International Accounting Standards Board - Example

Case study 2 Name Date Course Introduction A lot of fundamental changes have taken place as a result of the liberalization of the economy. This includes the aspects or accounting. The reporting system in accounting has also experienced a lot of changes. The public companies are required to provide an annual financial report that is mainly based on the accounting process (Ball & Grubnic, 2008). This has generated a lot of controversies due to the lack of clear definitions when it comes to some assets. The classification of the natural assets has generated a lot of controversies in during the reporting process. Organizations that manage the natural resources are increasingly finding it difficult to develop their financial reports due to the dilemma involved in the differentiation of the natural assets from the economic assets. The use of the term asset in reporting is also controversial and there seems to be difficulties in differentiating the natural from the economic assets (Cooper & Owen, 2007). The Great Barrier Reef is one of the assets that have generated controversies during the reporting process. In accounting, the reporting of the Great Barrier Reef is a challenge as there is a dilemma regarding whether it is a natural or economic asset. The paper thus discusses controversies in the definition of an asset in relation to the Great Barrier Reef. Discussion According to the International Accounting Standards Board (IASB), an asset has to meet the laid definition. IASB defines an asset as resource that is controlled by the entity resulting from the past events and from which future economic benefits are expected to flow to the entity (International Accounting Standards Board, 2010). This definition mainly focuses on the asset in terms of its control as opposed to the ownership. Based on the definition, some of the assets may not qualify for recognition due to the issues associated with the control. Heritage, Cultural and Community Assets (HCA), is comprised of both the tangible as well as the intangible components of economic, social, cultural and natural capacity of the public sector entities. The Great Barrier Reef is one of the Heritage, Cultural and Community Assets. Based on the definition of an asset by IASB, the Great Barrier Reef can be clearly defined as an asset. This is because it is a tourism attraction site and it will continue to be so based on the available plans by the government and Ministry of Tourism. As a result of this, it is expected that it will continue to generate revenue in future. Queensland Tourism Council has indicated that it has put in place measures to ensure that it continues to benefit financially from the Great Reef Barrier in future. This is therefore a clear indication that the Great Barrier Reef can be defined as an asset based on IASB definition. IASB definition however lacks some aspects associated with tangible and intangible components (El-Tawy & Abdel-Kader, 2013). The Great Coral Reef apart from the direct economic benefits that it generates also creates other intangible values that impact positively on the revenue generation. The Great Barrier Reef is considered a national identity in Australia due to its uniqueness. Its uniqueness and ability to create a national identity is intangible. Despite being intangible it has great benefits to the community as well as the country. This is an important component of HCA that has not been clearly identified by the accounting definitions. It therefore creates concern regarding the aspects related to the intangible assets (Herrmann, Saudagaran & Thomas, 2006). The intangible assets that contribute the generation of revenue should therefore be included in the broader definition of an asset in accounting. This means that a definitive or legal definition of HCA should be developed in order to capture the aspects of intangible assets. The presence of such a definition will also play an essential role in eliminating the confusions associated with the differentiation of natural from economic assets (West & Carnegie, 2010). The Great Reef Barrier as a tangible asset has several benefits to the community as well as the members of the public. This is an indication that the current definition does not consider some of the aspects that may ensure that the assets are recognized from an accounting perspective. In some of the media reports, the natural assets are only restricted to assets that are tangible which is not the case. The lack of a clear definition is thus responsible for the confusions. Some of the assets generate values but do not necessarily have the direct links to the economic aspects and this also makes it difficult to make definitions (El-Tawy & Tollington, 2013). The Great Reef Barrier also has some cultural aspects that contribute to value generation. However, due to the lack of clear definition of HCA, this important aspect may end up being lost. The definition of assets in accordance with IASB therefore leaves out some of the resources that till generate value though difficult to measure in terms of the economic terms. It is for this reason that there exist considerable differences during reporting when it comes to the natural and economic assets. In other instances some of the resources are not controlled by entities. This is common when it comes to the intangible assets that are not controlled by some of the entities. The lack of a standard definition is therefore bound to create confusions during the reporting process (Warren & Young, 2011). There is also confusion when reporting about the Great Reef Barrier. Some of the media outlets considered it a natural resource while other outlets consider it an economic resource. This means that a clear definition is required in order to make a clear definition. The misconceptions in the media regarding the Great Reef Barrier can also be avoided in the presence of a clear and inclusive definition. The presence of a definition will ensure that the arguments and misconceptions about Great Reef Barrier are eliminated. This is considering that some argue the Great Reef Barrier is not an asset. In most of the media reports, there is a tendency to indicate that the economic assets generates monetary value while the natural assets do not necessary generate monetary value. This is however not the case when it comes to the Great Reef Barrier. Despite being a natural resource it is also generates a lot of revenue that qualifies it to be considered as an asset. Additional information about the definition of the asset is an important in ensuring that confusions are eliminated. This will be useful in terms of ensuring that the reporting by the HCA is carried out in an accurate manner. Reporting the aspects of that involve the cultural values can be enhanced through the use of additional information. From an accounting point of view, the presence of a clear definition regarding HCA will also enhance the reporting process (Post & Preston, 2012). This will broaden the scope of the assets that will have to be included in the financial statements. The tangible as well as the intangible measure of value can therefore be enhanced through the presence of a wider definition of assets. This will also improve on the reporting of the Great Reef Barrier. The intangible aspects such as number of visitors as well as the approval rating can be reported as part of a financial statement. This will provide more information to the stakeholders in terms of determining the performance. Reporting as well as accountability can be improved in the presence of a clear definition (Jiang & Penman, 2013). Conclusion In conclusion, it is evident that the Great Reef Barrier is an asset based on IASB definition. Some components are however not clear in the definition and this involves the intangible assets. The accountants should consider the intangible assets in the definition in order to make a clear distinction between the natural and economic assets. It is evident that the lack of a clear distinction and definition mainly affects the HCA. It is evident that more information will also enhance the reporting on the media. Bibliography Ball, A & Grubnic, S 2008. ‘Sustainability accounting and accountability in the public sector’, in Unerman, J, Bebbington, J & O’Dwyer, B, Sustainability Accounting and Accountability, Routledge, Abingdon, UK, pp243-265. 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