Financial Accounting Report: Standards and Compliance

This financial accounting report provides a detailed overview of the financial reporting landscape in Australia. It begins by highlighting the statutory requirements aimed at enhancing investor confidence and economic integrity. The report outlines key financial reporting requirements, including business activity statements, ASIC filings, and Australian Stock Exchange disclosures. It then delves into the process of setting accounting standards, from the identification of technical issues by international organizations to the issuance of standards and pronouncements. The role of the AASB, IFRS, and IPSASB is discussed. Finally, the report addresses the enforcement of accounting standards, emphasizing the importance of compliance with the Corporations Act 2001 and the role of auditors in ensuring financial statements reflect a true and fair view. The report emphasizes the need for adherence to accounting standards and the role of various regulatory bodies in monitoring implementation.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Authors Note:

1FINANCIAL ACCOUNTING
Table of Contents
Answer to question 1.......................................................................................................................2
Answer to question 2.......................................................................................................................4
Answer to question 3.......................................................................................................................8
Answer to question 4.......................................................................................................................9
Answer to question 5.....................................................................................................................10
Answer to question 6.....................................................................................................................12
References......................................................................................................................................15

2FINANCIAL ACCOUNTING
Answer to question 1.
In Australia the statute is trying relentlessly to increase the confidence that the investor
have on the financial statements that are being prepared by the entities over the specific period.
The statute is also trying to improve the integrity in the economy, corporations and the capital
market.one of the factors that is going to constitute this is the preparation of the financial
statements in accordance with all the legislative requirements (Scott 2015).
The standards that have been issued for the purpose of preparation and the presentation of
the financial statements of the entity are applicable throughout the country in all the states and
the territories. The entities that are carrying out the business operations within the country are
required to report to the Australian Taxation Office, the Australian Securities and Investment
Commission (ASIC) and the Australian Stock exchange.
Some of the key financial reporting requirements are as follows:
a) Business activity statement:
The businesses that are operating within the country are required to file a business
activity statement with the taxation office of the country for the purpose of making
payments and reporting their respective tax obligations. Sometimes individuals are also
required to file BAS. The BAS is personalized to respective business and the same can be
lodged electronically by mail or in person. The entities need to lodge the same monthly,
quarterly and annually depending on the amount of instalments that are due.
b) Financial reporting requirements:
The Australia’s securities and investment commission has been assigned the
responsibility to overlook the corporates, financial markets and the financial services that
are being provided within the country.

3FINANCIAL ACCOUNTING
The companies that are conducting their business operations within the country need to
lodge their financial report with ASIC. This filing usually takes place at the end of the
financial year. The reports that are being presented need to be audited.
c) Australian Stock Exchange Requirements:
The companies that have their listing on the stock exchange of the country have to
compulsorily abide by the various disclosure requirements of the stock exchange. The
information regarding these disclosures is provided in the listing rules of the stock
exchange (Hoyle et al. 2015).
d) Australian accounting standards:
The Australian Accounting Standard Board is responsible for setting the various
standards that are to be followed by the entity. The standards are to be considered as
legislative requirements of the corporation. The application of the accounting standards
must be utilized for applying the same to all the general-purpose financial reports that are
going to be prepared by the public and the private sector reporting entities. The
requirements that have been set up by the International Accounting Standards Board. It
has to be noted that thought the principle say or the power is exercised by the
International Accounting Standard Board in the matters of the standard setting, the AASB
reserves the right to take the call in respect of the matters stated out in the accounting
standard that is going to affect the economic and the social factors that are going to
impact the performance of the entities that are conducting their operations within
Australia.

4FINANCIAL ACCOUNTING
Answer to question 2.
The various steps that are involved in the process of setting up of the accounting standards are as
follows:
a) International organizations identify a technical issue:
It is possible that an important issue is being identified by the International Accounting
Standards Board or by the IFRS interpretations Committee. (IFRIC).
Australia has indulged in the adoption of the international financial reporting standards
since the month of January in the year 2005. This was done in alignment with the view of
Financial Reporting Council. Because of this, the work programmer that is being related
to the IASB and the work program that is being undertaken by the IFRIC have found
their respective inclusion in the work program that is being undertaken by the AASB.
However, the degree of involvement of the AASB differs from work to work basis and
this involvement may be substantive or non-substantive in nature (Abdel-Maksoud et al.
2016).
It has been duly found that some of the technical issues that are being faced may be
undertaken by the International Public Sector Accounting Standards Board (IPSASB).
The work program that tis being concluded or undertaken by the IPSASB is duly
monitored by the AASB. This results in AASB undertaking work program in respect of
certain related topics. The topics are being selected by the AASB for concluding the work
program based on the significance that is being held by them in respect of the public
sector reporting that is being done in Australia.
b) AASB identifies a technical issue:

