ECOS40315 Contemporary Issues in Accounting and Taxation

Include all the text, including title, preface, introduction, in-text citations, quotations, footnotes and any other item not specifically excluded below.

Introduction

The accounting is regarded as the key for success of any company. It is because the whole working of any company or firm depends in total on the functioning of the finance department of the company. If the finance department is working well and smooth in accordance with the conceptual; framework of accounting then it will be useful not only for the owners of the company to know the financial status as on date and financial performance for the given period but also helpful to the investors or the stakeholders of the company in making useful and an efficient decision. The main aim of the report is to identify the processes and procedures followed by the companies which are listed in the respective stock exchanges of the countries in which they are incorporated and registered to know whether the companies are pursuing the international financial accounting in the manner as defined by the regulatory bodies like International Accounting Standards Boards, Finance Reporting Council and International Financial Reporting Standard Foundation and other laws which is applicable for the time being in force. Along with the accounting for financial information, the emphasis has also been laid down on the accounting of international non financial matters. The financial accounting includes transaction relating to purchase, sale and expenditures. The non financial accounting includes accounting for the matters relating to human rights, environmental rights, anticorruption or any other matters not relating to the daily routine of the business of the company. Thereafter, how the reporting for the both international financial accounting and non financial accounting will be done has been discussed in detail. Then the relevancy of the international financial and non financial accounting and reporting in the continuity professional development training program will be discussed with its subjective importance. The report has then ended with the proper conclusion as to whether the accounting for both financial and non financial matters counts useful for the users of the financial statements and conclusion is followed by the recommendation as to how much importance has been gained by the financial and non financial accounting and reporting in the continuity professional development program. With this the report has been bifurcated in different sections and data has been obtained from the reliable sources.

International Financial And Non Financial Accounting

Accounting shall be done by each and every organization whether it is a small scale enterprise or medium scale enterprise or a large scale enterprise and whether it is a listed company in the recognized stock exchange of the country in which the company is registered or it is a non listed company. Accounting provides the management with the actual data and results as to how the company has performed over the whole of the year and as of the current date what is the financial position of the company. Accounting is thus help in identifying the transactions entered into by the company over the period of time and thereafter summarizing it according to the nature and type of the transactions made and then the recording of the transactions is done in the pre defined ledger and journal. This in turn helps in preparing the financial statements and making different observations from it and finally interpreting the results out of it.

For starting any kind of work lay out is required or certain plan is defined as to where the work needs to be done and in which direction. In the accounting area, this framework is commonly known as the conceptual framework of accounting. This framework provides as to how the accounting of any transaction is required to be done. The conceptual framework of accounting provides the objective as to how certain assets and liabilities will be measured at the given point of time and how the revenue and expenses so incurred over the period will be recognized. This framework is made up of the statutory guidelines, accounting standards, international financial reporting standards and the Corporations act of the year 2001 as updated with each amendment and any provisions of any law or act which was applicable for the time being in force (Hoogervarst, 2016).

International financial accounting implies that the accounting for every financial transaction shall be made in the books of accounts in accordance with the guidelines and the provisions as issued by the International financial reporting standards association in the form of the International Financial Reporting Standards. Thus, accounting for all financial transactions shall be made in accordance with the provisions of the International Financial Reporting Standards. The International Financial Reporting Standards are issued by the International Financial Reporting Standards Association in association with the International Accounting Standards Board which was formed in the year of two thousand and one. The standards are generally issued after undergoing through the proper research and the observations and results of which are available as Exposure draft to the public and how the same shall be applied if it is passed for implementation. Thus, for accounting of the financial accounting international financial reporting standards are required to be applied.

