Initiative Of Disclosure Undertaken By IFRS †MyAssignmenthelp.com

Question: Discuss about the Initiative Of Disclosure Undertaken By IFRS. Answer: Memorandum TO: All the Employees of Cruz Accounting Ltd. FROM: XYZ CC: Senior Accounts Manager DATE: 22 September, 2017 SUBJECT: Issues with respect to initiative of disclosure undertaken by IFRS The International Financial Reporting Standards (IFRS) can be regarded as the guidelines, which are set for ensuring transparency in the style of financial reporting at the global level. These standards are infact set by theInternational Accounting Standards Board (IASB) (Rouse, 2017). During the year 2017, IASB was observed to pass disclosure initiative- principles (DP), so that it would be possible to improve the communication between the users of financial report and the ones who have prepared it. Precisely, the disclosure initiative provided better information regarding the financial performance to the users. IASB has focused on the agenda of enhancing the reporting standards for the period 2017 to 2021. The IASB proposes an inappropriate way of preparing financial statements that can lead to errors with respect to making investment decisions, as the investors may not be able to trace performance of a business. Moreover, the board propounded that adding irrelevant information in the final accounts involves loss of time and extra costs pertaining to the preparation of financial statements. Even, if relevant information is provided in the financial statements, improper presentation can make it difficult for the stakeholders to correctly interpret the performance of the business firms (EY, p. 1-2). In paragraph 6.16 of the disclosure initiative, it is mentioned that the primary intention of this particular initiative is to enable the organizations to get adequate insights about the aspects that have to be disclosed in the financial statements. For example, IFRS makes it necessary to mention regarding the changes in financial items that have included in the report (IFRS, 2017, p. 62). The disclosure policies of the IFRS state that disclosures enable the investors to have a better understanding about the style of financial reporting standards. There is no such need for disclosing financial information that is useless to the stakeholders. The entities must focus on explaining, whether a property has been measured at cost of acquiring or at the market price (IFRS, 2017, p. 60-67). It can therefore be stated that mitigation of disclosure issues will enable the stakeholders to make comparison of the financial statements of a particular period with others. On the contrary, it can further be stated that readability is critical pertaining to paragraph 6.22. This is because excessive sections and subsections have been used for describing the disclosure principles. In part, b and c of the paragraph 6.16, mentions about category 1, 2 and 3, which makes it necessary for the readers to focus on the previous paragraphs. These complexities could have been avoided by directly men tioning about the categories in paragraph 6.16 (Deloitte Global Services Limited, 2017; IFRS, 2017, p.64-66). Paragraph 6.22, additionally mentions that entities have to decide regarding the place, where disclosure of theaccounting policies will be conducted. The policies can be disclosed either in the footnotes of the financial reports or at the beginning. More precisely, the disclosure policies states that all the disclosure onaccounting policies can be given on a single note in a comprehensive manner. It enables to trace the items that have been given due importance while preparing of the financial statements. Another choice that is present before the entities is to give information on accounting policies separately pertaining to separate heads. For example, at the place where depreciation has been calculated, a note can be given on the method used for evaluating the same (IFRS, 2017, p.64-66). Finally, the entities can provide a complete separate note, which will focus on mentioning the accounting policies that have been used for the preparation of the financial statements. Thus, it can be stated that the disclosure initiatives have provided wide range of guidelines to the business entities, so that they can flexibly prepare the financial statements by disclosing accounting policies in the most convenient (IFRS, 2017, p.64-66). However, the statement but disclose the rest in the same notes as the information to which they relate is not well comprehensible. This is due to the fact that it is not possible to trace, whether it implies towards the need of disclosing information under a single note or under each specific items along with the foot note. Hence, it can be stated that the paragraphs 6.16 and 6.22 can be better understood with the support of higher level accountants as compared to those who work at the lower hierarchy. The above mentioned developments of accounting disclosures are done as per the norms laid down by the Australian Accounting Standards Board (AASB). It is observed that the disclosures requirements are set by AASB are similar to the provisions mentioned in the paragraph 6.16 of the disclosure initiative pertaining to IFRS. For example, AASB makes it mandatory to mention about the basis of measurement that has been used while calculating investments. It can be done on historical basis or at the fair value that prevails in the market. In case, if more than one method is used, then it is necessary to mention about them. The AASB also states that the final decision regarding the policies of accounting lies with the management. Additionally, the standards of IFRS provide a scope of disclosures pertaining to the accounting policies that can be presented. For example, in paragraphs 6.22, it is clearly mentioned that the information relating to accounting policies can be given on a single not e, under separate heads or completely a new report can be attached with the financial reports that states about the accounting methods (AASB, 2015, p. 24; IFRS, 2017, p.64-66). Pertaining to small business entities, it can further