Analysis
The primary purpose of this assignment is providing and overview of the accounting conceptual framework that could potentially bring vast changes in practices of business organizations and also controlling the organizations of the public sector from preventing the attempt of controlling the accounting standard settings (Gassen, 2014). It is important to be noted that the complete accomplishment of the concepts and the implications of the same can be initiated only the usage of these concepts in accordance with the related discussion. The reason for the reflection in the conclusion and the basis of such statement’s development are sketched out in accordance with the statement itself. Similarly, the framework can be depicted as a statement of principles, a hypothetical base, a guide as well as a rationality. The route of development of the new and emerging accounting standards of accounting is given primary focus by the accounting framework when a completely fundamental hypothesis of accountancy is set out (Abernathy, et al., 2015). It is crucial to keep in mind that the framework itself in not a standard of accounting, and places where disputes and disagreements are seen between the specific arrangements of accounting standards and the framework, the accounting standard wins the argument (Peasnell, 1982).
Currently, there is an ongoing process of updating of the conceptual framework in the international board of accounting standards. The preparation and presentation of financial accounting reports and statements is done for the usage of outside users by several business firms and entities across the globe. Even though such financial reports seem relative and qualified, there are several differences that have been brought forward by an integration and mixture of the social, legal and economic conditions. Several countries, while setting national prerequisites, keep the necessities of the financial statements’ users at the top of their priority lists. For the establishment of the new Australian Accounting Standards Board (AASB) two legislations are crucial. The first one is the Corporate Law Economic Reform Program Act 1999 and the second one is Australian Securities and Investments Commission Act 2001 (ASIC) (Brown and Tarca, 2001). The Financial Reporting Council was created by the government under the former legislation while making it responsible for overseeing the matters of corporate governance (Gaa, 1988). As such, it has the responsibility towards both, the Australian Securities and Investments Commission as well as the Australian Accounting Standards Board. The Financial Reporting Council (FRC) is a permitted entity which is under the legislation of Australian Securities and Investments Commission Act, which is amended by Corporate Law Economic Reform Program Act 2004 (Dignam and Galanis, 2004). The primary responsibility of the Financial Reporting Council is giving wide oversight of the procedures in order to set the standards of auditing and accounting. The other responsibilities of the council are to monitor and record the effectiveness of the requirements of the auditor independence and providing the minister with advices and reports in regards to such matters. (Australian Government, 2018).
The Australian Securities and Investments Commission is a government body which functions independently and has been set up for the purpose of enforcing and administering Australian Corporations Law (Securities, 2009). The issue of the standards of accounting is not the responsibility of the commission, however, it can lobby against as well as in the favor of the standards of accounting and issues practice notes regularly which are the explanation of the accounting standards while in effect. All the companies of Australia are liable to comply with and adhere by the standards of accounting. The financial information’s regulation that is provided by the companies has the involvement of the Australian Securities and Investments Commission (Warren Jr, Moffitt and Byrnes, 2015). A statement was issued by the Australian Accounting Standards Board that international standards of accounting would be adopted by Australia for the application on the financial statements that were produced after January 1, 2005 (Haswell and McKinnon, 2003). It was previously decided by the European Union that such a path would be followed by them due to which the Australian decision was influenced (Whittington, 2005). Hence, the International Accounting Standards Board (IASB) now determines the Australian accounting standards.
Australian accounting regulation
The above discussion has helped in detailing the manner in which attempts have been made for the regulation of the accounting information that is provided by the business companies in the form of financial reports and statements. These attempts have changed from being provisional and preliminary steps taken by professional entities and now have the full force of sanctioned backing. Such a change has been a complex path which has witnessed replacement of executive self-regulation with sanctioned regulation. This clearly implies that accounting is considered a crucial part of the economic framework of a nation and has started involving extreme politics. Disallowing the development of standards of accounting from being a part of the authority of market forces and self-regulation was the choice of several governments. Various lobby groups like the stock exchange and business groups have greatly affected the governments (Zeff, 2002). One of the crucial aspects of the effective regulation and its enforcement and the capitalist economies is the systematic operation of investment and financial markets. Additionally, other factors that are important to this are the development of IT and new financial tools, and economic globalization. All these have together contributed towards the increase in the difficulties of modern business practices. In order to easer modern business and the related practices, the timeliness and reliability of financial data are crucial. These have been a major factor in the alterations in the procedures of formulation of accounting standards. However, the irony is that in order to ease the effective operation of the markets, the regulations of accounting have become highly complicated and technical.