In respect of the non financial accounting, first it is required to have an understanding of the definition of the non financial accounting and how the same have been accounted for in the books of accounts and more importantly what type and nature of matters are included as the non financial accounting matters. There is no term like non financial accounting. Accounting is to records the transactions entered into the books of accounts and only those transactions are recorded in the books of accounts which can be expressed in terms of money. If no transaction can be expressed in money then it cannot be recorded in the books of accounts and can never come in the financial statements of the company. It is because the transaction which is non financial and which cannot be expressed in money cannot be account for in the books of accounts. The examples of the non financial matters are:

• Matters relating to environment – Matters like whether the company is producing any hazardous gas which is unfit for the environment or not.
• Matters relating to societies – Matters like whether the society is getting benefit from the presence of the company in the market
• Matters related to customer satisfaction – Matters like whether the company is producing the products in such a manner which is able to fully satisfy the customer present in market like Woolworths Limited and Wesfarmers Limited provided food products to their customers.
• Matters related to feedback from the customer – Matters like whether the company is having regular feedback from the customers or not and that with the favorable and unfavorable rankings.
• Matters relating to Anti Corruption issues – Matters like whether the company has paid any bribe to some agent or anyone else in order to get the work done
• Matters relating to diversity in directors – Matters like whether the directors of the company has been changed over the time or not.         

Thus, financial accounting shall be done in accordance with the requirements of the International Financial Reporting Standards and non financial accounting cannot be made in the books of accounts but are recorded separately which is necessary to be disclosed in the financial statements of the company which has been discussed in the next section.        

International Financial And Non Financial Reporting

The process of accounting all the transactions of the business will serve no purpose if there is no purpose of any reporting. Thus, reporting is the step which is very necessary to be included after accounting. It is further because of the fact that the users of the financial statements whether they are stakeholders of the company or the people charged with governance will require the summary of the results of the entity in which they are interested in many ways like how much is the earning of the company and what is thereby the earnings per share of the company or how much increase the company have gained over the last year in terms of gross profit or net profit or how much the company is giving dividend to the shareholders and how much the wealth of the shareholders have been increased over the period in comparison to the last immediately preceding year and etc. Thus, in this way the reporting is the intrinsic part of the whole process of financial accounting without the inclusion of which the accounting will be futile and will be in existence with no purpose out of it.

As per the requirements of the International Financial reporting standards, all the financial matters are required to be disclosed in the financial statements of the company. The financial statements of the company includes the statement of profit and loss, statement of balance sheet, statement showing changes in equity and the cash flow statement. In continuation of the financial statements containing and detailing all the financial matters the company is required to make disclosure in the notes to financial statements wherever it is required and it keeps on changing in accordance with the requirements from the environmental and social changes (EC, 2016). For instance amendment were proposed in International Financial Reporting Standard number eight on operating segments in consultation with the International Accounting Standard Board vide exposure draft dated 29^th of March 2017 (IFRS 2017). The amendments are:

• The criteria set out for identifying the operating segment must be met and much before the two or more segments are being segregated
• The companies will be required to disclose as to title and the roles and responsibilities of the person or group thereby who is operating the function of Chief Operating Decision maker
• The companies will be required to disclose the information related to the segments in the notes to the financial statements of the company if the identified and reportable segments reported in the financial statements are totally or minutely different from the segments reporting the any other part of the annual report.

Recently one primary based research project is being undertaken which is consultation with the International Accounting Standards Board and International Financial Reporting Standards Association. This project has laid down the emphasis on the changes that can be made to the primary financial statements including the cash flow statement. Its more focus will be on the following things (IFRS 2017):

• Change in the parameter which defines the financial position and the financial performance of the company.
• Changes in the statement of cash flows in order to provide more useful information with proper details and
• Introduction of the digital reporting structure.

Along with the above the updated framework has been developed by the Climate Disclosure standard which lay down that the environment related issues and issues relating to natural capital of the company, the reporting needs to be made in the annual report of the company. It entails that the non financial accounting is being reported in the annual report.

In view of the above discussion with reference to ongoing projects being undertaken by the International Accounting Standards Board with the International Financial Reporting Standards Association, the international financial matters are reported in the financial statements and the non financial matters are disclosed in the Notes to the financial statements of the company.

