International Overview and Suggestions †Free Samples to Students

Question: Discuss about the International Overview and Suggestions. Answer: Introduction: The report is prepared for discussing the role and functions of regulatory framework in context of Ireland and at international level. Discussion also incorporates identification of limitation of international regulations have also been demonstrated. The six key topics discussed in the observation document of IAASA 2013 that is impairment testing, deferred tax assets, forbearance measures, provisions, pension liabilities and alternative performance measures. The IAASA (Irish auditing and accounting supervisory authority) is the independent body operating in Ireland that is responsible for enforcement and examination of financial reporting of certain listed companies. Formation of such board intends to create a strong regulatory environment for business to promote and supervise high quality of financial reporting, effective regulation and auditing in the public interest (Iaasa.ie 2018). The role of IAASA is to promote improvements and examination in the financial reporting quality. Promoting and inspecting any improvement in the auditing quality of public interest entities. It prepares organization or reporting entities to enable them to respond to non-compliance within the remit in a prompt, robust and proportionate way. IAASA also intends to promote adherence by auditors, accountants and financial report preparers to high professional standards. The principal goal of IAASA is to make the delivery of effective and independent supervision of financial reporting that helps in promotion of high quality financial reporting. They also intend to provide support and provide specialist advice to the minister for enterprise, job and innovation and providing high quality information to stakeholders on accounting and key audit matters (Canning and O'Dwyer 2016). Moreover, it assists in setting the context of the authority in involvement with the directive and providing inform ation regarding the power and functions as it is transposed in the Irish law. The overview of administrative sanction process is provided by IAASA by the application of contraventions to the requirement of directive. Objective of authority is furthered by cooperating with the third parties at both international and domestic level and they are entitled to take appropriate enforcement and supervisory actions wherever necessary (Chughtai et al. 2015). The financial reporting supervision unit of IAASA is responsible for enforcement and examination of periodic financial report of some listed entities. There are number of significant financial reporting matters on which IAASA engages with issuers. They also undertake the challenge of solving the financial reporting treatment of issuers concerning the disclosure and recognition measurement of tax positions that are uncertain (Leuz and Wysocki 2016). IAASA is concerned with the powers for responding appropriately in event of any suspected infringement. Limitation of international regulations: IAASA does not have any statutory role in operating a system of final appeal that is taken by facilitation of individual complaints resolution taken by PAB. One of the limitations of international regulation is its inflexibility in the face of changed circumstances (Gao et al. 2017). It is desirable to alter the tools of regime and mandates in the event of changed circumstances but there is high likelihood of holdouts. It is for this reason international regulation should incorporate broad norms and standard. The failure of regulation of financial reporting is generally associated with fundamental problems of disclosure regulations. Failure of regulation of financial reporting might be attributable to the wrong disclosures made by firms. It is certainly possible that firms cam make disclosures in addition to those required by standard setters. Disclosure of information that is considered relevant to investors can be argued in terms of having no excuse. Firms are required to take something if they think they are making wrong disclosures. If people as regard disclosures as wrong leaded systematically by standards, then it is suggestive of the fact that expectations of people have been misguided or that there is defection in process of setting standard. In order for investors to provide with the better segmental information is the most insistent and long-standing demand for generating more information. The reason that information is never disclosed to the extent is that it would impose propr ietary cost as some users like it to be commercially sensitive (Hombach and Sellhorn 2017). However, it is not possible to make comprehensive specification of what should be disclosed by firm, as the range of information that is potentially relevant is limitless. Analysis of key topics covered in IAASAs 2013: Impairment testing- Under this particular topic, the underlying cash flow forecast forms the basis of assets value that are recognized in the financial statements. In this regard, directors could face challenge when monitoring appropriateness of certain value of assets recognized in the financial statements and underlying forecast of cash flow. Therefore, it is required by issuers to have a robust cash flow forecasting models and methodologies and they should be calibrated and refined to reflect current conditions. The projections of cash flow are based on supportable and reasonable assumptions that are representative of best estimate by management of reporting entity (Nobes 2014). There exists possibility of making inappropriate assumptions that might lead to misstating of financial statements. Forbearance measures- For financial institutions, forbearance measure is one specific area of interest and such measure also affects non-financial institutions having considerable amount of forbearance activities. Financial institutions of Ireland have considerable level of loans subjected to forbearance measures. For the users of financial statements, risk disclosures attributable to loans are subjected to forbearance measures. The ability of users to understand the differences between forborne and non-forborne loans should not be limited by financial statements risk disclosures (Kirwan and Pierce 2017).Disclosures related to forbearance risks should enable the users to understand the associated with