5FINANCIAL ACCOUNTING
The members of the AASB are responsible for the identification of the technical issues
that are going to need or are presently in need for the consideration. In case the
considerations or the factors that have been identified by the members are in relation to
for profit, entities are generally referred to the IASB or the IFRIC for consideration.
The issues that are being found in relation to the not for profit consideration, the public or
the private sector companies might addressed domestically or referred to the IPSASB.
c) Some issues are being identified by the organizations and the individual of Australia:
The stakeholders of the company can inform or suggest the AASB in respect of the
various issues that they feel might be included in the in the financial reporting of the
entities. The issues that might be thought by them for the purpose of consideration
include issues relating to the increasing the reliability that can be placed on the reporting
that is done in the financial statements of the entity and the process that should be
undertaken for the purpose of reducing the costs that are involved in the preparation and
the presentation of the financial statements of the entity (Dutta and Patatoukas 2016).
d) Addition of the issue to the agenda:
Once the issues have been duly identified a project proposal is being developed by
AASB. The project proposal is undertaken for ascertaining the benefits that are going
accrue in respect of the stakeholders. In addition to this, the costs that are going to be
incurred if the same are not addressed immediately, the resources that are currently
available and the time that is going to be required for the implementation (Weygandt et
al. 2015).

6FINANCIAL ACCOUNTING
e) Research and consider issue:
After the addition, FO the issue to the agenda the AASB will discuss the agenda that have
been prepared and presented by the staff of the AASB. The matters that are being
reported in the papers that are presented by the staff include the scope of the issues,
alternative approaches and also the timing in respect of the outputs. Relevant matters may
be drawn from different standard setting bodies that includes IASB, the IPSASB and the
New Zealand Accounting Standards Boards and from other organizations.
f) Consultation with the shareholders:
There are several documents released by the AASB for the comments off the public and
discussion with the stakeholders.
Exposure Drafts:
It is a type of draft or a proposed standards or draft amendment to standards.
Invitation to comment:
Feedback on broad proposals is often sought through an invitation to a comment. A
discussion paper or consultation paper might be contained in an invitation to comment.
Discussion papers:
A wide range of accounting policies is being outlined in respect of a particular topic. The
discussion papers, the consultation pears and documents of the similar nature are
generally issued by the AASB, the IASB, and IPSASB or by other standard setters.
g) Issuing of the standard and other pronouncement:
In respect of the outcome of the consideration that is given by the AASB may result in
the issuance of a pronouncement. This may be in a form of a standard, an interpretation
or a document that is related to the conceptual framework of the company. As an

7FINANCIAL ACCOUNTING
alternative method, the AASB may decide to give out its view in respect of the issues that
have been presented in the minutes of the meetings or in the form of a formal Board
Agenda Decision.
The pronouncements that are being made by the AASB in respect of the for profit
organizations will always remain compliance with the international financial reporting
standards that are being issued by the International Accounts Standards Board. This is
done for ensuring that the reports that are being prepared by the for profit entities in
addition to complying with the standards that are issued by the AASB also comply with
the standards that are being issued by the IFRS (Beams et al. 2017).
At present the AASB has adopted a transaction neutrality program under which the
transactions that are having the same nature and the characteristics must be accounted for
in the same manner by all the entities that are conducting their operations within the
country irrespective of the fact that they are for profit organizations or non-for profit
organizations. In addition to that, no relevance has been given to the fact that they are
public sector companies or private sector companies. This is done unless there are sound
reasons for being different in case of specific circumstances. While engaged in the
process of preparing the new IFRS for the companies due consideration is being given by
the AASB on the fact that they are non-profit entities.
h) Implementation and compliance:
The implementation of the accounting standards are being monitored by the AASB and
the way that these accounting standards are being monitored is ascertained by the AASB.
These implementation and the monitoring process may lead to the requisite changes
being made to the domestic standards or proposal may be sent to the IASB for making the

8FINANCIAL ACCOUNTING
changes in the international standards. Some of the organizations that monitor the
implementation of the standards are as follows:
a) ASIC
b) Australian Prudential regulatory authority.
c) Other federal, state, and territory government regulators.
d) CPA Australia.
Answer to question 3.
Merely the preparation of the various accounting standards for the purpose of financial
reporting and ensuring that they are in compliance with the standards that are prescribe in the
International Financial Reporting Standards is not enough. For ensuring that the same are, being
adopted byte entities all across the country by the entities strong steps are to be taken in respect
of enforcing them. The need for the adherence to the standards that are being issued by the
AASB is stressed in the provisions of the standards that have been set up by the AASB in the
provisions of the corporation act 2001 that is prevalent within the country. As per the provisions
and the conditions that have been laid down by it, the financial statements of the companies have
to be made in accordance with the standards that have been issued until date (Libby 2017). In
addition to that while conducting the audit of the financial statement of the company an opinion
has to be presented by the auditor of the company stating the whether the reports that have been
prepared by the entity is in accordance with the accounting standards or not. This is to be
analyzed by the auditor of the company to determine whether the financial statements of the
company that have been prepared are showing the true and fair view of the financial performance
and the financial position of the company for the respective year (Warren et al. 2015). So this is
seen that the corporation act that is prevalent in the country is the main enforcing legislation that

