201860 ACC518 Assignment 2 Question2

Answering Q2The purpose of Q2 is to demonstrate that you can review an upcoming accounting standard and provide a report to the partners of the accounting firm you work for. The report should outline the key elements of the upcoming standard, the opinions of other industry stakeholders, and the implications of the new standard for the firm.

A well-designed answer that addresses the specific aspects of marking rubric will:a) Present as a report to the partners of the firm.

Introductionb) Outline of major issues covered in the exposure draft.c) Description of issues where there is agreement/disagreement between the parties who

have written comment letters. Include a copy of each of four Comment Letters

d) Assessment as to whether the authors of the Comment Letters are utilising the arguments 'for' or 'against' regulation in their views

e) Application of each of the theories of regulation (public interest, private interest and capture) to the Comment Letters and a justification as to which theory best explains the comments.

f) Critically evaluate the underlying assumptions and assumptions of the theories of regulation, in particular, with regard to their application to the issues identified in the Exposure Draft and Comment Letters.

The Guidance outlines a range of relevant literature. First read through the literature in order to gain a greater understanding of the issues being analysed by your paper, then paraphrase your understanding of the concept or issue in your own words.

201860 ACC518 Assignment 2 Guidance: Academic References has been loaded into the 201860 ACC518 Assignment 2 folder in Student Resources on Interact; it contains links to the various publications, relevant APA referencing information for each publication, as well as referencing information for the other prescribed readings (including Deegan).

This guidance is based on the Post-implementation Review of IFRS 13 Fair Value Measurement.

The primary document is a Request for Information (RFI). Stakeholders are invited to respond to a series of questions as outlined in the RFI.

A brief contextThe following is an outline of the Post-Implementation Review project for IFRS 13.

The text is drawn from the IFRS website: IFRS13 2018a (see 201860 ACC518 Assignment 2 Guidance: Academic References

for the link to the webpage and method for referencing the site)

Current stage The Board is examining the effect of IFRS 13 Fair Value Measurement on financial reporting. IFRS 13 came into effect in 2013, introducing a framework for measuring fair value.

On 22 May 2017 the Board published a Request for Information. That document and its comment letters can be accessed from the consultation feedback tab.

About The International Accounting Standards Board (Board) carries out a Post-implementation Review (PIR) of each new IFRS Standard or major amendment, generally 30–36 months after companies are first required to apply it.

IFRS 13 Fair Value Measurement defines fair value, sets out a framework for measuring fair value and requires disclosures about fair value measurements. Companies were required to begin applying IFRS 13 in annual reporting periods beginning on or after 1 January 2013.

The Board's aim in issuing the Standard was to reduce complexity and improve consistency and transparency in the application of fair value measurement principles. In achieving these aims, IFRS 13 would reduce costs for companies and improve the information presented to investors to help them assess the financial positions and performances of companies.

The Board has published a Request for Information on IFRS 13, focusing on the following areas: disclosures about fair value measurements, prioritising Level 1 inputs or the unit of account, application of the concept of the highest and best use when measuring the fair value of non-financial assets, and application of judgement in specific areas.

The Board will also review relevant literature and may also conduct surveys and other outreach.

Published documentsRequest for Information: Post-implementation Review of IFRS 13 Fair Value Measurement

IFRS13 2017a

In terms of the standard-setting process, the published document: Request for Information: Post-implementation Review of IFRS 13 Fair Value Measurement is the equivalent of an Exposure Draft. This is the document that will draw Comment Letters from respondents, and as such, it is the focus of this Guidance.

Consultation feedback Documents in this section are consultative documents published during the lifecycle of this project. They include comment letter feedback, fieldwork summaries, outreach information and other consultative material.

IFRS13 2018b

ConsultationThe International Accounting Standards Board (the Board) has issued a request for stakeholders to tell the Board about their experience with the accounting standard that explains how to measure the ‘fair value’ of assets and liabilities, IFRS 13. The aim is to check whether the Standard meets its objectives.