such loans and type of forbearance measures that are adopted by reporting entity. Deferred tax assets- Deferred tax assets that arise from unused tax losses to the extent that entities expect to have future taxable profits should be recognized on the balance sheet. However, the determination of taxable profits is done based on forecast of future events that are highly subjective and it is required to exercise significant judgment. Assumptions that are made in determining future taxable profits should reflect issuers particular circumstances and must be realistic. In this regard, it is required by reporting entity to make disclosure of the amount of deferred tax assets in the notes to financial statements. If the assumptions are not realistic, then there could be misstatement of financial informations presented in the financial statement (Hombach and Sellhorn 2017). Provisions- In this area, company are provided details on level of information that should be disclosed. Disclosures of all information by reporting entity have the likelihood of creating detrimental impact on entitys position in event of dispute with other parties. It is required by entity in such case to make general disclosure of the dispute by stating the fact and reason of not disclosing the information. It would be required by reporting entity to ensure that there are appropriate measurement bases and recognition criteria that are applied to provisions. In order for users to understand the timing, nature and amount of contingent liabilities and contingent assets by disclosing it in the notes to financial statements. Values of assets recognized in the financial statements might be manipulated if the loans have been extended forbearance measures as they have lower credit quality leading to uncertain future cash flow (Martins 2017). Pension liabilities- This particular area depicts how the valuation of pension liabilities is done using the discount rate and how it is disclosed and measured by selected companies. This topic focuses in how the issuers of financial statements measures discount rate and whether there has been change in the methodology used for measuring the discount rate. The defined benefits liabilities of users are considerably impacted by any fluctuations in the discount rate that are used for discounting defined benefits obligations (Johnston and Petacchi 2017). Therefore, the judgment used by organization should be critically assessed and examined for avoiding any manipulation of financial statements. Issuers of financial statements should conduct a critical assessment for disclosure and determination of discount rates. Alternative performance measures- For the use of alternative performance measures, recommendations have been issued by IAASA. It is a financial measure of future or historical financial performance, cash flow and financial position. Entities used a variety of interpretations is respect of determining return on capital employed. Variations were also identified in respect of earnings measure of EBITDA (Martnez et al. 2015). It was ascertained that many issuers did not reconcile earning line items of IFRS to the earnings used in EBITDA measures. Measurement and recognition of deferred tax assets: While recognizing deferred tax assets in the balance sheet of reporting entity, entities uses deferred tax losses that can be utilized by entities against the future taxable profits. Such future taxable profits are forecasted value that is based on future events. This calls for making realistic and reasonable assumptions. A high threshold is imposed on issuers if the entities have history of recent losses. It is possible that for recovering deferred tax assets, supportable evidences should be provided by issuers about the availability of future taxable profits. However, reporting entity might not appropriately determine the forecasted value and realistic assumptions. The fact that entities would have taxable profits before the unused tax credits and unused tax losses is not probable (Hughes 2017). If the entity does not have any proper tax planning authorities for creating taxable profits. All these might lead to abuse of this area by reporting entity. The economic outlook for value in use calculations in impairment testing has remained uncertain. However, there have been improvements in the prospects of some issuers. Under this area, the value of assets recognized in the financial statements is determined based on forecast of cash flow. Directors of issuers face challenge for monitoring the appropriateness certain value of assets and there might not be robust methodologies and model of cash flow forecasting. If the values of assets were not appropriately determined, then it would indicate that such assets do not reflect true economic conditions. Financial reporting by entities if the assumptions of calculation of value in use are not consistent with the assumptions that are made elsewhere in the financial statements. If the cash flow forecast does not reflect expectations about possible variations in the timing and amount of future cash flow. Abuse of financial reporting in determination of assets value might also be related to re liability of cash flow projections over a period longer than five years (Gao et al. 2017). Questions might be raised about how the issuers have forecasted cash flows over the longer period. Therefore, failure of financial reporting can be experienced in terms of assumptions, methodology and model reliability. Conclusion: The report is prepared for explaining the roles and responsibilities of IAASA at local and international level. It was ascertained that the independent body has the responsibility of promoting and inspecting improvements in audit quality along with enforcement and examination of financial reporting of listed entities. However, there are limitations of international regulations in terms of their inflexibility to adapt to changing environment. Analysis of the reports on assessment of financial reporting by entities detected an improvement in risk disclosures and fair value quality by the financial report issuers. It is required by issuers of financial statements to make improvement in the quality by engaging with relevant service providers such as pricing vendors and investment managers in the process of planning the annual statements preparation. 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