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(i) Do your own research and critically discuss whether the financial accounting and reporting should be regulated or manager should be allowed to disclose financial accounting information voluntarily.   

(ii) Do your own research and critically explain how the Australian Accounting Standards Board take part in the global accounting standard setting process (i.e. in setting IFRS). Why is the IFRS set by the International Accounting Standards Board (IASB) not compulsory for the member countries of IASB?  

Standard Setting at the Global Level by the International Accounting Standard

The current paper has been prepared for addressing the importance of regulation of financial reporting and assessment of voluntarily disclosure of information by managers. The process of standard setting at the global level by the international accounting standard has been analyzed in the report. For the analysis of owner’s equity, four companies have been selected from the Australian stock exchanges namely Alliance resources limited, Aguia resources limited, Jupiter mines limited and Bauxite resources limited. Aguia resource limited is a company based in Australia with its primary focus on the development and exploration of mineral resources in Brazil. Alliance resources limited are a resource company of Australia that is involved in the exploration of base metals and gold along with having project in Western and South Australia. Jupiter Mines limited on other hand is a mining company that is engaged in developing and carrying out activities of mineral resources and is based in Australia. Bauxite resources limited are another mining company that is primarily engaged in bauxite minerals deposits acquisition, development and exploration activities in Australia. A comparative analysis of debt and equity position of all the chosen companies have been demonstrated in the report.

 Financial reporting or the financial reports published by reporting entities are sought by wide range of users such as investors, communities, employees, analysts, public and government for their decision making. Regulation of financial report helps in providing standardized information to the users. For making essential financial decision by the shareholders or investors, usage and interpretation of financial information is of utmost importance. In the absence of regulation of financial reports, different entities would create financial report by preparing in a diversified way. Regulatory framework acts as a balance between different accounting practices varying from country to country (Donohoe 2015). In addition to this, there also exists asymmetry information between user groups and directors ad managers of company. Therefore, regulation of financial report intends to alleviate the problems associated with the lack of comparability and information asymmetry.

If the contents of published financial information are left to be determined by managers, it would be uncertain that the external users will be provided with relevant information for rational decision making.  Therefore, there is a likelihood that external participants would be mislead and would draw the potential investors from making investments. Nevertheless, the voluntary disclosure concepts are used by managers to communicate the important financial information to users. This particular platform of voluntary disclosure is used by managers for communicating the firm’s superior performance and thereby supplementing the reporting that is mandated. Therefore, the decision to allow the managers to make disclosure of information voluntarily generates the ambiguous answer. Allowing managers to disclosure information voluntarily would help internal users and might not be useful for external users in their decision making (Pownall and Wieczynska 2018).

Comparative Analysis of Debt and Equity Positions of Australian Companies

The first step requires the international standard to identify the technical issue and the financial reporting council strategic direction aligns with the adoption of International financial reporting council. Moreover, the technical issues seeking consideration is also identified. The work program of public sector accounting program is closely monitored by the accounting board. Issues might be raised in the context of improving reliability and relevance of financial information. Second step requires development of project proposal after the identification of technical issue (Watts and Zuo 2016). The decision to undertake the project is taken after project proposal is reviewed. The decision to formally report to the board agenda decision can be done after adding or not adding issue to agenda. Furthermore, the agenda papers are discussed and developed by AASB staff after the issue has been incorporated in agenda. The output timings, issue scope and alternative approaches are addressed in the agenda papers. For compatible requirements development, consideration of issues can be done jointly with the accounting standard board of New Zealand (Campbell et al. 2017). After the completion of research work, the related documents are made available for discussing with the stakeholders and for public comments.

The International accounting standard board has implemented the International financial reporting. However, there are some drawbacks of the standard that does not make the adoption of the standard mandatory for all the member countries. It is so because complete adoption of the standard would make financial report some qualities. One of the members of IASB that is United States does not intend to adopt the standard because of the market incentive (Epstein 2018).

Contributed equity or issued capital- Contributed equity is the amount that is contributed by shareholders or owners of company in the form of paid up capital in exchange for stocks or shares held by them.

