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Implement International Accounting Standards by 1 January 2005 in Australia.

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Table Of Contents Abstract 2 Introduction 3 Proposed Structure by 2005 4 Treatment of Goodwill under AASB 5 Treatment of Goodwill under IAS 7 Comparison of treatment of Goodwill under the Australian and International Accounting Standards. 8 Treatment best for Australian Companies 9 Abbreviation 13 Fair value 13 Goodwill 13 Identifiable assets 13 Purchase consideration 13 Unidentifiable assets 13 Appendix 14 One 14 Abstract As we know, Australia is going to harmonies its standards with International Accounting Standards (IASC); as a result the Australian standards will automatically compliance with IASC Standards. Harmonizing would not lead to lessen in quality of Australian standards, but rather formulate Australian standards more internationally recognized. At present the International accounting standard board planning to change nearly half of its standards and these changes are come into force in Australia on 1st of January 2005. The changes, enclosed in the IASB enhancement project and in its amendments to standards on financial instruments, which will defiantly have leading effect on Australian companies. As a result the companies need to take necessary measure Goodwill in business has long been the subject of debate in accounting The main issue raised in the this paper regarding Treatment of goodwill under both the standards AASB1013 (Australian standard) and IAS 38 (International standard) and both the standards has different approach in treatment of goodwill. As the harmonization process is in progress and hence the Australian standard has to be compliance with International Standard therefore it is a burning topic for companies and in corporate world in Australia. At present under AASB 1013 the companies amortize goodwill over a maximum of 20 years but under the International standard IAS36 the treatment of goodwill is quite different manner. Under IAS36 there is no need to amortize such goodwill because we can not judge the life of Goodwill and it may go further 20 years time frame hence IAS36 has quite different approach to the treatment of goodwill. ...read more.


also acquire at the cost of: $75,000 The Exposure draft on Accounting for goodwill In Australia was issued in early 80s i.e. May 1983 which was consequently improved and issued as Australian Accounting standard as AAS18.This AAS18 was issued on March 1984 but before this standard there is very modest regulation or guidance for the treatment of goodwill in Australia and at that time goodwill is treated as fixed assets. In the past goodwill was treated in many ways: goodwill is written off completely against reserve or profit immediately or it is separately deducted from shareholders equity. [3] According to AASB 1013 goodwill is treated as asset only if it satisfies the following criteria of assets. i.e. (a) It is probable that the future benefits embodied in the Unidentifiable assets will eventuate; and (b) It possesses a cost or other value that can be measured Reliably. [4] AAS18 also states that goodwill that comprises the future benefits from unidentifiable assets because of its nature and it is not usually recorded separately in the accounts. The Accounting standard AASB1013 also classify between the internally generated and purchased goodwill and how these goodwill are treated. As both purchased and internally generated goodwill give rise to economic benefits, which is the one of the criteria of recognizing the asset but only purchase goodwill is recognized as an asset. 'This is principally because of the difficulty, or impossibility, of identifying the events or transactions, which contribute to the overall goodwill of the entity. Even if these were identifiable, the extent to which they generate future benefits and the value of such benefits are not usually capable of being measured reliably. Internally generated goodwill, which is not recognized as an asset will either go completely unrecognized or will be recognized as an expense."[5] And another reason is a management can manipulate the internally generated goodwill because it is in the control of the management of the entity. ...read more.


After analysis of181 Australian public companies financial statement it can be noted that there is nothing-positive consequence that IAS38 brings to Australian businesses (See appendix 1). There is quite a no of difference in Australian environment and the practices in treating and reporting of Goodwill from internationally environment in respect of Valuation of asset, Test of recoverable amount and historical cost framework. It seems incompatibility of IAS 38 in regards to Australian practice because of following reason: If we look at taxation point of view Amortization of goodwill is tax deductible in the in many European countries and as well as in US, where as amortization is not tax deductible in Australia. Therefore its economic impact on companies is enormous. The fundamental problem in accounting for intangible assets is the conflict of opinion between the historical cost and the mark-to-market approach. The Standard setting is presently leaning towards mark-to-market approach, whereas IAS 38 is clearly subjective towards the historical cost approach hence if Australian Corporate world adopt market-to-market approach mean there is need of independent valuations on each reporting date and recording increases and decreases in value directly into the results for the period as a result there is no requirement of amortization. Therefore it can be said that current Australian practice AASB1013 is better for Australian companies in the treatment of goodwill after looking at different point of views and after the review of both AASB1013&IAS38 but at the same time I can say in long term, as globalization is going around the world and hence it is compulsory for Australian companies to formulate there account which is widely acceptable and brings many benefits like (fund raising, listing of share, and world wide accepted) accounting practice. "Picker says the firm is undertaking a study to determine whether the contents of IAS 38, if implemented in Australia, would be contrary to the national interest."[12] "Paul Phenix, says: "This latest standard is difficult, and it has always been realised that it is difficult. Australia is further down the road on intangibles than other countries. ...read more.

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