Importance of Accounting Framework in Financial Reporting

Running head: ACCOUNTING FRAMEWORK
Accounting Framework
Name of the Student
Name of the University
Author’s note

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Executive summary
The aim of the report is to analyse the importance of the accounting standards in recording
financial transactions of the company. The company which is selected is Amcor Ltd for
which the reporting framework would be analysed. The accounting framework sets the
guidelines of the accounting system that the companies will follow to bring transparency in
the financial reports of the company. the report further explains the accounting principles of
the Australian accounting standards and how it impacts in the accounting system of the
organisations in Australia.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Theoretical models of accounting..............................................................................................3
Accounting standards board.......................................................................................................4
Theoretical constructs of contemporary financial accounting...................................................7
The need for the development of conceptual framework for accounting and the influence of
conceptual framework................................................................................................................8
Accounts for assets non-current assets and liabilities..............................................................13
The revaluation and impairments of non-current assets..........................................................14
Accounting for lease in the books of lessor and lessee............................................................15
Conclusion................................................................................................................................15
Reference..................................................................................................................................18

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Introduction
The accounting policies of the company is very essential to give a fair and true view
of the financial statements of the company. In the case of Amcor ltd, the same is also
applicable. The theoretical model of accounting contains the various accounting theories that
help the company to frame a model for recording the accounting entries in the books of the
company.
Discussion
Theoretical models of accounting
Accounting model is an established of expectations, agenda and practises used in the
study and request of the financial reporting philosophies. The study of accounting theory
includes a appraisal of both the historical basics of accounting practices as well as the way in
which accounting practices are altered and added to the controlling framework that rules
financial statements and financial reporting.
The conceptual framework of accounting binds all the theories of accounting. this
framework is delivered by the financial accounting standard board, a self-governing entity
that works to summary and found the crucial purposes of financial reporting by businesses,
both public and private. Further accounting theory can be supposed as of the rational
perceptive that aids to assess and direct accounting practices. Accounting theory as
supervisory standards growth also aids to construct innovative accounting practices and
events.
While accounting processes are formulae based, accounting theory is qualitative in
nature which act as a director for operative accounting and financial reporting. The most
significant aspect of accounting theory is helpfulness, which in the corporate finance world,
means that all financial statements should deliver substantial indication that can be used to

4ACCOUNTING FRAMEWORK
make knowledgeable business conclusions. This also states that accounting theory is
deliberately malleable so that it can yield operative financial evidence even after the lawful
environment deviates. The financial statement of Amcor ltd has presented the financial
statement of the business following appropriate accounting framework and reporting process
so that a level of efficiency can be maintained in the business organization.
In accumulation to practicality accounting theory statuses that all accounting
informations should be applicable, dependable, comparable and trustworthy. This means that
all financial statements want to be precise and obey to the commonly acknowledged
accounting principles. Observance to GAAP allows the training of financial statements to be
both steady and similar to a company’s previous financials of other establishments (Andon
Baxter and Chua 2015).
The accounting theory needs that every accounting professionals operate under four
conventions. The first expectations states that a business is distinct from its owners. The
second confirms the belief that a company will endure to sustain and not to go insolvent. The
third adopts that all financial statements are equipped with dollar quantities and not with
other figures like unit production. Lastly, all financial statements needs be organised on a
regular basis.
Accounting theory is an incessantly developing topic and it must familiarise to new
ways of doing business, new technological values and slits that are exposed in reporting
devices. For example, associations such as the international accounting standards board help
to generate and review applied claims of accounting theory, and experts such as CPA help
companies to steer new and recognised accounting standards.

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Australian Accounting standards board
It is an Australian government agency that improves and upholds financial reporting
standards applicable to units in the private and public sectors of the Australian economy.,
Also the AASB donates to the expansion of international financial reporting standards and
conveniences the contribution of the Australian community in worldwide usual settings. The
AASB’s functions and influences are established in the Australian securities and investment
commission act 2001 (Firth and Gounopoulos, 2017).
The Australian securities and investment commissions part is to impose and control
company and financial services law to defend Australian consumers depositors and creditors.
The AASB uses a theoretical outline to grow and assess accounting standards (Sweeney Lillis
and Curtis 2017).
The AASB makes Australian accounting standards including interpretation to be
applied by units has to mandatorily follow by the corporation act 2001. To prepare financial
reports of government and the general government sector and entities in the private or public
for profit or not for profit sectors that are reporting entities or that prepare general purpose
financial statements (Zhou Ou and Li 2016).
AASB 1053 applications of tiers of Australian accounting standards creates a
disparity in reporting outline containing of two tiers of reporting supplies for making overall
purpose financial statements.
Tier 1 Australian accounting standards and
Tier 2 Australian accounting standards reduced revelation necessities
Tier 1 necessities include international financial reporting standards , together with
interpretation delivered by the international accounting standards board with the additions of
sections on the applicability of each standard in the Australian environment (Otley 2016).