be stated that providing information on accounting methods is feasible within a single note. Medium scale organisations can mention the specific accounting policies under a separate head. On the other hand, large organisations that have several subsidiaries or operate in multiple nations having a wide range of products must disclose all the information on a separate note under specific headings. This will enable the investors and other stakeholders to easily know about the policies that are used for the preparation of financial statements. Pertaining to Cruz Accounting Ltd., it can be inferred that the disclosure initiatives of 2017 will enable in preparing financial statements more precisely for the clients. This is because customized notes can be given on the financial statements pertaining to the policies of accounting methods. As a result, the end users will be able to get sufficient information from the financial statements. Thereby, the clients will place repeated orders with Cruz Accounting Ltd. for preparation of financial statements, which can lead to rise in revenue earnings. On the contrary, more time and cost will be involved in the preparation of the financial statements, which can be set-off by increasing revenues (IFRS, n.d.; Deloitte Global Services Limited, 2017a). Letter To, The Senior Accounts Manager Alex Chemicals Pvt. Ltd, Australia, Date-22 September, 2017 Subject: Use of IFRS 2017 Dear Sir, It is hereby informed that on March, 2017 IFRS has passed a Disclosure InitiativePrinciples of Disclosure, which mentions about the changes regarding certain criteria of disclosures in the financial statements. These standards are duly important for the business entities, as it will enable them to improve the mode of communication with the stakeholders. The same benefits are applicable for Alex Chemicals Pvt. Ltd, so that it is possible to disclose the vital information in the financial statements. Alex Holdings Pvt. Ltd. will enable to obtain information that is to be included in the financial statements. For example, being a chemical manufacturing organisation, it is important to mention about the depreciation of machines in the financial statements. This will help the investors to easily understand regarding the methods used for calculating depreciation and its impact on the level of profit and return on shareholders wealth. It will boost up confidence of the investors and provoke them to purchase more shares (IFRS, 2017a). The board committee of Alex Chemicals Pvt. Ltd have wide range of options available pertaining to the disclosure mechanisms. Previously, the AASB only stated about the need of mentioning changes in the accounting policies that are brought about in an organisation along with the present ones that are being followed. On the contrary, on March 2017, the initiative that has been taken by IFRS, specifically mentions about the three types of options that can be followed during financial reporting. In case of quarterly annual reports, Alex Chemicals Pvt. Ltd can use single note mechanism for reporting the accounting procedures. This is because quarterly reports contain information only on three month time period, and so it is rational to mention regarding the accounting procedures at one place. In case of an annual report, the same can be provided on a separate attachment, as numerous policies are used for pertaining each of the items that are present on the financial statements (AASB, 2015, p. 24; IFRS Foundation, 2017, p. 4). The chemical industry and other sectors in Australia are observed to adhere to the policies that are initiated by IFRS. It is thus logical for Alex Chemicals Pvt. Ltd to easily adapt the standards of disclosure that have been prescribed in the disclosure Acts of IFRS in 2017. Hence, it is advisable to proactively adopt the standards while preparing the financial statements, as it will enable to get accustomed to the disclosure initiatives. It is possible that after a few years, AASB will make it necessary to adopt accounting policies and disclosure requirements that are given by IFRS on March 2017. Already, AASB has made certain regulations that make it necessary to adapt the IFRS standards (Australian Prudential Regulation Authority, 2005, pp. 2-3). Finally, it is to remind again that Alex Chemicals Pvt. Ltd must start adhering to the standards of disclosure that has been passed by IFRS in 2017. Yours sincerely XYZ Accounts Manager Cruz Accounting Ltd References AASB 2015, Presentation of financial statements File, pp. 1-31. Australian Prudential Regulation Authority 2005. Adoption of international financial reporting standards Lifs, pp. 1-19. Deloitte Global Services Limited 2017, IAS 1 presentation of financial statements, EN, viewed 22 September 2017, https://www.iasplus.com/en/standards/ias/ias1. Deloitte Global Services Limited 2017a, Background, EN, viewed 22 September 2017, https://www.iasplus.com/en/news/2017/03/dp-pod. EY 2017, Disclosure initiative principles of disclosure, Publications, pp. 1-4. IFRS 2017, Disclosure initiativeprinciples of disclosure, Media, pp. 1-110. IFRS 2017a, Snapshot: disclosure initiativeprinciples of disclosure File, pp. 1-16. IFRS Foundation 2017, Disclosure initiative principles of disclosure File, pp. 1-113. IFRS, No Date, Principles of disclosure. Work, viewed 22 September 2017, https://www.ifrs.org/projects/work-plan/principles-of-disclosure/ Rouse, M 2017, Definition IFRS (international financial reporting standards), Techtarget, viewed 22 September 2017, https://whatis.techtarget.com/definition/IFRS-International-Financial-Reporting-Standards. EFRAG 2016, Disclosure initiative - principles of disclosure Activities, viewed 22 September 2017, https://www.efrag.org/Activities/322/Disclosure-Initiative---Principles-of-Disclosure. PwC 2016, IFRS disclosure Assets, pp. 1-236. Robinson K 2016, Disclosure initiative An overview XBRL Europe, Luxembourg, pp. 1-17. XBRL 2017, Webinar about disclosure initiative from the IFRS foundation News, viewed 22 September 2017, https://www.xbrl.org/news/webinar-about-disclosure-initiative-from-the-ifrs-foundation/.