9FINANCIAL ACCOUNTING
is present to ensure the adoption of the accounting standards in the financial statements of the
company and the auditor of the company has to reaffirm that fact that the accounts have been
prepared in accordance with the accounting standards.
Answer to question 4.
‘ The objective of the general purpose financial reporting is to provide financial
information about the reporting entity that is useful to the existing and the potential investors,
lenders and other creditors in decision making about providing the resources to the entity’ the
statement hold very good in terms of the present scenario of the capital market.
The users of the financial users all across the globe are quite similar though not limited to the
same entities. The primary purpose of going through the financial statements of the entity is to
ensure that the financial performance and the financial position of the company have improved
significantly over the period of last years (Wen 2016). The stakeholders of the company include
the suppliers, government, the lenders of the company, the shareholders of the company and
many other entities like social groups regarding the impact of the company’s overall activities of
the company on the environment and the surrounding society. It is seen that depending on the
needs of the stakeholders the requirement of the information has to be included in the financial
statement of the entity. Some of the users of the financial statement of the entity and their
corresponding needs are as follows:
a) Suppliers:
The ability of the company to repay back the dues that is outstanding due to the purchases
that have been made by the entity from them in the near future.
b) The shareholders of the company:

10FINANCIAL ACCOUNTING
The information that is required by the shareholders of the company is in respect of the
returns that are being generated by the company in respect of them. It is very important
for the shareholders of the company to get assured that the company will be able to give
them good returns in the future with the help of the activities that are being concluded by
them (Callen 2015).
c) Government of the company:
The government is interested in ensuring that whether the company is abiding by all the
rules and regulations that are being made applicable on it but the various regulatory
bodies that are present within the country. In addition to that, the company must ensure
that the company is paying its dues properly in respect of the taxes that are accruing in
respect of the company on the net profits that have been generated by it.
It can be seen that the kind of information that is demanded by all the stakeholders of the
company are interrelated and in the absence of one of them the relevance and the reliability of
other information gets affected. For instance if the company is earning decent profits but is in
non-compliance with the laws and regulations that have been made applicable on it (Maynard
2017). Then in that case, there are high chances that the company is going to face government
interference in the future and this may result in the disruption in the revenue generation
capabilities of the entity. Similarly, if the due payments are being received by the suppliers at
present but the company is not earning sufficient profit. This may result in the non-capacity of
the entity in respect of ability to pay the suppliers of the entity.
Answer to question 5.
The limitation that is being presented by present value as a method used for measuring
the assets and the liabilities of the company are significant in nature. The users of the financial

11FINANCIAL ACCOUNTING
statements of the entity are not to be neglected by the shareholders of the company. The reason
being that the valuation that is being conducted by the entity in respect of the assets and the
liabilities of the entity can lead to significant alterations that are being made to the economic
decisions by the entity (Ramirez 2015). One of the most significant disadvantages that are being
presented by the use of the present value of the entity is the sensitivity of the results to the
discount rates that is going to be used for the purpose of valuation. The reason for this is that the
net present value computations are the summation of the numerous discounted cash flows. The
cash flow that are going to be generated by the assets or the cash flow that are going to flow out
of the company in the future in respect of the liabilities are being converted into their present
value under this method at the same point of time. For this purpose, the discounting rates are
being used in the denominator of the each present value computation. This is a critical step for
the purpose FO determining the present value of the assets and the liabilities that are being
generated by the company. Any small alteration that is being made in the value of the
discounting rate can have an immense impact on the results that are being obtained in respect of
the valuation (Martin and Roychowdhury 2015).
Another major flaw in case of the present value method is that the management of the
company needs to estimate the amount that is going to be generated in respect of the company
from the use of the assets that are being concluded by the company. The problem with the
estimate is that the nature of the estimated figure is subjective and not objective. The reason for
this is that the cash flow that is being presented by the management of the company in respect of
the assets and the liabilities that are owned by the company, is that the cash flows have been
predicted by the company on the basis of the judgement that has been exercised by them in the
matters that were adjudged as significant one to influence the cash flows that are going to be

