Financial Accounting and Reporting: Standards and Framework Analysis

This report provides an overview of financial accounting and reporting standards in Australia. It discusses the institutional arrangements for setting accounting standards, highlighting the role of the Australian Accounting Standards Board (AASB) and the purpose of these standards in ensuring accountability, transparency, and reliability in financial reporting. It also addresses the concept of a reporting entity and the objectives of financial reporting, emphasizing the importance of providing relevant and faithfully represented information to stakeholders for decision-making. The report further examines the Australian Conceptual Framework, including the definition, recognition, and measurement of key financial statement elements such as assets, liabilities, revenue, and expenses, with a focus on different valuation methods like historical cost, current cost, and realizable value. Finally, it covers the definition, recognition, and measurement of elements within the general purpose financial accounting framework, including GPFA statements like profit and loss accounts, balance sheets, and cash flow statements.

Financial Accounting
and Reporting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TOPIC 1...........................................................................................................................................3
Institutional arrangements for setting accounting standards in Australia...................................3
TOPIC 2...........................................................................................................................................6
Conceptual framework : Definition, recognition and measurement of elements in general
purpose financial accounting.......................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Accounting standards can be defined as group of written guidelines comprising of
procedures, principals, rules, regulations and standards which are required to be accepted and
following while preparing books of accounts or undertaking any financial practice. They focuses
on bringing consistency and uniformity in statements (Shimamoto and Takeda, 2020). The report
consists of two topics. First topic discusses about arrangements done for setting accounting
standards in Australia along with its purpose, reporting entity, objective and characteristics of
financial reporting. Second topic is about the conceptual framework defining its definition,
recognition and measurement.
TOPIC 1
Institutional arrangements for setting accounting standards in Australia.
It refers to a set of documents that provides the structure for financial statements. They
works on the basis of rules and regulations framed by Australian Accounting Standards Boards
(AASB) and gives guidance to publicly listed firms about the manner they have to follow to
make there reports. It serves number of services which are discussed below.
Purpose
 It make sure that standards are based on accounting principles and requirement of
external parties about the access to information could be fulfilled.
 They ask companies to work according to IFRS rules for making them accountable to
public.
 It directs businesses to disclose all the information to various stakeholders for assisting
them in taking decisions related to investment in firm.
 The most important aim of these standards is to check that accounts made by companies
are reliable and transparent (Maroun and van Zijl, 2021).
Reporting entity
It refers to the disclosure of all types of financial reports and statements which are useful
for external parties like shareholders, government etc. for taking and analysing there decisions
and performance of company. This can be related to a single business or a group of parent and
its subsidiaries. It also considers following points to check whether various users are dependent
on General Purpose Financial Statements or not.

 The management team and shareholders are common or different.
 Entity influences society, politically or economically or not.
Above points decides that whether a particular corporation is a reporting entity or not.
Objective of financial reporting
It is standard practice of every firm which makes use of accounting statements for
passing the financial information of business and its performance regarding a particular time
period (Vitolla and et. al., 2020). There are number of objectives of this reporting.
 It assists management and directors to make plans and setting benchmarks according the
position revealed in the reports.
 They provides knowledge to investors, creditors about the health of company and helps
them in taking investment decisions.
 Financial reporting also showcases the change in resources of organisation including its
assets as well as liabilities.
 It helps the auditors in having full information of company and checking whether it has
followed accounting standards or not.
Qualitative Characteristics of Financial reporting
There are mainly three features of these statements.
 Relevance- It means the data presented to various external users should be relevant. It
should contain all that information which can influence the decision of its user. In
Addition to this, any knowledge which is of no use should be provided to them as it
creates a situation of confusion in there minds and makes their decision making process
difficult (Kieso and et. al., 2019).
 Materiality- It is about proving correct and full data to the outside parties. Any kind of
misrepresentation or omitting or hiding of information will impact their decision and is
also against the rules of accounting standards.
 Faithful Representation- It is very important that financial reports holds the capacity of
showcasing what it really wants to present. The information should be in proper format
and not jumbled. There should not be any kind of bias and errors in selection of data
which can manipulate the decision taken by parties.
Fundamentals of general-purpose financial reporting

