Resisting compliance with IFRS accounting - MyAssignmenthelp.com

Question: Discuss about the Resisting compliance with IFRS accounting. Answer: Tabcorp holding limited The following assets have been subject to impairment testing- Property Plant and Equipment Investment Other Intangible Assets Goodwill Trade Receivables The firm has done impairment testing based on the concepts of fair value and value in use and carrying amount. The internal and external factors related to impairment are tested to state whether the fair value of asset is more than the carrying amount or not(Choy, 2018). Based on the same, impairment loss is calculated and is allocated to the different cash generating units in the balance sheet. An extract of the same is attached below- No, the company has not recorded any impairment loss in the income statement, but has disclosed the same in the notes to account and has provided a statement on the same. In case there was any expenditure it would have been due to due diligence or any transaction cost(Dichev, 2017). The key assumptions made by the firm in conducting the impairment testing are at the discretion of the management of the company and is widely based on the overall past and present experience with respect to this matter(Goldmann, 2016). An attachment is given below highlighting the key assumptions made by the management- There is a lot of subjectivity involved in the impairment testing and most of this is based on the guidelines issued by the IFRS and US GAAP. Most of this is assumption based, because many intangible assets are said to have indefinite life on paper, but in reality, they may not last that long. This might end up affecting the total impairment testing process conducted by the companies and might often lead to avoiding impairment testing or conducting the same with a lesser amount(Carlin, 2010). The most interesting thing was all the details about the assets tested for impairment and how the testing was done was given in brief. The most confusing thing was the testing of receivables as same is related to the bad debts and the provisions made for it(Md Khokan Bepari, 2014). There is a lot of difficult involved in understanding the various factor that triggers impairment. The new sights that were gained in this assignment was on how companies were conducting this process of impairment testing and not just intangibles, but many non-financial assets can be subjected to the same(DeZoort Harrison, 2016). Based on the above analysis, it can be said that fair value is the total price that a company will receive for transferring any asset or liability based on the prevailing market prices. It takes into consideration various other costs like replacement cost, separation cost etc. It reflects the true value of the assets and liabilities and is calculated in the most rational method possible. New Leasing Accounting Standard In this part, the objective assessment of the new leasing standard will be done to throw light on the aspects on why the same is better than the old leasing standard. Hans Hoogervorst, the Chairperson of the IASB believes that the old leasing standard was not reflecting the correct position of the economy and it was not giving an accurate and true presentation of the financials of the company to the investors. It can be said as true because most of the leases that these companies are having are operating leases which are not required to be reflected on the balance sheet. As per reports out of the three trillion-euro worth leases, 85 percent are operating leases that are not reflected on the balance sheet and are mentioned as a non-balance sheet item(Alexander, 2016). Thus, if these are reflected on the balance sheet, the overall liabilities will increase tremendously. Thus, the companies who are now reflecting that they have no lease liability based on the old standard are having debt in the form of operating leases and this is given a wrong impression to the shareholders of the company. As per the former accounting standard, the lease liabilities were more than 66 times than what was reported on the balance sheet. Given to the fact that none of the short or long-term leases were required to be reflected on the balance sheet(Boccia Leonardi, 2016). Thus, this not only presented a wrong picture to the shareholders and investors but also hampered the overall comparability of the companies worldwide. Many companies went bankrupt when they were required to pay off these debts of leases. The Chairperson of the IASB that before as per the old standard there was no level field playing for the airline companies, who takes the fleet of airplanes on operating leases and does not reflect the same on their balance sheet. This helps in showing the balance sheet at a better position. But along with the airline companies other companies are also using the old standard to reflect lower liabilities. This hampers the overall comparability between the various companies. But with the new standard this issue has been solved, and now there is better transparency on the amount of liabilities and the accurate financial position of the companies(Carlin, 2011). The Chairperson that the new standard will not be very popular and people will not like it because nobody likes changes that makes them put some extra effort or work more. With the advent of the new standard the companies would need to make changes in their balance sheet, with increase in their debt position, this will hamper their credibility. These companies would no longer be able to enjoy the benefits of the old standard. The chairperson of IASB mention the new visibility of all leases will lead to better informed investment decisions by investors, and to more balanced lease versus buy decisions by management. Because changes in the leases would help in improving the comparability between different companies and it will also present a transparent picture to the shareholders and the investors about the financial position of the company(Carlin, 2009). It will also help the companies in making capital budgeting decisions and as IASB has provided certain relaxation to the companies in reporting of short term and small leases, so the overall materiality will not be hampered. References Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431. Boccia, F. Leonardi, R., 2016. The Challenge of the Digital Economy. Markets, Taxation and Appropriate Economic Models, pp. 1-16. Carlin, T. a. F. N., 2010. Resisting compliance with IFRS goodwill accounting and reporting disclosures evidence from Australia. Journal of Accounting and Organizational Change, 6(2), pp. 260-280. Carlin, T. a. F. N., 2011. Goodwill impairment testing under IFRS: a false impossible shore. Pacific Accounting Review, 23(3), pp. 368-392. Carlin, T. F. N. a. L. N., 2009. Goodwill accounting in Malaysia and the transition to IFRS a compliance assessment of large first year adopters. Journal of Financial Reporting Accounting,, 7(1), pp. 75-104. Choy, Y. K., 2018. Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, p. 145. DeZoort, F. Harrison, P., 2016. Understanding Auditors sense of Responsibility for detecting fraud within organization. Journal of Business Ethics, pp. 1-18. Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), pp. 617-632. Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business. Financial Environment and Business Development, Volume 4, pp. 103-112. Md Khokan Bepari, S. F. R. A. T. M., 2014. Firms' compliance with the disclosure requirements of IFRS for goodwill impairment testing: Effect of the global financial crisis and other firm characteristics. Journal of Accounting Organizational Change, 10(1), pp. 116-149.