Several international legal systems are based on approaches derived from principles. Practically, the FRC supported the adoption process because of the indication towards lessening of information costs. Following the accounting processes under International Accounting Standards is accompanied by the cost reduction. Adoption of the international standards would also enhance efficiency within the Australian capital market through capital flow into the market. Enhancement of market efficiency would be possible because through the adoption, the nations would be able to set internationally accepted, competent quality, equivalent and apparent standards of accounting.
Although there are considerable benefits associated with the adoption of international standards of accounting, there are also various potential barriers that hinder proper implementation of the International Accounting Standards all around the world. Cultural factor is also among those potential barriers to the standards’ adoption. The propensity to restrict the implementation primarily prevails among the businesses which are conducted locally inclusive of the small and medium enterprises. This is due to the existence of strong cultural and regional values among the people within the firms. For completely implementing the international accounting standards, it is the most significant to educate the firm’s auditors and accountants about the processes to be followed. Due to the cultural resistance to international adoption, the entire implementation process gets hampered. Cultural barriers impact the way that the financial statements are overviewed. Adoption of international standards would require evaluation of financials based on concepts. Pertaining to the cultural beliefs, a massive expense incurred due to a day-off because of regional program might not be considered to be harmful. A number of day-offs would at times lead to prevalence of huge imbalance in financial statements (Sawani, 2006). Answer to Question No 1 b From January 1, 2005, the units operating under the Corporations Act (2001) of Australia were required to frame and present their respective financial statements as per the standards being followed in the International Accounting Standards Board. Although Australia was boosting up towards harmonizing its standards as per the international ones, after the comprehensive adoption, the transformation process would make various business aspects to change. As regards to the practices within financial reporting, reported results of the Australian firms had to be presented in a changed way and also the adoption affected compensation based on performance. Apart from these general transitions, the acknowledgment and measurements of the firms’ assets and liabilities also were affected. To name a few, various financial instruments were to be recorded within the financial statements as per their fair values. This change even resulted in classification of instruments as debts which were previously classified as equities. Amortisation of goodwill