Relevance In Firm Cpd Training

The CPD is referenced as Continuing Professional Development. These are referred to as the training programs which are basically introduced by the companies in order to have the in house trained staff and also to make the human resources of the company updated in all the ways so that they would easily cope up with the changing requirements of the business.

The Continuing Professional Development training is given by each and every enterprise to their audit members on the timely basis and in an adequate manner. This program contains not only the discussion about how the audit is required to be conducted and what is the business risk that is being encountered by the owner of the company and how the business risk have paved the way to the audit risk and how the same shall be considered by the auditors in their audit plan and audit checklist.        

Apart from these risks the auditor shall be informed on timely basis that how the accounting is required to be done in respect of not only the financial matters but also the non financial matters. Accounting in itself requires the framework to be followed and the sound application of the provisions of the International Financial Reporting Standards. Without applying the same, company financial statement will not represent the true and fair view. Also apart from the application of the International Financial Reporting Standards, the company shall ensure that the team member of the audit team shall be informed about the matters which shall be considered while performing the audit function.

The inclusion of financial and non financial accounting and reporting in the Continuing professional development has created an edge for the audit staff. The staff of the audit team will now in no case can argue as to how the particular matter is required to be reported in the financial statements or notes to the financial statements and how the presentation will matter to the different users of the financial statements. For instance, the shareholders will be in position to know about the financial performance of the company or the earnings per share of the company whereas the regulatory authorities will be interested in knowing how much compliances has been made by the company with regard to the international financial reporting standards and the sustainability and corporate governance reporting along with the environmental and societal effects (Sundgren, 2016).              

As per the environmental norms and relevant act, the companies are required to disclose the nature and type of harm that the manufacturing process of the company may incur as required by the Climate Disclosure Standards (CDSB, 2014). Thus, through these types of inclusion in the training program of the audit staff will not only able the staff to conduct the audit in an effective and efficient manner but also provides the insights as to how to check the various compliances that is required to be made by the company before the reporting date and confirm whether it has been in actual done or not. Therefore, in this way, the audit firm has thought to include the international financial and non financial accounting and reporting in the Continuity Development Program.  

Conclusion

The international financial and non financial accounting and reporting in the financial statements plays a very vital role in the preparation of the annual report of the company and making available to the shareholders and users of the financial statements. In this report, the historical background of the accounting and the relevance of the financial and non financial information have been emphasized. The importance of the same has been mentioned with regard to the different framework and different research projects of regulatory. To conclude, the study is extensive and has helped the audit firms and also the number of users of the financial statements    

Through the whole review, it is recommended that all the audit firms shall include the topic of international financial and non financial accounting and reporting in their programs being provided to their audit staff.    

References

CDSB, (2015), “Environmental Information and natural Capital” available on https://www.cdsb.net/what-we-do/reporting-frameworks/environmental-information-natural-capital  accessed on 04/05/2017.

EC, (2016), “Non Financial Reporting” available on https://ec.europa.eu/finance/company-reporting/non-financial_reporting/index_en.htm#legal-framework   accessed on 04/05/2017.

Hoogervarst H, (2016), “Who are we and What we do – IFRSF and AASB” available on https://www.ifrs.org/About-us/Documents/Who-We-Are-English.pdf   accessed at 06/05/2017.

IFRS (2017), “”IASB Consults on Proposed Investments to IFRS 8 Operating Segments” available on https://www.ifrs.org/Alerts/ProjectUpdate/Pages/IASB-consults-on-proposed-improvements-to-IFRS-8-Operating-Segments-.aspx   accessed on 06/05/2017.

IFRS (2017), “”Development of IASB Research projects – Primary Financial Statements ” available on https://www.ifrs.org/Alerts/ProjectUpdate/Pages/Developments-in-the-IASB-research-project-Primary-Financial-Statements.aspx   accessed on 06/05/2017.

Sundgren J, (2016), “Financial and Non Financial Reporting including IFRS”, available on https://www.tapestrynetworks.com/issues/corporate-governance/financial-and-non-financial-reporting.cfm   accessed on 04/05/2017.