The GPFS (general purpose financial statements) must be de-regulated b in order to control the make sure that market control the financial statements. This will give the accounting manager enough scope to handle the external audit freely which will bring transparency within the financial statements (Albrecht, 2009). Fundamental element of the external audit is the need for the public sector entities to prepare annual financial statements and publish them in their annual report. As per the most of the theorist and positivist general purpose of financial statements are only to be means to be deregulated which will given enough scope to make control the market forces. This will also enhance the quality of the accounting (Benedict and Elliot, 2011).
The deregulation of the GPFS would creates usefulness and reduce the limitation of the financial reporting. If the GPFS is deregulated then the decision of the purchasing, selling and holding of the equity will be based on the investor returns which they are expecting from their investment (Bebbington et al. 2010). This de-regulations will given the accounting manager to assess whether or the company has been able manage its proper information which will given insight of the financial reporting. In to assess the entity, prospectus for the future of cash flows, the existing and potential investor along with creditors who needs the information about the entity and entity management that would give the company takes the responsibilities to cater the large market in order to manage the price and technological changes (Ifrs.org, 2015).
Deregulation here depicts the reform is needed to be made in the GPFS which would creates better regulations commission. If the GPFS will be de-regulated then it would be enhance the role of the independent external audit as the market is going itself analyses the quality of GPFS (Berry, 2009). The external audit is been one of the major concern for the company which would lead the companies and market top decide the quality of financial reporting which will again given enough scope to the external audit firm to manage the financial reporting. Although financial market is regulated by the governing bodies like AASB and IFRS which are setting the norms to as per the financial statements which would benefit the investors and the company to select their equity as per the external audit reports which would again enhance the duty of external auditors (Khairurizka, 2009). With de-regulation of the of the financial reporting the firms are being using counter term to manage the market which would increase the value of external auditor who have enough scope to make the manage the money supply and the prevents widespread banking panics. D the deregulation should increase the proper way of conducting the financial reporting by making the separate regulations for the market or rather the reform the market (www.accaglobal.com, 2015).
The reform in the first half of the 20th century creates a system regulatory agencies most of which remain today, which are organized by the financial activity. Separates agencies focused on the separate activities which is often found with different priorities (www.accaglobal.com, 2015). However, the de-regulation of GPFS would creates positive aspect of the capital maintenance that will determine the accounting model used in the preparation of financial statements. Different forms of accounting models would give various degrees of relevance and reliability which is very much helpful to manage and maintain the relevance and reliability within the financial reporting (Laughlin and Gray, 2008).
Revaluation of non-current asset
There is strong opportunities in the revaluation of noncurrent asset is the process of increasing or decreasing the carrying value in case of major changes in the fair market value of the fixed asset. As per the IFRS norms, the required fixed asset is to be calculated initially on the cost but subsequently it requires two models of accountings for fixed asset which is also known as the cost model and the revaluation model (Ifrs.org, 2015).
In the revaluation model as asset is initially being recorded at cost but its carrying amount is to be increased to appreciation in value. For instance, if the building worth of 190000 as per 31st December 2013. The carrying amount at the year is 170000 and revalued at 190000 then the journal entry will be:
Building 20000 Dr.
To revaluation surplus 20000 Cr.
This shows that there is lot of opportunities to make the non current asset to change its price as per the company fair valuations structure. The depreciation period after the revaluation will be based on the revalued amount which can be increased or decreased as per the building cost (Laughlin and Gray, 2008). Fixed asset like land and building, machinery and the freehold premises can be revalued as per the available surplus with the company. However, in the case of reversal revalued , it has been found that, revalued asset could be valued down due to the impairment loss for the certain months which would be written off against any of the balance or surplus available which would given enough scope of obfuscations (Lewellen, 2009).
Moreover, if the loss excesses the revaluations surplus balance of the same asset the same difference is charged to income statements as impairment loss. The revaluation method is very different from the cost model (Berry, 2009). The cost model allows only down adjustment and the revaluation model given enough scope to manage the revaluation both upward and downward adjustment for the asset impairment value of the company.
Upward evaluation is not considered as the normal gain and is not recorded in the income statements. It is generally recorded within the equity accounts called revaluations surplus. Revaluation surplus given the scope for the upward revaluations of a company asset until is totally disposed off (Benedict and Elliot, 2011)
Albrecht, W. (2009). Financial Accounting. 3rd ed. New York: John Wiley & Sons.
Bebbington, J., Gray, R. and Laughlin, R. (2010). Financial Accounting: practice and principles. 7th ed. Bedford, London: Thomson Learning.
Benedict, A, and Elliot, B., (2011). Financial Accounting: An Instruction. 5th ed. Mason: South-Western Cengage Learning.
Berry, A., (2009). Financial Accounting: an introduction. 4th ed. California: Random House.
Khairurizka, R. (2009) The effect of financial ratios, firm size, and cash flow from operating activities in the interim report to the stock return,) Chinese Business Review, 8(6) , 44-53.
Laughlin, R. and Gray, R. (2008) Financial Accounting: method and meaning, 5th ed. New York: Prentice Hall
Lewellen, J. (2009) Predicting returns with financial ratios, Journal of Financial Economics, 74, 209-235
www.accaglobal.com, (2015). accounting for property, plant and equipment. [online] Available at:https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/sa_sept10_ias16.pdf [Accessed 23 Jan. 2015].
Ifrs.org, (2015). IFRS - Home. [online] Available at: https://www.ifrs.org/Pages/default.aspx [Accessed 23 Jan. 2015].
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