Financial Instrument Disclosure in Industry †MyAssignmenthelp.com

Question: Discuss about the Financial Instrument Disclosure in Industry. Answer: Introduction Australian Accounting standards are accounting standards that are set by the Australian Accounting Standards Board (AASB) which is in charge of formulating and maintaining accounting standards in Australian (Azoor-Hughes, 2011). The AASB is an independent standard setter and has its headquarters in Melbourne. The AASB continuously develop high quality management and understandable accounting standards in the best interests of the public. The standards are required to have transparent and comparable information in the general purpose of financial statement. The AASB 9 is set to replace AASB 139 starting 1 January 2018. The following write up will briefly outline the AASB 9 and AASB 139 accounting standards. It will also discuss the importance of AASB 9 and it difference with AASB 139. The AASB 9 was developed in 2009 to replace AASB 139 which was adopted in 1 January 2006. The AASB 139 Financial Instruments was developed in recognize and measure financial liabilities and assets management. These standards of accounting had several shortcomings on it adoption that led to development of AASB 9. The AASB 9 Financial Instruments was developed in 2009 where several amendments have been made over the years. The AASB 9 was amended in 2010, 2013 and 2014. The AASB 9 contains all amended that have been made in Financial Instruments in recognizing and measuring financial liabilities and financial assets. Therefore, AASB 9 is an amendment of AASB 139 to provide a more concise and understandable classification, recognition, and measurement of financial liabilities and financial assets in financial statement when preparing annual reports. First, AASB 9 will introduce flexibility in the accounting standards when undertaking hedge accounting. The AASB 9 provides entity stakeholders to make decisions when handling range of activities that are risky. Secondly, AASB 9 classifies financial assets and liabilities in categories that make it easier to calculate and measure these items in financial statements (Jin, Shan, Taylor, 2015). This also enables the calculations of provisions for impairments. First, there are only two categories of financial assets in AASB 9 as opposed to four categories in AASB 139.; Previously, the financial categories included; fair value through profit or loss, loans and receivables, held to mature and available for sale financial assets. The AASB has amortized cost and fair value categories of financial assets. The financial assets will be classified based on the characteristics of contractual cash flow and objective of the organizations business model that has been outlined to manage financial assets (AASB, 2014). This change in the AASB has an impact on the accounting for financial investment. Secondly, AASB 9 permits irrevocable of elections to initial; recognitions to show losses and gains on investments to equity instruments. This has to be done when not trading with another comprehensive income. This accounting standard will require dividends from the investment to be recognized as loss or profit and there is no impairment (AASB, 2015). This is different from AASB 139 Third, AASB 9 requires financial assets to be designated and be measured at fair value. This is done through loss or profit at initial recognition. These changes will eliminate or reduce recognition or measurement management inconsistency that occurs when measuring liabilities or assets, or recognition of losses and gains from financial assets (Birt, Rankin, Song, 2013). Conclusion AASB 9 is an amendment of AASB 139 that seeks to improve the accounting standards in the Australian accounting system for financial reporting. AASB 9 contains changes on classifications, measurement, and calculations of different financial assets in financial statements. AASB 9 has also introduced flexibility in hedge accounting. The changes made in AASB 9 will enable users of financial information to make informed decision as a result of consistent and understandable financial information from financial reports. References Azoor-Hughes, D. (2011). The next wave of financial reporting changes:[In 2012, directors will have to prepare for another wave of accounting changes.]. Company Director, 27(11), 34. AASB, C. A. S. (2015). Investments in Associates and Joint Ventures. AASB, C. A. S. (2014). Financial Instruments. Project Summary. Birt, J., Rankin, M., Song, C. L. (2013). Derivatives use and financial instrument disclosure in the extractives industry. Accounting Finance, 53(1), 55-83. Jin, K., Shan, Y., Taylor, S. (2015). Matching between revenues and expenses and the adoption of International Financial Reporting Standards. Pacific-Basin Finance Journal, 35, 90-107.