In: Accounting
Question 2 - 10 marks (1,500 words) The Senior Partner of the firm you work for has appointed you to a new role. It is now your responsibility to review upcoming accounting standards and provide a report to the partners on the proposed standard and the opinions of other industry players on the changes. Firstly, you are required to find a current exposure draft or proposal for a new accounting standard which has been opened for public comments. (These can be found on the websites of most standard-setting organisations, such as the IASB, AASB and FASB. Hint: These websites can be quite difficult to navigate, so as a first step try typing “IASB exposure draft and comment letters”/”FASB exposure draft and comment letters” into Google or other search engine of your choice). Read a sample of the comments from a range of respondents. Select four respondents, ideally from different types of organisations for example, from accounting bodies, industry, companies or corporate bodies. If you are having a problem finding suitable comments letters then contact your subject coordinator. In your own words, supporting your evaluation with appropriate citations, appropriately referenced in APA 6 style, you are required to include the following information in the report. An outline of what the exposure draft is introducing or changing. An assessment as to whether the exposure draft is being introduced in the ‘public interest’. An outline of the views presented in the comments letters which highlights the areas of agreement and disagreement with the exposure draft and/or other comments letters. An assessment (with relevant examples) as to whether the comments letters utilise any of the arguments 'for' or 'against' regulation. An application of each of the theories of regulation (public interest, private interest and capture) to the comments letters and a justification as to which theory(ies) is most effective at explaining the comments and which theory(ies) is least effective at explaining the comments. Please note: you need to attach the comment letters you selected for your report (there is no need to attach the exposure draft) Academic Writing and Referencing - 6 marks Content assessed: Accounting regulation, current financial reporting issues and topics(s) that your research is related to. Key generic skills: Research, critical thinking and written communication.
Exposure Draft selected - The International Accounting Standards Board (IASB) has published an exposure draft 'Property, Plant and Equipment — Proceeds before Intended Use (Proposed amendments to IAS 16)' on proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management. Comments are requested by 19 October 2017.
1. The major chnges proposed are - ED/2017/4 Property, Plant and Equipment — Proceeds before Intended Use (Proposed amendments to IAS 16) proposes to amend IAS 16 to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity would recognise the proceeds from selling such items, and the cost of producing those items, in profit or loss.
2. The changes proposed by the regulator is not to reduce the selling cost of items used to bring the product to its functioning way. The additional cost will reduce the profits. Apart from this the draft also requires the recognition of revenue. The draft addresses specific industries and provides a clarification towards recognition of value of assets during testing period for specific industries. It is debatable from the point of public interest theory.
3. Overview of letters - A general disagreement in the comment letters are for the amemdements in Pra 17(e). Also the letters agree for the more clarification over the definitions as specified in the exposure draft.
4. The letters in all cannot be determined as 'for' or 'against' the draft. Each selected letter has their own agreements and disagreement points. Also for seperate questions the comments are 'for' and 'against'. The conclusion which can be drawn is that the comments suggest for more additions in the recommended proposals.