Its name indicates that it is a set of statements which is used for general observation about
the finances of firm. It is a standard report which provides whole information about the business
and its activities in a specific time period. It does not focus on a particular group, rather focuses
on fulfilling the needs of all its readers like government, creditors, shareholders, employees,
management etc.
Australian Conceptual Framework
It comprises of the objective and concept of general purpose financial reporting. It helps
the Australian accounting board to manage the accounts of Australia and establishing rules and
regulations according to which the accounting system of whole country works. They give
definition of all points included in various financing statements like what is included in asserts
and liabilities and what is not (Yahya and et. al., 2018). This framework continues to change
with upcoming of new businesses, scale of businesses and methods of measuring various things
like depreciation.
Recognition
It is a criteria which helps accountants to recognise an item according to the definition of
that element. If it satisfy the whole explanation, then that thing is included in that point,
otherwise not. It is an important part of Australian conceptual framework and any kind of change
in recognition criteria is to be followed by whole country.
Measurement of elements of financial statements
Its main elements are assets, liabilities, revenue, equity and expenses which completes
the accounting reports. There measurement means to recognise their monetary figure to carry
them to financial statements. There are number of bases with holds the capacity to change the
value of these totals.
 Historical cost- It urges to record the amount of assets with which it was acquired in
beginning and liabilities with which the exchange of material took place.
 Current cost- In this, items are recorded with amount that would have been paid for
buying it in current period. Liabilities are also value with there current settling value.
 Realizable value- Assets in this criteria is valued at sum which can be obtained by
selling it presently along with liabilities at there expected realization figure (Safari and
Areeb, 2020).

Mostly companies use historical cost for recording various items in their accounting
books. But still there are some assets and liabilities which are posted with other method. For
example, inventory is usually recorded at its realisable value to decrease the risk of loss.
TOPIC 2
Conceptual framework : Definition, recognition and measurement of elements in general purpose
financial accounting.
Definition
It refers to visual representation of financial data with some pre- defined rules,
regulations and standards. It frames the limits and functions of accounting statements. The main
reason behind making this framework was to set some standards according to which the accounts
system of whole country runs. It also provides base for solving any kind of issue or dispute
related to book keeping (Mosweu and Ngoepe, 2018).
Conceptual framework focuses on classifying all the objects of same category under
single head and gives proper definition of every items, according to which all the items are
recognised and recorded at there places. It also assists auditors in preparing legal report that can
be used by readers across the globe. They consider this framework as base for examining the
financial statements of the firms.
Recognition
According to the conceptual framework, only those items that can comes under the
definition of assets, liabilities and equity can become a part of balance sheet. In the same way,
there are pre – defined incomes and expenses and those items which satisfy these meaning are
taken its part. Apart from this, it also recognises the criteria of relevance and faithful
representation of various items. Those things which are either irrelevant or misrepresented is
usually recognised from accounting statements.
Measurement of elements in general purpose financial accounting
GPFA is a set of financial reports including profit and loss account, balance sheet, cash
flow statement and retained earning statements. The measurement of theses statements is done
on the basis of costing method attained by company. These measuring techniques are:
 Historical cost- It recognises the cost at which the material was purchased in beginning
and liabilities at the value it was recognised in beginning (Ivannikov and Dollery, 2020).

 Current cost- Items in this method are priced at the cost at which they would be acquired
form market in present time period.
 Realizable value- It guides the firm to record various items at price which could be
realised from market if they are sold currently.
CONCLUSION
It can be concluded from the above report that accounting standards of Australia provides
a framework for companies within which they have to maintain there accounts. There purpose is
to ensure that the whole data is correct and reporting entities are disclosing there information
correctly with relevant and fair representation of data. General purpose accounting reports
includes the set of various financial statements which provides guidelines about the frame of
these reports. It records all assets, liabilities, income, expenditures and revenues by suing various
measures like current cost, realizable value etc.

REFERENCES
Books and Journals
Ivannikov, I. and Dollery, B., 2020. Accounting Problems in Infrastructure Asset Valuation and
Depreciation in New South Wales Local Government. Australian Accounting
Review. 30(2). pp.105-115.
Kieso, D.E. and et. al., 2019. Intermediate Accounting, Volume 1. John Wiley & Sons.
Maroun, W. and van Zijl, W., 2021, July. Fair value accounting: epistemic commitment and
resistance. In Accounting Forum (pp. 1-26). Routledge.
Mosweu, O.L.E.F.H.I.L.E. and Ngoepe, M., 2018, December. Legal framework for auditing
public sector accounting records in the digital environment in Botswana.
In Proceedings of the 9th ProLISSA Conference. Newcastle upon Tyne: Cambridge
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Safari, M. and Areeb, A., 2020, October. A qualitative analysis of GRI principles for defining
sustainability report quality: an Australian case from the preparers’ perspective.
In Accounting Forum (Vol. 44, No. 4, pp. 344-375). Routledge.
Shimamoto, K. and Takeda, F., 2020. IFRS adoption and accounting conservatism of Japanese
firms with governance system transition. International Advances in Economic
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Vitolla, F. and et. al., 2020. The determinants of integrated reporting quality in financial
institutions. Corporate Governance: The International Journal of Business in Society.
Yahya, I. and et. al., 2018. Factors that influence success implementation of government
accounting standard (Sap) based on acrual in the government of the districts/cities in
North Sumatera Province. Journal of Management Information and Decision
Sciences. 21(1). pp.1-14.