In the recent decades, accountants are facing several changes in the profession due to the rapid shift evident in the market, wherein parallel to opportunity enhancement several issues have also been raised. With these increasing issues, it has become difficult for the accountants to focus on a particular issue and implement measure accordingly. Integrity and accountability are considered to be major issues that need to be addressed by the accountants. The professionals have been looking for reliability, independence and integrity factors in regards to accounting, wherein balancing between company profitability and customers expectation or satisfaction has become a major problem (Hood, 2014).
The article considered for this section is ‘Why Agtech is Australia's next $100 billion industry’, which concentrates on the use of technology in the agriculture industry. In addition, the article also elaborates the issues that are hampering the growth of productivity in Australia and the significance of introducing new agricultural technology to improve the production.
In the coast of Tasmania, there lies a small sensor, which is used to measure the water level, temperature and level of salinity of the ocean. There are other sensors in the area that helps in transmitting the readings with the help of large data collection. The oyster acts as filter by removing impurities from water such as toxins brought by heavy rainfall, which might be hazardous for people. The cost incurred by the industry was about AU$34 million per annum in which the network of sensors are used that belongs to small Australian firm. This sensor network helps to provide actual data, which measures the level of threats to the oyster’s farm all across Tasmania. This enables the oyster farmers to initiate proper decisions based on the accurate information. The oysters could harvest early, which helps to save millions of dollar. The company that provides the network of sensors intends to help the farmers all across Australia in order to increase the production through proper analysis and measurement. It is considered to be one of the six set up case studies, which was outlined in the latest report of Startup AUS’s. The report was co-written by KPMG and assisted by Commonwealth Bank and the government of Queensland, which concentrated on the impact that the technology would make on the Agricultural sector (McCauley, 2016).
It is observed that the agricultural sector is considered to be Australia’s next big industry with the value of AU$100 million. The National Farmers Federation of Australia predicted the rise in the agricultural sector up to double by the year 2030, stating the knock of opportunity. The use of technology would increase the production and is estimated that the demand for food at a global level would increase by almost 60% by the year 2060. In addition, it is believed that the middle class of India and China would be consuming significant amount of food. To ensure a smooth flow of the operations, Australia has built positive relationship in regards to trade with new and emerging markets. This has created an opportunity for developing the technologies, which helps in the growth of economy sector (McCauley, 2016).
The technological development would also help rural parts of Australia to recognize the economic benefits with the implementation of digital technology. Australia has supportive climates, in addition to world-class research facilities, which help the farmers to export their products in an international market. The projected value of the agricultural technology in the global market is estimated to be US$189 billion during the year 2013-2022. This has not only created opportunities for the agricultural sector, but also for technology sector (McCauley, 2016). Australian agricultural sector has made significant change in technological innovation leading to development over a period of time (ABC, 2015). In this regard, it is worth mentioning that the farmers need to realize the value of innovation as well as technology in order to encourage investment for future (Keryn, 2016).
To achieve the desired goal, it is essential to develop the foundation or the base of the domain. AgTech solutions discrete and expose the conditions of Australia, wherein it can be regarded as a support to technological innovation. The development of the technologies mostly includes rural and regional communities, which has create huge impact on Australia as a whole. The technology might also face challenges for which Powering Growth has carried out some discussions with the government, shareholders, startups and investment. The discussions concentrated on the comparison between AgTech space of Australia with other major global companies, wherein it is evident that AgTech lacks in three major areas including capital, direction and connectivity. AgTech provides an opportunity for effective digital technology in order to transform the industry, as it is considered to have strong relationship with the physical world. In this context, it is also believed that the role of technology is considered to be one of the most essential factors in the economic growth of Australia (McCauley, 2016).
From the above article, it has been found that the company is considered to be the next AU$100 billion industry. This is being as the industry had a growth in past years. Various factors are considered while examining an industry. One of the most essential factors that have been the demand constraints relating to the industry as well as growth forecast. It is essential to understand the characteristics of other industries and know about the competitors, if the company is estimated to have shift in share moving forward (Risius, 2007). Farming or agriculture in Australia is considered to be a major contributor for the development of the nation as a whole specifically to the economic growth of Australia. The gross value of the production through agriculture during the year 2009-2010 was estimated to be below $40 billion. The reason for considering a significant growth in the AgTech industry is because of enhancing the inventions and methods that have used for the food production. The inventions include a combination of producing food with the help of new technologies such as header harvester. The farmers of Australia have successfully adopted the changes in the mechanization, grain handling as well as irrigation practices. The increase in the production rate is considered as a result of including changes in the technologies (Commonwealth of Australia, 2016).
