Question

How do you see the future of financial reporting evolving over the next 10 years? Specifically, discuss any significant accounting new standards that you predict will be passed in the next ten years. Discuss at least two potential future standards and discuss why these standards are important for improving financial accounting information. (Include at least two reasons for each standard in your answer.)

Answer 1

A decade ago, the near-simultaneous adoption of International Financial Reporting Standards (IFRS) in over 100 countries could fairly have been described as a brave new world in financial reporting. Any systems innovation, and especially an innovation of such importance and magnitude, thrusts those involved (companies, users, and accountants) into the unknown. There was good reason to expect success, based largely on widespread enthusiasm for international standards and, behind that, recognition of the strong forces of globalization. Nevertheless, there were risks involved and there was limited a priori evidence to guide the decision-makers. A decade later, this is still the case.

In Next 10 years, Globalization remains a potent economic and political force, and drives the demand for globalization in accounting. Nevertheless, most political and commercial activity remains local, so adoption of uniform rules does not by itself lead to uniform reporting behavior around the world. For many of the claimed benefits of IFRS adoption to be realized, uniform implementation would have to occur in a wide range of countries, which seems unlikely and requires more than simply creating regulatory enforcement mechanisms.

The new accounting standards is the the new Lease Accounting standards has been the appointment of non-specialist real estate companies to abstract data so that calculations are available for day one of the new standards. Going forward, all new leases will need to be abstracted, renewals reflected (with changes in term dates, rent indexations and other changes captured), and all will need to be documented and made available to support a review by your company’s auditors. With a typical portfolio churning over 30% a year a clear plan as to how this will be managed and organized on an ongoing basis.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the 2 usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects.