Part A Literature Review
The accounting standards are very important current corporate world. Through the help of the standards, the general purpose financial statements of the company which includes the profit and loss account, balance sheet and cash flow statement are presented in a particular format which becomes easier for the similar companies to make the comparison and further can be used by the users and other stakeholders of the companies to make the comparison among similar companies and take decisions relating to investment. Through the help of these accounting standards the management of the companies tends to become more accountable to the stakeholders and shareholders of the company about the financial feasibility of the companies.
Australian accounting standard board is a government agency that has been established by the government to provide financial reporting android that can be used by public as well as private entities in Australia. Powers and duties of Australian accounting standard board are set up by Australian securities and investment Commission act 2001. In order to protect the interest of the consumer, investors and creditors the Australian securities and investment commission was set up. This governing body was set up to protect and regulate the companies and the financial services law within Australia. Accounting standards and the interpretation that has been developed by the accounting standard board is used by the entities that are required to prepare the financial report as per the guidelines of Corporation Act 2001. The Government of the country is also required to prepare financial statements for the entire government and for the general government sectors as per the guidelines provided in the accounting standards issued by the accounting standard board. Further private and public sector entities for working for profit or nonprofit sectors are also required to prepare the general purpose financial statement as per the guidelines provided in the accounting standards. (AASB)
Australian accounting standard board has been set up in the country to perform the following functions in the country:
- In order to evaluate the standards that has been proposed they are likely to set up a conceptual Framework around it.
- The body has been authorized to develop accounting standards as per section 334 of the Corporation Act 2001.
- Authorized to make changes in the accounting standards for different purposes.
- The body further has been authorized to participate and make contribution in the area of development of single set up accounting standards that will be accepted worldwide.
- The body has been authorized to promote the main objects of part 12 of ASIC act which ensures to make the Australian entities more competitive world wide and increase the confidence level of the investors in Australian economy and entities.
The mission of accounting standard board in Australia is to create reporting standards for the country that help them to meet the needs of the uses. Further they are required to make considerable contribution in developing the international reporting standards that will be accepted worldwide. (AASB)
The Australian accounting standard board has adopted international reporting financial standards in the year 2005. This adoption has been done with an intention to make the Australian entities more competitive in the international market. After the adoption of international reporting accounting standards AASB has issued a mandate that all the profit entities such as listed companies and the nonprofit organization public sector entities like the Australian government and the non-profit private sector entities like charities etc is required to carry out their financial reporting as per the international financial reporting standards.
The financial reporting Council, in the year 2005 has announced adoption of international financial reporting standards in Australia. Financial reporting Council has been given delegated powers by the government to ensure successful implementation of international standards into the Australian accounting standards. This change has been done with an intention so much the Australian market with the world financial markets. This option will make a market more competitive for the Australian companies. Considering work that needs to be done later on the date of implementation of IFRS date has been extended till Jan 2006. Since the year 2004, IASB has started issuing exposure draft for entities in the extractive industries. Later on certain stages has been determined for the implementation exercise where the exposure draft has been presented for comments to the Australian board. Australian accounting standard board has started incorporating IFRS aspect in their accounting standards.
Part B Report
Being AASB has adopted international financial reporting standards, any technical issue that has been identified by the IFRS interpretation committee or by international accounting standard board will also included AASB change process. In this case the technical issue can also be identified by international Public Sector Accounting Standards Board (IPSASB). The AASB authorities’ places close watch on the program of IPSASB. Any Australian stakeholders or investors can also identify issues to the authority. (AASB)
Based on the technical issue that has been identified by the authorities, the AASB prepare proposal agenda. Proposal the attached benefit that will be there if the issue has been resolved, the associated cost, resources required and the time that will be taken to implement the proposal. Once the proposal has been placed, the AASB authorities will take a decision whether the proposal that has been put in place is worthwhile and if it is, then the same should be put in their work flow agenda. It is at the discretion of the board whether to address the technical issues in the agent or not. These issues are termed as “items not taken onto the agenda”.
Once the technical issue has been added in the agenda, the AASB board will go through agenda papers that have been presented in developed by the staff of the board. The person that has been prepared by the staff members includes the scope of the issue, any alternative approach and the expected time of the output. The working papers in this case can be made considering the material that can be obtained from different boards light ISAB, IPSASB etc. This discussion can be made jointly with the New Zealand accounting standard board official is common in both the countries. (AASB)
Once the agent has been discussed and necessary research work has been completed, the accounting standard board will issue the working papers for public comments and for the stakeholders. There are different ways which we can be used by the board to present the documents to the public which includes presentation of exposure draft which contains the issue, through the help of invitation to comment, through draft interpretation, discussion papers etc. The Australian accounting standard board sometimes form advisory panels which includes members from different areas includes auditors, regulator, preparers and the users of the financial statements which can give their opinion on the draft exposure. The main function of the advisory panel is to list down the alternative views that has been presented by the public and if found reasonable can be presented along with their recommendation to the board.
It is again at the discretion of the board whether to accept the public comments made in the above case or not. In this case, the accounting standard board can issue pronouncements in the form of conceptual framework, interpretation or in the form of standard. Any pronouncement that has an impact on the profit entities should be in line with the international financial reporting standards issued by the international accounting standard board. This has been done in order to ensure that the financial statement that has been prepared by the profit entities belonging to Australia is in line with the international accounting standards. Further, the accounting standard board adopts a transaction neutrality policy under which any similar transaction shall be accounted in a similar way in all entities whether the same is a profit entity or a non-profit entry unless and until there is a sound reason with states that transition should be accounted in a different manner. (AASB)
Australian Accounting Standard Board’s Functions
Once the interpretation and pronouncement has been finalized by APRA, they send the final draft to the international organizations for the approval. This process will help in setting high quality standards and process improvements. Sometimes after the draft exposes form has been sent to the international organizations they suggest some comments and based on their comments certain changes have been further implemented in the accounting standards. Once the changes have been done, the exposure draft is against sent to the stakeholders for their comments.
