IFRS IS A BIG FOUR GRAVY TRAIN BY RICHARD MURPHY
Order Instructions: FIRST QUESTION FOR 600 WORDS ALL OTHER QUESTIONS FOR 1(300 WORDS) PAGE
The case is about the global controversy around the adoption and application of International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). The specific debate in this case is about forcing the UK local authorities to adopt IFRSs for their financial reporting. Australia has been one of the early adopters of IFRS. This case may have major implications and ramifications for local authorities in Australia. Read the above case, examine the arguments and counter-arguments, and research other relevant materials to answer the following questions in your own words:
1. Murphy argues that ‘UK GAAP was accruals accounting and sought to match transactions in a period to provide a measure of what had happened in that time scale. Balance sheets are a residual measure in that process. So, this GAAP was about stewardship, financial performance, delivery of value for money, and action over time. IFRS on the other hand is about measuring value at a point of time and comparing that with values at another point in time. The difference is the result for the period. So the balance sheet is predominant and the profit and loss account secondary . . .’
– If Murphy is correct, then the introduction of IFRS implies a major paradigm shift in
accounting. Critically examine the nature of IFRSs through your own research and comment
on Murphy?s statement. Is Murphy correct in his claims?
2. Murphy suggests: ‘IFRS will not require accounting for stewardship of public funds entrusted, or
for the supply of services, both of which are core to the management of local authorities. And we
know that a failure to measure almost always means a failure to deliver in management terms. This
means we have a potential disaster on our hands.’
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