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ACCM 4600 - Accounting Theory & Contemporary Issues

   

Added on  2020-03-02

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Accounting Theory & Contemporary Issues
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IntroductionThe present research paper aims to discuss and analyze the Australian accountingstandard setting environment. In this context, the report presents a literature review in relation tothe procedures adopted by the AASB for incorporating changes into international accountingstandards. Also, it demonstrates the process through which AASB adopts local and Australianissues into Australian accounting standards. In addition to this, a report is presented at last inresponse to the call for comment in relation an Exposure Draft ED 116 on the AASB website. Part A: Literature ReviewInternational accounting standards changes adoption into the Australian accountingstandardsAs per theinformation obtained from Australian Accounting Standards Board (2017), theAASB (Australian Accounting Standards Board) develop accounting policies and procedures tobe followed by the businesses operating within the country for developing their financial reports.The accounting policies and procedures adopted by the AASB are developed in accordance withthe IASB (International Accounting Standard Board) rules and conventions. The AASB hasmade the Australian accounting standards as equivalent to IASB in the year 2004 as pre thestrategic direction of the Financial Reporting Council. The AASB complies with the IASBstandards by integrating the content and words of the International Financial ReportingStandards. The AASB modifies the content of IASB in accordance with the legal environment ofAustralia. The AASB modifies the wording of the IASB as per the Corporations Act 2001without affecting the substance of the requirements. The AASB aims at ensuring highest qualityof financial reporting in Australian business firms by adopting the IASB standards (AustralianAccounting Standards Board, 2017). According to Deegan (2012), the modifications adopted by the IASB are adopted by theAASB as per the strategic direction of the Financial Reporting Council. The modifications arealso included by the AASB work program with varying level of involvement that can besubstantive or non-substantive. The IASB regulatory adopts and integrates changes into theaccounting standards with the aim of improving the quality of financial reports. The Australianstakeholders provide recommendations to AASB for consideration of the new issues adopted bythe IASB for improving the relevance and reliability of financial reports. The AASB develops aproject proposal in relation to the proposed changes that identifies and illustrates the potentialbenefits raising form adoption of the IASB changes. The project proposal also outlines the costof undertaking the proposed changes and analyzes the availability of resources for theirsuccessful adoption. The project proposal is reviewed by the AASB for taking decision inrelation to whether the project should be considered or not. The decision of the Board to not adda topic to the AASB conventions as per the IASB changes is reflected as formal report into‘agenda rejection statements’. However, in the situation of adopting the proposed changes, the
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AASB develop an agenda paper addressing the scope of issues, alternative approaches andbenefit realized (Deegan, 2012). As per theinformation obtained from AASB adoption of IASB standards by 2005 (2005),the proposed change is implemented by taking into consideration the relevant materials fromother standard-setting accounting bodies such as IASB and New Zealand Accounting StandardsBoard. The AASB needs to comply with the Australian Securities and Investments CommissionAct (ASIC) 2001 at the time of adopting the IASB changes. The implementation of each andevery IASB standards needs to be in accordance with the ASIC Act 2001. The FinancialReporting Council has mandated AASB to adopt standards equivalent to IASB for enabling thebusiness entities in Australia to compete effectively in the foreign markets. This was mainlydone to promote the development of Australian business firms and to promote their goodwill inthe international market. This will help the Australian forms to attract investors from theoverseas market thus promoting their growth and development. The compliance of Australianbusiness firms with the IASB financial reporting requirements will help in making their financialreports more understandable, comparable, relevant and reliable in the eyes of foreign investors.This is essential for developing the investor confidence in the Australian economy thuspromoting the country long-term economic growth (AASB adoption of IASB standards by 2005,2005). Local, Australian issues Incorporation into the Australian accounting standards by AASBPatel and Chand (2011) stated that the AASB in Australia holds the responsibility ofdeveloping accounting rules and standards for all type of reporting entities that includes profitand non-profit entities. However, IASB standards are mainly developed in relation to provideguidance for-profit entities in developing the financial reports. The AASB additionally includesthe financial reporting requirements for non-profit entities that do not have any impact on therequirements in relation to for-profit entities. Thus, it can result in the development of a situationwhere a non-profit entity complies with the AASB standards and inconsistent with IASBstandards. This is because the additional requirements stated by AASB for non-profit entities donot comply with IASB financial reporting requirements. As such, the local Australian issues areincorporated by the AASB through stating the additional disclosures. The AASB also contains acommentary for providing guidance to the domestic business entities for dealing with the localissues. The commentary is not equivalent to the IASB standards but provides benefit to the localfirms for complying with the AASB rules and conventions (Patel and Chand, 2011). Williamson (2004) stated that the AASB has also maintained that such additionaldisclosures does not contradict with the IASB standards but is only meant for resolving thesituations that are faced by businesses while operating in the Australian environment. The AASBin developing additional requirements for dealing with local issues complies with the ASIC Act.The Act proves to be helpful for the board in developing the requirements about allocating scareresources, reducing the cost of capital and protecting the investor confidence in the Australian
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