholder of the firm. Once there will be no asset revaluation, the firm will face massive decline in the assets which in turn will reduce the profit of the firm due to the fall in the stock price. Under this situation. It would provide price ceiling to the overall return on the investments of the shareholders of the firm and they will face large amount of fall in their wealth too.
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