One of the primary tasks of the Financial Accounting Standards Board (FASB) was establishing and developing the conceptual framework (Whittington, 2008). The conceptual framework was defined by the FASB as a rational system of fundamentals and objectives that were interrelated, that together are expected for leading towards harmonious standards and which would prescribe the function, limits and nature of financial reporting and accounting (Jones, 1992). One item of the FASB’s first agenda of 1973, was the establishment of a conceptual framework (Gore, 1992). Hence, the continued concern of the accounting profession was signaled by the FASB towards the development of a theoretical basis which could form accounting principles. The project was taking an approach of a building block that would start with fundamentals and would be built further from there. The continuation of the project of the conceptual framework was made by the issue of Statements of Financial Accounting Concepts (SFACs) by the Financial Accounting Standards Board (Financial Accounting Standards Board, 1987). Seven such concept statements have been issues to this date. These statements are: Qualitative Characteristics of Accounting Information (1980); Objectives of Financial Reporting by Business Enterprises (1978); Elements of Financial Statements of Business Companies (1980; although replaced by SFAC 6); Measurement and Recognition in Financial Statements of Business Enterprises (1984); Objectives of Financial Reporting by Nonbusiness Enterprises (1980); Usage of Present Value information and Cash Flow in Accounting Measurement (2000) and Elements of Financial Statements (1985) (FASB, F.A.S.B., 1978). These statements of the SFAC might look like standards of accounting however, they are rather concept statements that can be utilized as a base for the development of accounting standards. The conceptual framework’s idea was adopted by many other countries as well such as New Zealand, United Kingdom, Canada, etc. (Frank, 1979). Additionally, the International Accounting Standards Committee which is now known as the International Accounting Standards Board (IASB), also started working on a certain type of project related to the conceptual framework. By the title of such efforts, they somewhat had the same aims and objectives, however, none of them have been known to made great success. The United States of America was followed closely by Australia in the development of the conceptual framework (Tarca, 2004). One of the primary objectives of the development of conceptual framework is reduction of uncertainties.
A conceptual framework
In 1979, a series of Accounting Theory Monographs was commissioned by the Australian Accounting Research Foundation on the basis of which certain Statements of Accounting Concepts (SAC) were formed after the commencing publication in the form of disclosure draft (Horton and Macve, 2000). Four SACs have been published to this date. These are: SAC 1 – “Definition of the Reporting Entity”; SAC 2 – “Objectives of General-Purpose Financial Reporting”; SAC 3 – “Qualitative Characteristics of Financial Information”; and SAC 4 – “Definition and Recognition of the Elements of Financial Statements” (Financial Accounting Standards Board, 1987).
Conclusion
It can be concluded that the story of accounting so far has been unsatisfactory and there has been a lack of success in the attempts of developing a foundation, standards and common framework for accounting. Theorists, regulators, committees and several accounting experts have failed massively in developing a common theory of accounting that can be accepted by every nation and regulatory body. If there is no presence of any theory, the regulations that are urged on the discipline can be considered as policies that replace the diligent theory. One of the primary issues discovered from doing this assessment is that an incorrect opinion regarding the theory is possessed by people. The growing globalization of the modern business and economics has complicated the above-mentioned issue. Attempts of bringing change in the accounting standards by introducing conceptual framework have not been able to succeed. Even though it appeared like SAC 4 would require companies to report more liabilities, lobbying began to withdraw and reverse any sorts of innovations in business. Hence, it was expected from the conceptual framework that it would validate the present practices, maintain the social and economic status and prevent the attempts of public sector in controlling the settings of accounting standards.
Reference List
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