12FINANCIAL ACCOUNTING
generated by the entity (Nilsson and Stockenstrand 2016). If the judgment that is exercised by
the company in respect of the determination of the future cash flows that are going to be
generated by the assets and the cash outflow that is going to be incurred in respect of the
liabilities of the entity is wrong, then the value recognized in the financial statement of the
company will also be wrong.
Answer to question 6.
Several limitations are present in the AASB 138 in respect of its ability to provide useful
and relevant information to the users of the financial statements. Some of the most significant of
all the limitation that are present within the standard that describes the intangible assets are as
follows:
a) The definition of the intangible assets-
Under the definition of the intangible assets, the scope of the same is very limited.
The reason being that the concept of seperability restricts the recognition of the
significant amount in respect of the intangible assets that are being currently recorded
by the company. The potential assets could have bene the human resources,
reputation of the company, the relationship with the customer, labor relations and the
meaning that is conveyed by the job to the society (Barron et al. 2016).
b) There has been a significant restriction placed by the standard in respect of the
recognition of the brands that have been generated internally, mastheads, titles that
Aare being published, the lists of the customers and all the items that are very similar
in nature and substance. It has been clearly notified in the paragraph 63 that for
recognizing the intangible assets the company cannot recognize the internally

13FINANCIAL ACCOUNTING
generated brands, mastheads, publishing titles, customer lists and the items that have
the same substance (Romer and Romer 2015).
c) As per the provisions that have been stated out in the accounting standard it can be
seen that it allows the recognition of the assets in the financial statement at fair value
if the same have been acquired by way of business combination. This is allowed by it
even if the active market is not present for the assets that have been acquired in
respect of them. For increasing, the relevance of the data that has been presented by
the entity in this respect the standard must ensure that it records the same at a value
that is being ascertained as per the method of fair value measurement as laid down by
the standards that have been laid out by the AASB 13 (Christensen et al. 2016).
d) In the case of the valuation of the assets that are under development or the ones that
are internally generated intangibles the standard suggests that the same must be
recorded only if the following terms and conditions are being fulfilled and the
following demonstration can be presented:
i) The technical feasibility in respect of conducting such activities that will lead
to the completion of the intangible asset for making it available for use or sale.
ii) The intention of the company in relation to making use of it and selling it.
iii) The ability of the company for the purpose of using and selling the intangible
asset.
iv) The availability of the adequate resources, financial and other sorts of
resources for ensuring that the project is being completed and the intangible
asset is being used or sell.

14FINANCIAL ACCOUNTING
v) The ability of the company in respect of the ability to allocate the costs that
have been incurred in respect of the development of the asset in its
development phase to the intangible asset (Narayanaswamy 2017).

15FINANCIAL ACCOUNTING
References
Abdel-Maksoud, A., Cheffi, W. and Ghoudi, K., 2016. The mediating effect of shop-floor
involvement on relations between advanced management accounting practices and operational
non-financial performance indicators. The British Accounting Review, 48(2), pp.169-184.
Barron, O.E., Chung, S.G. and Yong, K.O., 2016. The effect of Statement of Financial
Accounting Standards No. 157 Fair Value Measurements on analysts’ information
environment. Journal of Accounting and Public Policy, 35(4), pp.395-416.
Beams, F.A., Brozovsky, J.A. and Shoulders, C.D., 2017. Advanced accounting. Pearson.
Callen, J.L., 2015. A selective critical review of financial accounting research. Critical
Perspectives on Accounting, 26, pp.157-167.
Christensen, H.B., Nikolaev, V.V. and WITTENBERG‐MOERMAN, R.E.G.I.N.A., 2016.
Accounting information in financial contracting: The incomplete contract theory
perspective. Journal of accounting research, 54(2), pp.397-435.
Dutta, S. and Patatoukas, P.N., 2016. Identifying Conditional Conservatism in Financial
Accounting Data: Theory and Evidence. The Accounting Review, 92(4), pp.191-216.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to
Behavioural Accounting Research (pp. 42-54). Routledge.
Martin, X. and Roychowdhury, S., 2015. Do financial market developments influence
accounting practices? Credit default swaps and borrowers׳ reporting conservatism. Journal of
Accounting and Economics, 59(1), pp.80-104.

16FINANCIAL ACCOUNTING
Maynard, J., 2017. Financial Accounting, Reporting, and Analysis. Oxford University Press.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..
Nilsson, F. and Stockenstrand, A.K., 2016. Financial Accounting and Management Control.
Springer International Publishing: Imprint: Springer,.
Ramirez, J., 2015. Accounting for derivatives: Advanced hedging under IFRS 9. John Wiley &
Sons.
Romer, C.D. and Romer, D.H., 2015. New evidence on the impact of financial crises in advanced
countries (No. w21021). National Bureau of Economic Research.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Warren Jr, J.D., Moffitt, K.C. and Byrnes, P., 2015. How Big Data will change
accounting. Accounting Horizons, 29(2), pp.397-407.
Wen, L., 2016. Integrate Video-Based Lectures into Online Intermediate Accounting II Course
Learning. Business Education Innovation Journal, 8(2).
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.