Contemporary Issues in Accounting IASB

Question: Discuss about the Contemporary Issues in Accounting for IASB. Answer: Introduction The conceptual framework of accounting of IASB (International Accounting Standards Board) provides accounting standards and principles for developing general purpose financial statements of businesses worldwide (Macve, 2015). In this regard, this report has been developed to examine the usefulness of current accounting framework to meet the needs of end users of financial reports through analyzing the annual reports of Qantas and Air New Zealand. Also, the report examines the inclusion of prudence to address disparity in corporate reporting. Examining of the Current Accounting Framework toMeet the needs of the users of Financial Reports as Prescribed in the Objective of the Conceptual Framework of Accounting through Analyzing Annual Reports of Qantas and Air New Zealand The conceptual framework of accounting aims to promote transparency in financial operations of business corporations. The end-users of financial reports disclosed by the business entities are investors, lenders, creditors and other stakeholders. The businesses around the world need to develop financial reports as per the standard accounting principles of current accounting framework (Conceptual Framework for Financial Reporting 2010, 2017). This ensures the protection of interest of stakeholders by providing reliable information about the financial performance of a business corporation. The main principles of conceptual framework are relevance, reliability and comparability that accountants need to follow and implement while developing financial reports of business corporations. The relevance principle of conceptual framework states that financial reports developed should be accurate while reliability principle states that it should be free from any material error. The comparability principle of conceptual framework states that financial statements developed should be compared with the financial results of previous year in order to provide information regarding the [profitability of the current year of a business entity (Macve, 2015). The annual report of Qantas and Air New Zealand is evaluated for examining their compliance with standard requirements of accounting framework. Qantas, a leading airline of Australia, adopts and follows all the principle of current accounting framework. The airline has disclosed all the materialistic information in its financial statements about its net profit, operating income, earnings and dividend per share as per the principles of conceptual framework. The directors report states effective compliance with Companies Act 1965 and adoption of all accounting policies in development of its financial reports as per the AASB standards. Also, the airline follows principle of consolidation as per the IASB accounting policies. According to the principle of consolidation organizations need to effectively compile all the financial information of its subsidiaries in a single economic entity. Also, directors report declares that all the financial statements are developed as per the Corporation s Act 2001 (QANTAS Annual Report 2016, 2016). On the other hand, Air New Zealand, national carrier of New Zealand, does not effectively comply with the standard accounting principles of current accounting framework as analyzed from its annual report. The airline has not properly disclosed all the materialistic information in its financial statements. Also, there is no adequate disclosure in the directors report regarding the accounting policies and standards followed for developing the accounting financial statements. The airline has also not implemented consolidated principle of conceptual framework and also there is no disclosure about the accounting policies followed at the time of preparation if financial statements by the accountants of the airline. The financial statements are complex too be understood by the end-users and thus has not effectively followed reliability and comparability principle of conceptual framework. The reason of non-disclosure of airline with conceptual framework principle of accounting is its small-s ize business operations as comparison to Qantas. Air New Zealand is still in growth phase and thus does not effectively comply with all the international accounting standards and policies (AIR NEW ZEALAND Interim Financial Report, 2016). Conceptual Framework Revision to Include Prudence is Likely to Address the Disparity in Corporate Reporting The concept of prudence in conceptual framework refers to maintaining neutrality of financial statements. The prudence concept was mainly developed for protection of interest of stakeholders in the conceptual framework of accounting. The prudence concept mandates the accountants to present only clear and realistic information to the end users of the financial reports. It restricts the accountants to hide any materialistic information in the financial statements such as understating the expenses or overstating revenues. The prudence concept was removed from the current accounting framework as it prevents businesses to create any hidden reserves for them that can be utilized at the time of occurrence of any contingency. However, it has been included again in the conceptual framework with increase in number of business frauds related to mis-representation of financial performance. Thus, prudence concept was included in the conceptual framework for removing disparity in corporate reporti ng with the aim to protect the interest of stakeholders (Prudence and IFRS, 2014). Conclusion Thus, it is summarized from the overall discussion carried out in the report that current accounting framework is developed mainly for promoting transparency in business operations. The general purpose financial reports of businesses needs to be developed by complying effectively will all the accounting policies for meeting the interest of end-users. Also, the concept of prudence should be included in conceptual framework for preventing misrepresentation of financial statements. Recommendations On the basis of the overall report discussion, it is recommended to the accountants that they should strictly adhere to the adoption of all accounting policies and standards while preparing financial statements. Air New Zealand should also emphasizes strictly to adopt all the accounting policies and standards for promoting its sustainable growth and development. The accountants should also refer to the concept of prudence while preparing financial statements. The inclusion of prudence concept is required for addressing disparity in corporate reporting (Macve, 2015). References Air New ZealandInterim Financial Report. 2016. [Online]. Available at: https://p-airnz.com/cms/assets/NZ/PDFs/2016-interim-shareholder-review.pdf [Accessed on: 8 April 2017]. Conceptual Framework for Financial Reporting 2010. 2017. [Online]. Available at: https://www.iasplus.com/en/standards/other/framework [Accessed on: 8 April 2017]. Macve, R. 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat. Routledge. Prudence and IFRS. 2014. [Online]. Available at: https://www.accaglobal.com/content/dam/acca/global/PDF-technical/financial-reporting/tech-tp-prudence.pdf[Accessed on: 8 April 2017]. QANTAS Annual Report 2016. 2016. Online]. Available at: https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf [Accessed on: 8 April 2017].