FINANCIAL ACCOUNTING AND REPORTING

Financial Accounting and Reporting



Financial Accounting and Reporting

Economic Consequences

Before IFRS was introduced, every member state had its own formulated accounting standards. The globalization of capital markets and internationalization of business has enlarged considerably, and along with this same trend, the call for international accounting rules and harmonization has also enhanced. With the aim to attain this objective, IASB (the International Accounting Standards Board) was structured in April 2001. Subsequently in 2002, the EU passed regulations to implement IFRSs for companies listed on the stock market beginning from January 1st, 2005. All European listed companies were needed to organize their combined financial statements as per the regulations of the IFRS.

Many people studied and contended that authorized amendments in accounting standards can have noteworthy economic effects. Deegan and Unerman (2006, p.69) asserted that accounting regulations have genuine economic and social consequences for many companies and populace. Diverse accounting standards have an effect on a company's financial statement in different ways. In the meantime, owners and managers are not unresponsive to optional financial statements because of possible economic outcomes. Holthausen and Leftwich (1983) argued that voluntary and compulsory amendments of accounting methods have an effect on the value of the company, and the wealth of managers, investors, auditors, and regulators. The results of any latest accounting standards are ahead of the influence on the financial statements (De Jong, Rosellon & Verwijmeren, 2006). The accounting standards of employee benefits after retirement (pension) in IAS 19 need firms with describes benefit pension plan to realize the assets/liabilities related to pension on the organizations' balance sheet as per the fair value.

The amendments in the statement revealing financial position will normally bring about larger volatility in balance sheet, which yet again may support a move towards investments in bonds. As the entire gains and losses will instantly be documented on the balance sheet; also re-measurements influence OCI, there will be no unrealized losses. therefore, some firms may at this instant discover it easier relatively to de-risk the pension plans, as these firms will no require to supervise the recognition of unrealized losses any longer through the Profit and Loss statement when there is a curtailment or settlement. Additionally, as risk transfers happen to more widespread, there is a requirement to decide whether a settlement is custom, and consequently realized in the OCI, or non-routine, and the aftermath realized in the service cost.

Modifications in a funded plan's status also require to be considered for reporting purposes during interim periods, with a condition for re-measurement of the plan's funded status, depending on the implications of the revisions (www.mercer.com).

Furthermore, the decline of the defined benefit pension is a complex process. There has been a range of factors that have contributed to the current situation where the vast mainstream of private segment defined benefit schemes are now closed to new members and/or future accrual. Successive amounts of statutory overlay increased the cost of pension provision and rapid increases in life expectancy increased the ultimate liability faced ...