Considering the fact, the AgTech industry has huge contribution in changing the techniques, as this has directly boosted the revenue generation of the company as well. Thus, taking the reference from the theoretical understanding, it can be stated that the industry valuation of the company is largely based on the projected reports, strategic priority, financial capability and future potential among others (Commonwealth of Australia, 2016). In this regard, it is apparent that the use of money in innovation a well as research has ensured in making the industry more competitive through which it can successfully gain competitive advantages among other competitors. The increasing availability of sophisticated machineries has made it possible for the farmers as well as the industry to work in a smart way. With the support of technological advancement, the AgTech sector has been able to maintain high profit and steady growth in the domain, which in turn also enhanced investment opportunity in regards to agriculture, forestry and fisheries (Australian Bureau of Statics, 2012).
The AgTech sector is on the rise due to the continuous productivity through constant innovation, which is one the key reasons for driving the productivity with the help of new technologies. The increase in the productivity leads to increase in the revenue generation of the sector, thus making the industry sustain for a longer period along with higher competition. Concerning the broad agricultural sector in Australia, technologies such as less expensive GPS systems helped to direct the driverless tractors, which on the other hand helped in the growth of yields, thus reducing the cost of fuel (Parkinson, 2016).
From a different perspective, the global agricultural technology sector is also estimated to earn US$189 billion during the period 2013-2022. The US and other developed countries involve farmers and highly depended on the technology in moving, storing and processing of the producer’s output through value chain, which expands from food products to final customers. The activities have contribution of around $US1.2 trillion to the GDP of the US annually and has supported around 24 million jobs (Motes, 2010). It is also apparent that Australia accounts for 3% of the total global food supply, which is more than AU$30 million per annum (The Conversation Media Group Ltd, 2016).
Based on the fact presented by the Conversation Media Group Ltd (2016) it can therefore be stated that the technological improvement has emerged by increasing the production in addition to environmental protection (FAO, 2015). The investment has successfully helped to enhance the agricultural sector especially in the areas of finance. The AgTech industry is sensing a boom, as the farmers are also adopting new technologies, which indicates higher productivity in comparatively lower cost (Locke, 2016; Firefax Media, 2014). Thus, with the support of accounting concepts, it is apparent that the agricultural sector has evident a huge transformation through technology innovation based on which it is estimated to increase the global investment by $4.6 billion in 2015 (Burwood-Taylor, 2016).
Agriculture has been a major part of Australian economy, which has increased over past few years with the help of technology innovation. This in turn also enhanced the economic growth along with higher profitability of the industry. The rise in the production of the agricultural environment has maintained a constant growth in the rise of the AgTech industry, as it contributed around AU$100 billion for implementing new and innovative technologies to increase the production. This has provided new opportunities for farmers to increase their productivity, thus contributing to the GDP of Australia and making the AgTech a more valuable industry in Australia.
One of the new standards passed by the US Financial accounting Standards Boards (FASB) and the International Accounting Standards Board (IASB) is regarding the revenue recognition. The new standard is named as the IFRS 15, which states about the manner of recording revenue and assists in comparing the financial statements of different companies. However, the industries faced huge issues regarding the implementation of the new standards (Chartered Accountants Australia and New Zealand, 2015). The standards further included certain specifications such as the revenue of different goods and services have to be recorded in different manner (Delloite, 2016). However, it is very difficult to follow these standards, as huge calculations have to be performed separately for each of the obligations that are involved in a particular contract (1Delloite, 2014). The challenges that are faced by the companies while implementation of IFRS 15 include increased judgment made by the management, dual GAAP, gathering and analysis of data and changing models of business (Cruss, 2014).
The comment letters of IFRS 15 indicate varieties of responses from huge numbers of parties. Considering the case of Glaxo Smith Kline, it can be said that they support the recommendation provided by IASB to apply the IFRS 15 standards. After 1st January of the year 2008, a uniform way of recording transactions will be continued by all the industries (GlaxoSmithKline, 2015). However, the Revenue Recognition Transition Resource Group has elaborated certain issues that can be discussed in more proper manner due to deferral of the application of IFRS 15 (GlaxoSmithKline, 2015).
CFA institute of the US that provides professional services also favors the decision taken by IASB in the ED regarding IFRS 15. From the perception of CFA, it can be stated that it is difficult to adopt the new accounting standards regarding revenue recognition within a short period of time, as it will required huge shift and strategies to change the entire process as well as aligning different entities with the standards. The decision implemented by IASB regarding postponement in the date of implementation of the new standards is supported by CFA. However, there are certain other concerns that have been mentioned by CFA regarding revenue recognition. Firstly, it is stated that the date of adoption of the standards issued by the FASB and the IASB should be the same for all type of companies regardless of the fact that they are profit based or non-profit based organizations. This will ensure to compare the financial statements of various companies in more efficient manner. Apart from this, CFA also has opposed the decision taken by FASB regarding early adoption of the standards that is going to create a problem while comparing the financial statements or reports of the companies (CFA Institute, 2015).