This request is part of the Board’s Post-implementation Review (PIR) of IFRS 13 Fair Value Measurement. The objective of a PIR is to assess whether an accounting standard works as intended and achieves its objectives. This assessment involves analysing how the requirements in the standard affect investors, companies and auditors. The PIR also helps detect areas of a standard that may present challenges that could result in inconsistent application of the requirements.

The PIR of IFRS 13 consists of two phases. In the first phase, the Board identified topics for further analysis in the second phase. The second phase starts with a Request for Information (RFI) published today, and focuses on:

Disclosures about fair value measurements; Further information about measuring quoted investments in subsidiaries, joint ventures and

associates at fair value; Application of the concept of the ‘highest and best use’ when measuring the fair value of non-

financial assets; and Application of judgement.

In addition, this RFI explores whether there is a need for further guidance on measuring the fair value of biological assets and unquoted equity instruments.

IFRS 13 defines fair value and sets out, in a single IFRS Standard, how fair value should be measured and which disclosures are required about fair value measurements. The Standard was issued in May 2011 and became effective from 1 January 2013.

Deadline for submission: 22 September 2017

View the Comment LettersComment letters are public and all comment letters received on the due process document can be accessed below.

This reference leads to the link for the Comment Letters. IFRS13 2018c

Project HistoryNext milestone

Due: Q4 2018Feedback Statement

Period: May 2017 - Jan 2018Request for Information Feedback

May 2017Request for Information: Post-implementation Review of IFRS 13 Fair Value Measurement

IFRS13 2017a

Jan 2018AP7E: Feedback summary: Request for Information on IFRS 13 Post-implementation Review

IFRS13 2018d

Your paperFirst of all, consider the presentation of this assessment. A well-designed answer will incorporate the following sections:

a. Present as a report to the partners of the firm 50 words Introduction:

Your paper is meant for the partners to read, so when you do your analysis of the article, write your response to them. Begin your paper with an introductory paragraph of around 50 words that outlines what your paper will be presenting; write the introduction to the CEO...

Here is a template for to use; you need to add in the specific details:

Attention: the partnersThe following report is an analysis of a post-implementation review of a current accounting standard... Make sure you define the Post-implementation Review of IFRS 13 Fair Value Measurement, refer to it by name, and reference it correctly. Do not assume that the reader knows this information.First, an outline is given of the major issues covered in the Request for Information (RFI) document; next an outline is given of the views presented in the comments letters which highlight the areas of agreement and disagreement with the RFI document; then an assessment is given as to whether the comments letters can be interpreted as being 'for' or 'against' regulation; and finally, an application is given of the theories of regulation to the comments letters.

b. Outline of major issues covered in the RFI document. ≈200 words

The RFI document is best understood within the context of IASB’s standard setting process...

The following image and text are drawn from the IFRS website: IFRS 2018d IFRS 2018e IFRS 2018f

Post-implementation ReviewsThe Board carries out a Post-implementation Review (PIR) of each new IFRS Standard or major amendment. A PIR is an opportunity for the Board to assess the effect of the new requirements of an IFRS Standard on investors, preparers and auditors. In undertaking a PIR the Board:

Considers important or contentious issues in the development of the IFRS Standard; Considers issues that have come to the Board’s attention since issue; and Identifies areas where unexpected costs or implementation problems were encountered.

The Board normally begins a PIR after the IFRS Standard has been implemented for two years internationally, which is generally about 30-36 months after the effective date. The first phase of a PIR involves the initial assessment of the matters to be examined. The Board consults publicly on the matters identified in the first phase of the PIR. It also reviews relevant academic studies and other reports and may also conduct surveys and other outreach including issuing an RFI document.

At the end of the PIR the Board publishes a Report and Feedback Statement summarising its findings, and sets out the steps it plans to take, if any, as a result of the PIR. The next steps may result in a research, standard-setting or maintenance project, depending on the nature of the topic and the evidence provided by the PIR.

