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Mid Semester 2 Exam.docx - School of Accounting ACC706...

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School of AccountingACC706 Accounting Theory & PracticeSemester 2 - 2021MID-SEMESTER EXAMTotal Marks – 40Weighting – 20%Question 1Part A:It could be identified from the article that the IFRS does not comply with bothrelevance and faithful representation while preparing the financial report. Underrelevance, the information used in the accounting system should meet the needs of theaccounting system and had a positive impact in their decision-making process wherefaithful representation, the financial report should be complete, neutral, and error-free.The article indicates that the annual financial report using the IFRS methods willshow a different picture about the management decision and working to its investors.The financial report prepared under IFRS does not serve its purpose to businessmanagement and investors. In other words, a financial report prepared under IFRSwill not provide sufficient and reasonable explanations to meet the needs of theinvestors. Instead, only those investors who have been technically trained would beable to understand the notes in the financial report and able to identify thedevelopment and the level of profit earned in a business. Those investors with lowtechnical capabilities would not able to understand the financial report. Hence it willcreate misinterpretation and misleading management and investors. The introductionof IFRS in the financial report makes the report meaningless to investors and as aresult, most of them will not accept the report as they can not clearly understand thetrue position of a business. Investors and management are not in a position to comparepast and current business performance and forecast future performance. Thus with theuse of IFRS, both relevance and faithful representation is being violated.Part BThe views in the article support the objectives of financial reporting under theConceptual Framework for Financial reporting. Geoff Roberts said that from thestatement, it is clear that the financial report prepared under IFRS does not meet theneeds of investors and management. Instead, he indicates that investors rely on howquickly management provides information quickly and effectively about an issue andaccount report and not the financial report of a business. The objectives of theConceptual Framework states that financial reporting should provide usefulinformation to users to aid in decision making. How can investors and managersdecide on a financial report that does not meet their needs?

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Term
Summer
Professor
VISHWA PRASAD
Tags
Balance Sheet, Depreciation, Generally Accepted Accounting Principles, historical cost, Devi

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