The Australian Accounting Standards Boards (AASB) also favors the decision of postponement of the date application of IFRS 15 to the year 2018 from 2017. The application of the new standards is considered to be quite cumbersome as compared to the expectation. AASB considers that the change in the date of application of IFRS 15 will create a perception that IASB is not efficient enough in taking proper decisions regarding company operations. The deferral of IFRS 15 can be considered as an ideal example that can provoke the constituents to demand postponements of other standards. The decision to defer the date without making any amendments in the internal structure of the standards is considered as unnecessary by AASB (Australian Accounting Standards Boards, 2015).
Apart from this, the perception presented by the British Telecommunications (BT) it is apparent that the decision of deferring the adoption of IFRS 15 is a rational one. However, the earlier date of adoption on 2017 would have created a huge problem to prepare financial statement in an effective manner. It further suggested that the adoption of IFRS 15 should be postponed by two years (British Telecommunications, 2015).
The comments of various companies clearly suggested that every company supports the decision implemented by IASB to make postponement in the date of adoption of IFRS 15 (that states about revenue recognition). This is due to the fact that every company considers that there was no such guidance regarding revenue recognition (as laid in IFRS) previously. Thus, implementation of the new standards from 1st January, 2017 would create a problem within the organization to prepare the financial statements along with all the new criteria (Australian Accounting Standards Boards, 2015; British Telecommunications, 2015; CFA Institute, 2015; GlaxoSmithKiline, 2015).
On the other hand, there exists certain extended view regarding the IFRS 15, as GlaxoSmithKline is found to support the proposal of the date. The telecom industry will largely be affected by the implementation of IFRS15 standards. In the telecommunication industry, a variety of handsets, service plan used by customers and the sellers also provide a variety of discounts. In this regard, it can be affirmed that different customers sell different combination of services that makes the prices of products different. Therefore, the telecom companies should keep a record of transactions made by the customers to maintain detailed information regarding the revenue generated and the scope of earning in future. The customers, who are expected to create similar amount of revenue should be clubbed together, although there is doubts regarding following the process in the actual scenario (Ernst & Young, 2015).
Differences in the nature of industries can be regarded as a major cause for such different perceptions provided by the companies regarding IFRS 15. The pharmaceutical sector will observe a change in the profile of revenue and also in the cost recognition methods (2Delloite, 2014). In this regard, it is also observed that the AASB is observed to provide an extended view on the IFRS 15. This is due to the fact that the accounting boards are generally involved in identifying the efficiency of the new standards in detail, so that it can be easily implemented by all the industries. This implementation will eventually provide a clear understanding to the companies regarding their future potential and further flaws without performing auditing due to detailed information in the financial reports (Australian Accounting Standards Boards, 2015).
The deferral in the adoption of IFRS 15 is an implication for the public as well as the private companies exists in the market. Considering the case of GlaxoSmith Kline, it can be said that comment letters have concentrated on both the private and the public interests based on which the companies have provided different feedback by considering own benefits. The comment letter of GlaxoSmith focuses on the uniformity that will be brought by deferring the date of adoption of IFRS 15 on behalf of IASB. This will help the companies to compare their revenue earnings in respect of their competitors. From a different perspective, the investors will also be able to compare the revenue earnings of each of the companies and take investment decisions accordingly. The comment regarding convergence of the international standards and the US standards shows the concern of GlaxoSmithKline for the public and the private investors as well (GlaxoSmithKline, 2015).
The CFA has also supported the view of IFRS to delay the date of deferral of IFRS 15, which shows that the institute is also concerned about the problems that the private entities would face due to early adoption of IFRS 15. In the similar context, the institute stated that the deferral will bring about a quality in the adoption of the financial reports presented by the companies along with detailed information. The convergence between the date of adoption by the FASB and IASB standards reflects the fact that CFA is concerned about the problems that might be experienced by the private companies due to the variations in dates. The decision of FASB to allow early adoption has been criticized by CFA, which again reflects that the institute prioritizing the concerns of private entities. The concern for public is also reflected from CFA’s comment regarding same date of adoption for profit and non-profit companies, as adopting new standards indicate change in the entire process which might slowdown the work procedure as well. This in turn will reduce the profitability as well as the rate of revenue generation (CFA Institute, 2015).
Concerning the feedback of AASB, it is evident that the entity also assumes that the decision to postponing the adoption of IFRS 15 will benefit the private organizations, as they will get certain time span to understand the new proposal and major areas to focus while changing the process. However, the board considers the limitations that are involved with the IFRS 15, as it stated that the implementation of the new standards appears to be more critical as compared to the expectation and reflects the inability of IASB to make proper decision regarding fixing a date of standard adoption. AASB considers that it is unnecessary to make changes in the date of deferral without making any amendment in the structure of the previous IFRS standard. This type of changes is likely to create demands of deferral in the adoption dates of other standards as well (Australian Accounting Standards Board, 2015).
On the other hand, BT has also supports the decision of IASB to delay the adoption of IFRS 15, and considers that early adoption would be problematic for the companies in following the requirements to prepare the financial statements. The entity also concentrates on the need of delay in the adoption of IFRS 15 date due to complexity in the telecommunication industry (British Telecommunications, 2015).
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