RESEARCH PAPER SCENARIO The year is 2030 and you work for one of the big accounting firms in Sydney, Australia. The US FASB and the London based IASB have just announced that they have agreed in...

RESEARCH PAPER SCENARIO The year is 2030 and you work for one of the big accounting firms in Sydney, Australia. The US FASB and the London based IASB have just announced that they have agreed in principle to a merger, however, there are a number of areas that are still in contention and yet to be resolved. As part of the merger, the FASB are seeking to bring IFRS into line with the US standards so that accounting standards are congruent with Sarbanes Oxley and the Dodd Frank Act. The result of this will be that the USGAAP will be applied where there are differences with IFRS requiring many of the current IFRS accounting standards to be completely rewritten. Many of the proposed changes are far-reaching and extremely complex and likely to result in a significant amount of additional regulation and compliance. The impact on the accounting profession will be significant. Early projections estimate that the compliance costs will at least double when compared to the current system, with initial costs expected to be even higher in the first two years due to change over. Some of the purely financial accounting changes are likely to negatively impact upon Australia’s small and medium sized businesses whilst providing significant advantages for most large multinational corporations. Not surprisingly, the proposed changes have polarised not only the geopolitical landscape but also the political environment within Australia with many of the proposed changes proving to be highly controversial locally. Internationally, there has been a public backlash with Russia, Brazil, Singapore, China, India, Turkey and South Africa vocally opposing the merger. They have already indicated that they will not agree to the proposed merger, and instead have determined they will be establishing their own version of IFRS. On the other hand, the UK Financial Reporting Council, Korean Accounting Standards Board, Financial Reporting and Assurance Standards Canada and the Accounting Standards Board of Japan are publicly committed to joining. Within Australia, the Australian Industry Group is worried about compliance costs and uncertainty and the Australian Shareholders Association doesn’t believe the changes will provide any additional information. Both have joined the calls for the AASB to abandon international standards and replace them with new regulations designed specifically for Australia which would mostly consist of reverting to pre 2005 Australian GAAP. Conversely CAANZ, CPA Australia and the big 4 are publicly supporting the move based on increased global integration and unification. The board of the AASB however, are still undecided as to what is the best course of action for Australia and are consulting widely. Your Task You and your team have been asked to prepare a research paper which will be presented to the Board of the AASB. The purpose of the presentation is to outline the impacts of the proposed merger on the Australian Accounting Standards and the business community. Your advice is required to critically analyse and evaluate the facts of the scenario and based on your analysis provide detailed advice recommending the best course of action for the AASB. Subject: ACACT305A Contemporary Accounting Concepts Assessment 3: Group Research Paper © TAFE NSW – Higher Education Page | 3 Use the various theories of accounting as a framework to direct your research in the following areas: 1. The costs and benefits of accounting regulation The scenario highlights some of the divisive attitudes regarding accounting regulation and identifies some of the contemporary issues that are facing the accounting profession, particularly, the power of accounting to define the direction of the global economy. This proposal may have significant impacts on future accounting regulation and reporting disclosures across the world. Critically evaluate the costs and benefits of the proposal and outline the key considerations for the AASB. 2. Adoption of International Accounting Standards There are far reaching impacts on society that could result from the proposal in the scenario. It took many years for the international accounting standards to become widely accepted and resulted in many countries adopting IFRS in their own ways. Analyse and critically evaluate, the similarities and differences between the way that IFRS has been adopted internationally to date and provide detailed advice to the AASB about how this might impact on societies both internationally and within Australia. 3. Political nature of accounting It is also well known that the FASB has long opposed a merger and that the adoption of the International Standards in Australia in 2005 were contentious and highly political. It has been suggested in the scenario that from Australia’s perspective, the proposed merger could potentially mean taking a backward step, that is ‘reverting to pre 2005 Australian GAAP’. Analyse and critically evaluate the political positions of each of the players in the scenario and in your advice to the AASB identify possible issues or outcomes that could potentially result. Summary of Conclusions and Recommendations to the AASB The final report will comprise the detailed research and potential impacts that the team have identified could result from the proposed merger and provide key advice on the best course of action for the Australian Government