Question

Question 2 - 1,500 words

The Senior Partner of the firm you work for has appointed you to a new role. It is now your responsibility to review upcoming accounting standards and provide a report to the partners on the proposed standard and the opinions of other industry players on the changes.

Firstly, you are required to find a current exposure draft or proposal for a new accounting standard (no older than 1 year) which has been opened for public comments. (These can be found on the websites of most standard-setting organisations, such as the IASB, AASB and FASB. Hint: These websites can be quite difficult to navigate, so as a first step try typing "IASB exposure draft and comment letters" / "FASB exposure draft and comment letters" into Google or other search engine of your choice). Read a sample of the comments from a range of respondents. Select four respondents, ideally from different types of organisations for example, from accounting bodies, industry, companies or corporate bodies. If you are having a problem finding suitable comments letters then contact your subject coordinator.

In your own words, supporting your evaluation with appropriate citations, appropriately referenced in APA 6 style, you are required to include the following information in the report.

• An outline of the major issues covered in the exposure draft (what is the exposure draft introducing or changing?).
• An outline of the views presented in the comments letters which highlights the areas of agreement and disagreement with the exposure draft.
• An assessment (with relevant examples) as to whether the comments letters utilise any of the arguments 'for' or 'against' regulation.
• An interpretation of the actions of the authors of the comments letters based on each of the theories of regulation (public interest, private interest and capture) including an explanation of which theory(ies) you think best explains the comments.

Answer 1

Qo The senious pasther of the firm work for has appointed you to new gole...- 9 SOL A new role is a sinior partner of the Film you wosk bor has appointed. The Exposerre draft mainly talks about whether to treat short term bank borrowings as part of fitneee activity ox as a part of cash and cash Equiva - lents at the time of preparation of cash Hlow for ttre entity ie, The IAS 7 deals with classification of Short term loans and credit facilities offered by The bank. The committee has decided not to include The discussion to it's standard setting agenda. such an action of part of the committee is in public interest. the issue include the short term bayro wings and credit facilities entended by the bank and clearly defined in the IFRS. As per para 8 of the IAS 7 general seenario, the short term borrowings and gredit facilities have to classified under financing activity. (i) However, it can classified as aash Equipulent provided, two conditions as meet with conditions being the banking in any % a oe

2 arragement repoyable on demand and forme intgenal part of company's cash managment. (1) whether the is borrowing is fiaming part of campany's cash managoment is matter of facts and circumstances. Since There is no ambiguity in classification of such short. (m) ) we agree with the Intasepretation committee decision not to add this item to its agenda. Requirment of IAS 7 clearly stipulate That an entity is de quired to disclose the opening balence of cash & cash equivalants Adgest ments Codditione/deletions) to each & cash equivalents. Ⓡ clossing balence of Cash of cash equivalents. There by creating geconciliation and high lighiting the changes to the Cash & Cash Equialents. A180, the policy Odepted by an entity in determining the composition of cash and cash equivalents has to be disclosed. paragraph 8 of IAS 7 clearly stipulates the requirments of classification of bank borrowing and short lerm credit facilities. The above mentioned clauses are in agreement to the Expo sure droft. а a

9 The comment laller utilizes arguments [F8] The requlation The IFRS provides detailed guideline on The classification of short term borrowing as a finacing activity. and also provides clearly cut conditions to be met for classification of the same as cash or cash Equivalent. the basis for the concly -sion provided by the commettee is given as short term arrangement s are not repayable on demand and ttie balence does not often fluctuate from arrangemets are a film of Financing rather than on integral part of the entity cash manage ment. * The pubic interest is the most effective at explaining the comments. It providee odequete justification on the Changes required in the accounting standards. That is charges should bring about a more clear picture of the Eganisation in the public eyed: The capture theory is the least effective at Explaing The comments as it does not provide any justification for the charges to be introduced in the accounting Standard there 64 reducing the chances of a healthy. debate on The changes to the Aso the

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we suggest that an exhaustive thought of the issues emarging from such Exercises and comparative issues emerging in deftent enterprisee is essential preceding making alterations to Explic cit IFRS'. restricted Extension change, as а a for example, the one proposed in the pre sentation draft can't address those issues and convey's That dangere of uniteded rusult. of gequlation best explain the comments. The theories