Reserves- Reserves are the amount that have been apportioned from the profits of company and is set aside for specific purpose such as for repair and maintenance, bonus payment, legal settlement and purchasing of fixed assets (Edwards et al. 2015). 

Retained earnings- Retained earnings are the amount of profit that is used by business for reinvestment and they are not distributed in the form of dividends to shareholders.

Accumulated loss- It is the amount of loss that is incurred by business which is also impacted by the distribution of dividends to shareholders.

Equity of Aguia resources consist of accumulated loss, issued capital ad retained earnings. It can be seen from the equity section as presented in the balance sheet that the issued capital stood at $ 72912689 and $ 81895554 in year 2015 and 2016 compared to $ 93849407 and $ 100972143 in year 2017 and 2018 respectively. Figure indicates that the value of capital contributed by owners has been increasing year on year. Reserves value stood is negative figure that decreased from $ 1971174 in year 2015 to $ 1013025 in year 2016 and thereafter increased to $ 1927956 and $ 3838650 in year 2017 and 2018. Accumulated loss incurred has been on a continuous rise from $ 50932966 in year 2015 and $ 56806178 in year 2016 which further increased to $ 60629927 and $ 62872918 in year 2017 and 2018 respectively (Aguiaresources.com.au 2018).

Importance of Regulation of Financial Reporting

The amount of contributed equity for Bauxite resources declined from $ 87651716 in year 2014 to $ 78401613 in year 2015 compared to $ 66631264 in year 2016 and $ 66641060 in year 2015 respectively. Value of reserves initially increased to $ 690892 in year 2015 from $ 580953 in year 2014 compared to $ 571240 in year 2016 and $ 561219 in year 2017 respectively. Retained earnings figure were negative for consecutive years with value recorded at $ 41166374 in year 2014 and $ 51788573 2015 compared to $ 47450689 and $ 47949155 in year 2016 and 2017 respectively (Bauxiteresource.com.au 2018). 

Equity of Alliance resources limited consist of contributed equity, accumulated loss, reserves and non controlling entities. Value of contributed equity has increased in the initial years of analysis and reduced subsequently. Equity increased from $ 98918022 in year 2014 to $ 103475639 in year 2015. This amount reduced drastically to $ 55841095 in year 2017 and $ 47494743 respectively. Looking at the figures of accumulated loss, it can be seen that the amount of loss incurred from $ 75097294 in year 2014 to $ 78222860 in year 2015 which reduced further to $ 30981165 and $ 32130741 in year 2017 and 2018 respectively. Reserves value was in negative figure of amount of $ 781145 in year 2015 compared to $ 363809 in year 2014 and the negative value increased to $ 63509 and $ 1375436 in year 2016 and 2017 respectively. Financial year 2017 recorded non controlling entities of amount $ 901937 (Allianceresources.com.au 2018).

Analysis of each items of equity of Jupiter mines limited:

For both the year 2017, 2016 and 2015, the amount of issued capital is recorded at $ 526639293 which declined to $ 433003602 in year 2018. Reserves amount was recorded at $ 979639 in year 2014 which declined to zero in year 2015. For financial year 2017 and 2018, the amount of reserves is recorded at $ 180488 and $ 1105503 respectively. Accumulated loss is recorded at amount of $ 79098969 and $ 241495298 in year 2015 and 2016 and the loss further increased to $ 51395961 in year 2017 (Jupitermines.com 2018). However, year 2018 generated accumulated profit of amount $ 32048589.

 The total value of equity of Aguia resources limited increased from $ 31291524 in year 2017 compared to $ 34260575 in year 2016 indicating that the value has increased in recent year. Financial year 2018 and 2017 did not record any loan, borrowings and therefore it does not have debt. However, financial year 2015 and 2016 recorded borrowing of amount $ 1000000 and $ 213949.

Assessment of Voluntarily Disclosure of Information by Managers

For Alliance resources limited, total value of equity is recorded at amount $ 24796421 in year 2016 which reduced to $ 14890503 in year 2017 indicating that equity value declined in recent year. Total amount of debt for year 2017 is recorded at $ 74287 compared to $ 81841 in year 2017. The amount of equity is considerably higher than the amount of debt recorded.