Once the same has been finalized, AASB give instructions for its implementation and closely monitors the interpretation of the change in the accounting standards in the country, there are several other organizations in the country which monitors the implementation of the accounting standards which includes the Australian securities and investments Commission, the Australian Prudential regulatory authority, CPA Australia and several other organizations. The Australian accounting standard board after the implementation of the changes in the accounting standards receives feedback from several organizations which can be used by them for future development of the standards. Through their feedback, accounting standard board can implement for the changes in the accounting standards. (AASB)
The AASB standard setting process has been depicted in the below diagram:
The process that has been followed by AASB to incorporate technical issues in the Australian accounting standards is common for all the local and other Australian issues as well. Being at the end the financial reporting is to be done considering the International accounting standards, it is important that at the end all the local and other Austin issues are in line with the International standards. Thus, the process that has been discussed above is common for all and to implement any changes in the existing accounting standards.
AASB 116 stands for property, plant and equipment. AASB 116 property plant and equipment has been amended and incorporates IAS 16 as issued and implemented by international accounting standard board. For profit entities, there has been no major change being in this case, the provisions of AASB 116 are in line with the provisions of IAS 16. However, in terms of not-for-profit entities, there has been some difference in the provisions of AASB 116 and IAS 16. There are certain different provisions for determining a not-for-profit entity in case of IAS 16.Thus, after Incorporation of IAS 16 with AASB 116, the rules for determining a not-for-profit entity has changed which has resulted in change in accounting for the entities. Thus, in order to ensure that a not-for-profit entity IAS 16 will depend on whether the “AUS” paragraphs provide some additional guidelines for these entities or some other requirements which are in line with the corresponding international standard.
There are so many research conducted all over the world to implement IFRS as the official financial reporting standards for all countries including developing and developed countries. However, there have been many obstacles being faced during this adoption which includes corrupt and weak government, poor education level and most important cultural differences. Looking at the positive side of the IFRS, if all countries in the world adopt recent they would be no financial disparity. Comparison between the companies would become easier. Through the help of IFRS, financial reports that can be generated tend to be more detailed. These reports at the same time will offer better transparency and more viable compatibility.
Currently IFRS has been adopted by more than hundred countries in the world. There has been multiple studies been carried out all over the world which at the same time complicates and influence the movement of local accounting standards towards international financial reporting standards. In case of developing countries, the adoption of International accounting standards and their implementation/ enforcement are two different things. The growing corruption in developing countries tends to be a hindrance which may impact the adoption of International accounting standards in these countries. This correction tends to be done the effectiveness of government institutions. (Albu, 2012)
Thus, does it is very difficult to adopt single accounting guidelines all across the globe. It is very important to understand the context behind choosing a financial reporting system for a country. We cannot just implement and international financial reporting standard to a developing country when its people and government are not ready to accept the changes. The cultural differences and the corruption in the developing countries and most important lack of proper education impact this adoption process. However if there is a need and government of the country is ready to adopt the standards and wanted to compete in the International Financial Market, the adoption of IFRS can be a success. The effectiveness and fairness of the concept “one size fits all” for international accounting standards can be a success only when people and the government understand the actual importance behind the process. Force full implementation of these standards will not help and may have its own repercussions. It is a long process and may take considerable time. But looking at the current scenario, share more than hundred countries have already adopted International standards, the motion of ” one size fits all” does not look impossible. (Bova, 2012)
References
AASB, Accounting standards, Viewed on 19th Aug 2017, Retrieved from https://www.aasb.gov.au/About-the-AASB/For-students.aspx
AASB, About the Accounting standards, Viewed on 19th Aug 2017, Retrieved from https://www.aasb.gov.au/About-the-AASB.aspx
AASB, 2009, IFRS adoption in Australia, Viewed on 19th Aug 2017, Retrieved from https://www.aasb.gov.au/admin/file/content102/c3/IFRS_adoption_in_Australia_Sept_2009.pdf
AASB, The Standard-Setting Process, Viewed on 19th Aug 2017, Retrieved from https://www.aasb.gov.au/About-the-AASB/The-standard-setting-process.aspx
Williamson M, 2004, International Accounting Standards and their Impact on Resource Industries in Australia, Viewed on 19th Aug 2017, Retrieved from https://www.austlii.edu.au/au/journals/AUMPLawAYbk/2004/28.pdf
Albu., N., Albu N., C., & Girbina M., M. (2012). Educating accounting students in an emerging
economy – An analysis of the importance of stereotypes in teaching IFRS. Internation Journal of Academic Research,Vol. 4(No. 3), 51-57. Retrieved from Ebsco Host.
Bova, F., & Pereira, R. (2012). The determinanats and consequences of heterogeneous IFRS
compliance levels following mandatory IFRS adoption: Evidence form a developing country. Journal of International Accounting Research,Vol. 11(No. 1), 83-111. Retrieved from Ebsco Host.
Cardona J., R., Castro-Gonzalez C., K., & Rios-Figueroa B., C. (2014). The impact of culture and economic factors on the implementation of IFRS. Accounting & Taxation,Vol. 6(No. 2), 29-47. Retrieved from Ebsco Host.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
