Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
ICMAP SURVEY ON “IMPACT OF IFRS APPLICATION ON MANAGEMENT ACCOUNTING CONCEPTS / PRINCIPLES” The ICMAP Research Department is carrying out a brief survey on the “Impact of IFRS Application on Management Accounting Concepts/ Principles” and for this purpose it seeks valuable professional input from our members, especially those working in business and industry. The feedback so received from the members would be analyzed, compiled and presented in shape of a “Survey Report”. The members are therefore, encouraged to participate in the survey and furnish us their expert opinion/ views on this important subject. Please fill-up and send it to Deputy Director Research on email : [email protected] Mushtaq Madraswala Executive Director (1) Historical Cost Accounting vs. Fair Value Accounting Under the IFRS, the “historical cost” concept has been abandoned and replaced by a “current cost” system for a more accurate financial reporting. IASB and other international standard setters have begun to prefer the use of “fair value” accounting over “historical cost” accounting in financial reporting. A key reason for this shift in methodology is to improve the relevancy of the information contained in financial reports. The “Fair Value’ concept is applied in several IASB standards, such as: IAS 16 IAS 37 IAS 38 IAS 39 IAS 40 IAS 41 IFRS 2 IFRS 3 - Property, Plant and Equipment; - Provisions, Contingent Assets and Contingent Liabilities; - Intangible Assets; - Financial Instruments; - Investment Properties; - Agriculture; - Share-based Payment; and - Business Combinations Question – (1) Do you think that valuing assets based on current cost (instead of historical cost) would have any impact on the costs of raw material, finished goods and overheads? [ Yes ] (Please expand this box if your reply is lengthy) [ No ] (2) Question – (2) Do you think that valuing assets based on current cost (instead of historical cost) would have any impact on the “Cost of Production”? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) (2) LIFO vs. FIFO and Average Methods of Inventory Valuation Under the IFRS, the “LIFO” method of inventory valuation is not allowed and instead “FIFO” or “Weighted Average (WA)” method is preferred for use. The FIFO or WA method is to be used for general inventory valuation whereas for specific inventory, the valuation is to be done separately, on an individual basis. IAS 2 requires the cost for items that are (a) not interchangeable or (b) have been segregated for specific contracts, to be determined on an individual item basis. The cost of other items of inventory used is assigned by using FIFO or the weighted average cost formula. Question – (3) Do you think that change in inventory valuation method from LIFO to FIFO or Weighted Average would have any impact on ‘current assets” account in Balance Sheet, and “net income” in Income Statement ? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) Question – (4) Do you think that change in inventory valuation method from LIFO to FIFO or Weighted Average would have any impact on the “Cost of Good Sold / Cost of Sales” and Profitability of the company? [ Yes ] (Please expand this box if your reply is lengthy) [ No ] (3) (3) Integration of Management Accounting System with MIS As conversion to IFRS require major changes to the Management Information Systems (MIS), it is therefore important that the “management accounting” requirements be integrated into this transformation process. As such, there is a leading role for Management Accountants in IFRS conversion planning and implementation, so as to ensure proper integration of control and performance metrics, as well as data effectiveness. Thus management accounting systems must be adapted to support the financial accounting side of IFRS while also delivering best practices for the analytical data required for internal controls, performance management and strategic planning. This presents an opportunity to examine the metrics currently used within the organizations and the methods used to derive them. Question – (5) Do you agree with the above viewpoint that management accounting requirements need to be integrated with the MIS under IFRS conversion process? Do you foresee any role for Management Accountants? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) Question – (6) Do you think that a Management Accountant has a possible role in conducting an “Impact Assessment” to analyze the anticipated changes (as a result of IFRS application) to measurement bases of relevant statement items, including current assets, current liabilities, revenue, cost of goods sold etc? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) (4) Convergence of Financial and Management Accounting, Leading to Integrated Management Accounting System (MAS) A wide transition to IFRS-based financial accounting has been witnessed during last decade in the European Union (EU) and other countries. Many companies have set up their ‘Management Accounting Systems (MAS)” using a financial accounting database, which often is termed as an ‘integrated MAS’. On the other hand, there are also companies which are still in the transition process to integrated MAS. (4) Question – (7) Did your company implement an ‘Integrated MAS’ in the course of IFRS application / conversion? (Please tick in relevant box) [Yes] An integrated MAS has been implemented / completed [No] We are currently planning / implementing an integrated MAS [No] We have a separate MAS and have no plan to implement integrated MAS (Please expand this box if your reply is lengthy) (5) Management Accountant’s Role as ‘Information Provider’ for Financial Valuation Purposes Under IFRS, Management Accountants also have to provide information to financial accountants on regular basis. IFRS depends much on internal “Management Accounting System (MAS) information, for disclosure as well as for valuation purposes. This underlying accounting principle denotes a ‘management approach” with reference to IAS14/ IFRS8, but it can also be found in other standards e.g. IAS11, IAS16, IAS36/IFRS3 or IAS38 mainly concerned with internal reporting information, not reflected in financial accounting system. IFRS 8 on ‘Operating Segments’ is a disclosure standard replacing IAS 14 Segment Reporting. It introduces the "management-approach", which means that segments definition and information used for segment reporting is based on information prepared for internal management decisions. IFRS 8 has no implication on reported profit or loss; it is a pure disclosure standard. However, segment information is a highly relevant source for users of financial statements to get a better understanding of the overall performance of a company. Question – (8) Do you think that the Management Accountants’ role is changing under IFRS as Information Provider to Financial Accountants for disclosure or valuation purposes? [ Yes ] (Please expand this box if your reply is lengthy) [ No ] (5) Question – (9) Do you agree that the ‘management approach’ as provided in different IASs / IFRSs have any relevance to the management accounting principles? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) Question – (10) Do you think that different costing methods viz. Activity based Costing (ABC), Target Costing, Standard Costing, Marginal Costing etc, would also have impact from IFRS application? [ Yes ] [ No ] (Please expand this box if your reply is lengthy) END OF SURVEY Respondent’s Name : ICMAP Membership # : Telephone / Mobile # :