Accounting Theory Accounting for Stewardship

Question: Discuss about the Accounting Theory for Accounting for Stewardship. Answer: IFRS will not require accounting for stewardship of public funds entrusted, or for the supply of services, both of which are core to the management of local authorities The UK accounting Board has proposed a plan of replacement of the UK GAAP system with the IFRS. IFRS is the new approach that will have an impact on the companys and the SMEs to shift towards the new system of financial reporting (Deegan, 2013). The transition that is seen after the IFRS has been proposed is more significant for the public sector organization as compared to the private sector (Christensen et al., 2015). The public sector organization has to develop a new system of financial reporting which is in line with the new system (Jones, 2015). The system that is proposed now considers greater degree of disclosure of the accounts while taking into account the contracts that have been made in the last date (Daske et al., 2013). The system thus, requires a change in the reporting of the financial statements. The difference between the IFRS and the UK GAAP system is IFRS considers the accounting for investments in the separate financial statements (Barth et al., 2012). IFRS is likely, to make the financial disclosures more trustworthy since, they are accounted at the cost value. This would help the government employees to correctly state the cost and the investments on the financial statements. The taxation is the vital role that has been changed in the IFRS system with respect to the UK GAAP system (Ramirez, 2015). IFRS takes into account the important issues for the public sector organization includes the accounting for the PFI schemes, the adjustment of the derivatives and other contracts that are undertaken by the company (Ramanna Sletten, 2014). The IFRS on the other hand, proposes that the PFI schemes that are being taken by the organization all such schemes will be disclosed in the financial statements of the company (Voulgaris et al., 2014). The lease contracts that are taken by the organization will be recorded on the original cost at which it was purchased. This view is being critically contrasting with the view of the Murphy who says that introduction of IFRS will lead to the backdating of the financial statements which makes them no more useful in the current time period (Schatt et al., 2016). The change was being proposed where the financial disclosures are meant to be shown at a greater number. However, with the greater financial disclosures will help the authorities to identify t he problems that are associated with the financial disclosures in the organization (Collier, 2015). The proposed IFRS is likely to put strict rules and regulations on the organization. Stricter rules emphasizing on the personnel rules would lead to greater regulations on the public sector enterprise (Barth et al., 2012). The Public sector organizations are the non- profit making organization and does not take into account the valuation of the goodwill or investment. The Public sector units are not concerned about making profits rather they serve the society (Jorissen et al., 2012). It can be stated that the issues like investments, valuation of goodwill and asset valuation are not applicable to the public sector enterprise. Thus, the introduction of the IFRS may not be required for the public sector enterprise (Morley, 2016). IFRS ensures the establishment of the standards which is linked with the financial reporting and the financial resources. Since, the adoption of the IFRS is the time consuming process and are meant to be used by the private enterprise (Whittington, 2015). a. Some authors claims that the IASB does not act in the public interest. They are a private cartel designed and promoted for the benefit of their biggest sponsors the Big 4 firms of accountants IFRS is been formulated by IASB to enforce strict rules and regulations. IFRS has been formulated in order to ensure the strict control on the regulations so that the firms cannot mislead their shareholders (Chua et al., 2012). The IASB has consulted the stakeholders and the investors before proposing and drafting IFRS system. The IASB has analyzed the issues before drafting the compliance (Ntoung Agbor Tabot et al., 2015). In order to ensure the representation of the stakeholders the board has proposed the International Accounting Standard Committee Foundation (IASCF), IASB, International financial Reporting Interpretation Committee (IFRIC) governing bodies (Sugiyama Islam, 2016). The following bodies include stakeholder representation in the board. The IASB on the other hand, has ensured strict regulations with respect to the stakeholders. The meeting that was held on 11th of July throw the light on the highlight of the public commitment of the IASB. The meeting was propounded in order to establish the rules and regulations and draft the paper on the Governance (Schatt et al., 2016). At the end of the meeting the authorities came with the decision to strengthen the structure of the Governance. The bodies came with the decision to maintain the public interest and to built the financial stability. The board has taken various decisions which would be in favor of the stakeholders and also ensure the protection of the stakeholders (Ntoung Agbor Tabot et al., 2015). The big four firms i.e. Price water house coopers, Earnst and Young (EY) and KPMG and Deloitte. These firms do have representation in the IASB but the rules and regulations have been laid for the corporate compliance ensuring greater degree of the financial disclosure. These firms may exercise some control and make the suggestions and recommendations but the cartel system is non-existent as these firms are the major competitors of each other (Voulgaris et al., 2014). Adoption of the system by the different countries various according to the regulatory compliance (Whittington, 2015). In the countries where there are strict rules and regulations the countries would be less willing to depart from the adoption of the IFRS system. The regulator can raise certain objections while disclosing the financial information in the financial reporting system. The strength of the regulator is important to ensure that the worldwide compliance of the IFRS (Chua et al., 2012). IFRSs should be adopted by Australian local authorities? In the year 2004, Australia adopted the policies of the IFRS. The decision of implementing and drafting the policy generated much of the debate in the public. The general agreement was formed between the formal groups of the group and the community and was debated on the terms that drafting of the policy would materially affect and cause confusion in the financial performance of the organization (Christensen et al., 2015). While the authorities announced the changes in the accounting standards, the major modifications were made in the accounting and disclosure of the financial statements. However, on the other hand, there exists the positive influence of the IFRS. IFRS act as the vital source of information provider for the other countries. IFRS discloses the items from the balance sheet, which is influencing the surpluses, and the profits of the organization. The studies have proven that the IFRS system ensures a greater degree of financial transparency in the system. The organizati ons that have adopted the IFRS system are suffering from the problems of the cost of capital and the liquidity (Christensen et al., 2015). The adoption of the IFRS affects the treatment of many issues. The issues include the issues of the property plan, the equipments and the assets, intangible assets, depreciation of the machinery, taxation and many others. It has also been proven that the quality of financial disclosures has improved after the introduction of the IFRS system. The following statements have been analyzed by many of the researchers and have been proved with the help of the statistics (Voulgaris et al., 2014). The IFRS system has ensured that there in an increase in the value relevance and the earnings of the company. Some may have adopted the IFRS voluntarily but empirical studies have proven the success of the system. However, the adoption of and the enforcement of the standards has varied from country to country depending upon the regulator. Countries like China and India which have strict regulators can be apprehensive about the adoption of the system. Nevertheless, UK, USA and European Union have effectively adopted the system (Collier, 2015). Adoption of the IFRS system by big countries the made the system universally acceptable.UK has also given extra time to its public sector units to successfully adopt the system. As most of the businesses and government bodies deal with organizations, globally it is important to have a universally acceptable system of accounting (Deegan, 2013). A universal system ensures easy dealings various organizations globally even essential for public- private partnership projects. Thus Australian firms should adopt the IFRS to ensure global compatibility with governments as well as private company operators globally as the IFRS has become an accepted norm in the European countries, USA and following soon are the developing economies like China and India (Daske et al., 2013). Reference Deegan, C. (2013).Financial accounting theory. McGraw-Hill Education Australia. Christensen, H. 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