For bauxite resources, total amount of equity recorded has increased from $ 19751815 in year 2016 compared to $ 19253124 in year 2017respectively. On other hand, there was no borrowing recorded in the recent years and therefore, no debt exists for year 2017 and 2016.

There were fewer declines in the amount of total equity of Jupiter mines limited from $ 475423820 in year 2017 compared to $ 466157694 in year 2018. Debt stood in the form of deferred tax liabilities for both the year 2018 and 2017 at amount of $ 2581865 and $ 3537977 indicating decline in the tax liabilities. Figure suggests that the debt burden is lower than the equity position of company.

From the analysis of the above figures of debt and equity, it can be concluded that Jupiter mine limited has higher equity value compared to other companies operating in material sector. One of the surprising facts deduced from analysis is that Jupiter mines limited has higher debt burden, however, no companies have financial leverage in the form of increasing debt burden.

Conclusion: 

 The report prepared helped in addressing different accounting aspects in terms of regulation, owner’s equity and standard setting process. It has been found that regulatory framework plays a very important role in standardizing the financial report and alleviating several problems associated with reliability, comparability and relevance of financial information. Moreover, the global standard setting process has been outlined which depicts that it takes various steps to complete the process by the international accounting standard. Analysis of owners equity position of the companies have deduced the fact that equity position of Jupiter mines limited is favorable compared to other companies. In addition to this, it has also been ascertained that there is no debt that is owed by Bauxite resources limited. 

References and Bibliography list:

Aasb.gov.au., 2018. The standard-setting process . [online] Available at: https://www.aasb.gov.au/About-the-AASB/The-standard-setting-process.aspx [Accessed 19 Sep. 2018].

Aguiaresources.com.au., 2018. Retrieved 26 September 2018, from https://www.amcor.com/investors/financial-information/annual-reports

Allianceresources.com.au., 2018. Retrieved 26 September 2018, from https://www.amcor.com/investors/financial-information/annual-reports

Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P., 2014. Working capital management, corporate performance, and financial constraints. Journal of Business Research, 67(3), pp.332-338.

Bauxiteresource.com.au., 2018. Retrieved 26 September 2018, from https://www.amcor.com/investors/financial-information/annual-reports

Campbell, J.L., Khan, U. and Pierce, S., 2017. The effect of mandatory disclosure on market inefficiencies: Evidence from Statement of Financial Accounting Standard Number 161.

Capkun, V., Collins, D. and Jeanjean, T., 2016. The effect of IAS/IFRS adoption on earnings management (smoothing): A closer look at competing explanations. Journal of Accounting and Public Policy, 35(4), pp.352-394.

Donohoe, M.P., 2015. The economic effects of financial derivatives on corporate tax avoidance. Journal of Accounting and Economics, 59(1), pp.1-24.

Edwards, A., Schwab, C. and Shevlin, T., 2015. Financial constraints and cash tax savings. The Accounting Review, 91(3), pp.859-881.

Epstein, M.J., 2018. Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.

Goh, B.W., Lee, J., Lim, C.Y. and Shevlin, T., 2016. The effect of corporate tax avoidance on the cost of equity. The Accounting Review, 91(6), pp.1647-1670.

Jupitermines.com., 2018. Retrieved 26 September 2018, from https://www.jupitermines.com/investors/financial-information/annual-reports

Khan, M., 2015. Accounting: Financial. In Encyclopedia of Public Administration and Public Policy, Third Edition-5 Volume Set (pp. 1-6). Routledge.

Kraal, D., Yapa, P.W.S. and Joshi, M., 2015. The Adoption of International Accounting Standard (IAS) 12 Income Taxes: Convergence or Divergence with Local Accounting Standards in Selected ASEAN Countries?.

Nilsson, F. and Stockenstrand, A.K., 2015. Financial accounting and management control. The tensions and conflicts between uniformity and uniqueness. Springer, Cham.

Pownall, G. and Wieczynska, M., 2018. Deviations from the mandatory adoption of IFRS in the European Union: Implementation, enforcement, incentives, and compliance. Contemporary Accounting Research, 35(2), pp.1029-1066.

Watts, R.L. and Zuo, L., 2016. Understanding practice and institutions: A historical perspective. Accounting Horizons, 30(3), pp.409-423.

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