The RFI for the Post-implementation Review of IFRS 13 Fair Value Measurement identifies four key areas of focus:

IFRS13 2017a p.7: The focus of this RFI

o Disclosures about fair value measurements. To gain a deeper understanding of both users’ and preparers’ perspectives on the usefulness of

fair value measurement disclosures.o Prioritising Level 1 inputs or the unit of account.

To further assess the extent and effect of the issue as well as current practice.o Application of the concept of the highest and best use when measuring the fair value of

non-financial assets. To better understand the challenges when applying this concept, and to assess how pervasive it

is and whether further support could be helpful.o Application of judgement in specific areas.

To assess the challenges in applying judgements in specific areas and whether further support could be helpful.

Read through the relevant sections of the RFI and then outline the major issues in your own words. Take note of the questions that are included in each section; the questions have been published in the RFI so that interested stakeholders can respond with their comments:

IFRS13 2017a: pp.10-11:Fair value measurement disclosurespp.12-13: Prioritising Level 1 inputs or the unit of accountpp.13-14: Application of highest or best use for non-financial assetspp.14-15: Applying judgements required for fair value measurements

At this point, it is critical that you relate the questions in the RFI to the current standard. In Australia this standard is AASB 13 Fair Value Measurement, which incorporates IFRS 13 Fair Value Measurement issued by the IASB.

AASB13 2015: pp.16-19: Disclosurepp.14-16: Fair value hierarchypp.8-9: Application to non-financial assets-Highest and best usep.17: s73: Applying judgement; pp.23-24: Valuation techniques

Again, the key here is to read through the various resources and then to paraphrase the content in your own words. So, using all the above, outline the major issues covered in the RFI in approximately 200 words.

c. Description of issues where there is agreement/disagreement between the parties who have written comment letters. ≈300 words

This section requires that you review a number of Comment Letters that were submitted by respondents to the Post-implementation Review IFRS 13 Fair Value Measurement Request for Information.

Include a copy of four selected Comment Letters.

The link in 201860 ACC518 Assignment 2 Guidance: Academic References contains 67 Comment Letters.

You need to select four Comment Letters for analysis. IFRS13 2018c

You must include a copy of each of the four Comment Letters as shown below: -Name the Respondent as a title-Take a screen shot of the Comment Letter from the website and paste a copy into your Word doc. -Format the image: crop, border. -Label and reference the image.

Here is an example of a correctly formatted, labelled and referenced copy of a Comment Letter:

CPA Australia

Figure 2: Post-implementation Review-IFRS 13 Fair Value Measurement-Comment Letter: CPA Australia (Tsahuridu, 2017)

Note that you only need to copy the title page of the Comment Letter, and not the whole letter.

You must repeat this process four times, one for each of the four Comment Letters. Marks will be deducted if you do not correctly format, label and reference all four Comment Letters.Remember: structure, consistency, attention to detail… Show pride in your work.

There is an example of how to reference the Comment Letters in in 201860 ACC518 Assignment 2 Guidance: Academic References. Remember, it's a two stage process: in text and Reference List!

CPA Australia 2017

Now that you have included copies of the Comment Letters, next you must analyse in at least 300 words where there is agreement/disagreement between the parties who have written the Comment Letters.

Consider the respondents' positions regarding the questions proposed in the RFI. Outline if there is agreement or disagreement between the parties who have written the comment letters.

-Do they all agree on each point? -If not, what do they disagree about? -What do you think are the reasons behind the differences? -Are there any observable patterns to their responses? -Think about the organisations. What are their goals? -What do they hope to achieve by submitting a Comment Letter?

For example, look at the CPA Australia Comment Letter. Their response to Question 2-Fair value measurement disclosures (pp.3-4) indicates an opinion that some disclosures are useful, while other disclosures are excessive and unnecessary. Then compare this to the Accounting Standards Board of Japan's Comment Letter. Their response to Question 2 (pp.7-11) is much more detailed and quite specific. Think about this in terms of the above questions when you are writing your answer.

