Understanding AASB Standards and Their Role in Economic Decision Making

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Introduction
Australian Accounting Standards Board refers to Australian government board which comes up
with the financial standards that various companies both in public and private sectors apply
dealing with issues related to the economy of Australia according to Adamyk, and Adamyk,
(2017: p.56). Apart from maintaining financial reporting standards in Australia AASB also take
part in developing the international financial standards applicable in the Australian community.
The AASB work using the guidance that was adopted in the law. For instance, Perera, and
Chand, (2015:pp.170) said that the commission act 2001 relating to Australian Securities and
Investment elaborated the powers and the function of the board. One of the duties of AASB
outlined in the act included the ability to form regulation and enforce them to the companies
offering financial services. The regulation mainly target the company financial laws to ensure
that creditors, consumers and investors are safe from any form of financial exploitation. There
exist several standards that have been created by AASB. Bamber, and McMeeking, (2016:p.60)
argued that some of these standards include AASB standard 101 which is on financial statement,
standard 2 which is on share based payment and standard 4 which is about insurance contracts
among other standards. However, the goal of this essay is to outline how understanding of the
AASB standards will assist a wide range of users in making economic decision. Apart from the
standard 101 on financial statements, this assignment is going to refer to standard 107 on
statement of cash flows, standard 9 financial instruments and standard 16 on lease.
AASB standard 101
The AASB standard 101 talks about presentation of the financial statements. Financial
statements refers to the set of reports that an organization prepares at a given point to show its
financial performance and position and performance at that particular time. Some of the financial

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statements include the income statements, the balance sheet, the statement of cash flows and the
statements of the owners’ equity. However, the purpose of this standard is to outline the
guidance of presenting the financial reports of a company. The standard ensures that there is a
level of compatibility between the company’s financial reports of the previous year with the
financial reports from other entities. Consequently, there are various requirements that an
organization need to follow to satisfy this standard. The guidelines covers the contents of the
reports and the minimum issues they must contain.
On the other hand, AASB standard 101 plays a crucial role guiding people in making economic
decisions. When a company present financial statements that comply with the accounting
standards, it clearly shows its financial performance and its cash flows. The owners, creditors,
employees, investors and regulators can make firm decisions on how they can allocate the scarce
resources based on their evaluation (Ellwood and Greenwood, 2016: p.10). When it comes to
corporations and organizations, complying with this standard the actions ensures that their
statements are comparable with other entities. The benefit of such move is that the decision
allows the users of the financial information, for example investors compare and contrast these
organizations. At the end the can make a decision on which firm to invest to base on the true
records they have on finance. Lastly, financial statements give out various ways in which the
authorities and the management in the organization can respond to the accountability questions
to people who commit resources to these entities. The level of accountability plays an important
role in ensuring that the goal of financial reporting is achieved in the nation. Accounting for
resources do not only happen in public sectors but also to the private sectors and the non-profit
organization. The decision assist the sponsors to decide whether they will continue supporting
the entities or change the leadership to achieve the goal.