Before writing your answer, you should also review the Feedback Summary document issued by the IASB for the Post-implementation Review of IFRS 13 Fair Value Measurement:

IFRS13 2018d

While this feedback is general in nature, it does provide a more holistic overview of the respondent's comments.

Remember you need to do more than just provide definitions; your answer must demonstrate that you can think critically.

You must complete an analysis of the Comment Letters from four different respondents.

d. Assessment as to whether the authors of the Comments Letters are utilising the arguments 'for' or 'against' regulation in their views. ≈350 words

First outline the arguments 'for' and 'against' regulation:

Deegan, 2014: pp.44-47: The rationale for regulating financial accounting practicep.77: The 'free-market' and the 'pro-regulation' perspectives

Now evaluate whether the respondents to the Post-implementation Review IFRS 13 Fair Value Measurement Request for Information are 'for' or 'against' the existence of regulation. Do this by linking the different aspects of the rationale for regulating financial accounting practice with the comments made by the respondents. Table 3.1 (Deegan, 2014, p.77) is a useful reference point.

-Do the respondents indicate that they believe the Post-implementation Review IFRS 13 Fair Value Measurement is an exercise designed to serve the self-interests of the IASB, that is, that the review is politically motivated ? -Or, do the respondents indicate that the IASB is acting in the public interest?-If the respondents disagree with an element of IFRS 13, is it regulation that they disagree with, or is it the approach that the standard-setter has assumed, that the respondents prefer a different approach within the Standard?

Remember you need to do more than just provide descriptions; your answer must demonstrate that you can think critically.

You must complete an analysis of the Comment Letters from four different respondents.

e. Application of each of the theories of regulation (public interest, private interest and capture) to the comments letters and a justification as to which theory best explains the comments. ≈400 words

First define the three theories of regulation:

Deegan, 2014: pp.79-80: public interest theorypp.80-87: capture theorypp.89-93: private interest theory

Now evaluate whether the comments of the four selected respondents can be explained using the three theories of regulation. Do this by linking the different aspects of the theories to the specific comments of the respondents.

-Are the respondents simply acting in their own private interest? -Or is there evidence of their acting in the public interest in their role as a public or professional organisation e.g. Accounting Standards Board of Japan or CPA Australia? -Finally, is there evidence of the respondents having similar responses, perhaps forming a lobby group in an attempt to influence or capture the regulation process?

Make sure you evaluate all four of your chosen respondents' Comment Letters. Refer to the respondents by name and be specific about which theory best explains their comments. Use examples from their Comment Letters to support your evaluation. And make sure you reference your examples correctly with appropriate in-text references.

Remember you need to do more than just provide descriptions; your answer must demonstrate that you can think critically.

You must complete an analysis of the Comment Letters from four different respondents.

f. Critically evaluate the underlying assumptions and assumptions of the theories of regulation, in particular, with regard to their application to the issues identified in the Exposure Draft and Comment Letters. ≈285 words

The following are some questions and/or statements that can guide your critical evaluation of the theories of regulation. Remember, you are writing this report for the partners of the accounting firm you work for, so use this critical evaluation to provide them with a deeper theoretical understanding of the issues identified in the Post-implementation Review IFRS 13 Fair Value Measurement through your insights, in your own words.

The IASB/IFRS standard-setting process follows a deductive process. As such, it is supposed to be value-free and unbiased.

o Is the IASB merely seeking to serve its own self-interests by pursuing the Post-implementation Review IFRS 13 Fair Value Measurement?

o Does the value-laden and biased input of respondents compromise the purported objectivity of the output?

o Does the focus on the pursuit of private interest by respondents prevail over the public interest goals of the IASB?

o Are powerful and influential lobby-groups able to achieve preferential treatment with regard to securing their vested interests, in effect capturing the regulation process?

Does the Post-implementation Review IFRS 13 Fair Value Measurement reflect the advertised goals of the IASB?