Financial Accounting Report: AASB and Qualitative Information

This report provides an overview of the importance of financial information for businesses and stakeholders, emphasizing the role of qualitative characteristics as defined by the Australian Accounting Standards Board (AASB). It discusses how AASB amendments aim to make financial information more useful for investors, lenders, and the public. The report delves into the qualitative characteristics, including understandability, relevance, freedom from error and bias, and faithfulness, highlighting their significance in financial statements. It further analyzes how these characteristics impact decision-making by investors, lenders, and management, and the importance of adhering to AASB guidelines. The report emphasizes the role of financial information in assessing a business's performance and making informed decisions, and the overall objective of AASB to provide information that aids investors and lenders in their decision-making processes.

BAO2202
Financial Accounting
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Abstract
The report portrays the requirement of information for the business entity and other
parties associated with the business entity. Information is important for any kind of business to
remain competitive in the market. AASB has made certain amendments to make the information
more useful for the investors, lenders and for general public. Proper information helps in
deciding not only the future aspects but it also analyzes the financial performance of the business
entities (Amendments to the Australian Conceptual Framework, 2013). Thus qualitative
characteristics of information play a significant role. It suggests that information provided by the
reporting agency is required to posses’ qualitative characteristics of information. Various
features such as materiality, relevance, error and bias free, faithfulness etc. in addition to this it is
also important to effectively implement these concepts in business so as to gain maximum
output.
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Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................4
Concepts of Qualitative Characteristics of Financial Information..................................................4
Conclusion.......................................................................................................................................6
References........................................................................................................................................7
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Introduction
The role of information has certainly become quite significant in the changing and
dynamic environment. For any sort of business a proper information base has become a prime
important aspect. Information which is readily available to those who required that can help in
making their business profitable. When it comes to financial statements, information plays a
highly significant and complex role. On the basis of information, the investors decide to invest or
not to invest in the same (Whittington, 2008). The financial statements represent public image of
the company in the market. Information which is readily understandable to users is effective
which means information which is presented in a proper form and format can support the
performance of the organization. On the basis of the same, the business organizations decide
their future aspect and actions (Amendments to the Australian Conceptual Framework, 2013).
The report figures out the importance of qualitative characteristics of financial statements in
concern to AASB. In addition to this it also analyses the importance of qualitative information to
those who requires the same such as the investors, shareholders and general public.
Concepts of Qualitative Characteristics of Financial Information
The Australian Accounting Standards Board is an agency of Australian government that
develops and maintains financial reporting standards applicable to all those companies that got
listed in the Australian Stock Exchange. AASB has taken various steps to work in compliance
with the IASB (International Accounting Standards Board). It has amended its own regulations
so that in order to follow the accounting standards mandated by the IASB properly (Birt,
Muthusamy and Bir, 2017). The reconsideration of qualitative aspect of financial statements will
enhance the performance of the business houses. AASB has made amendments in its previous
guidelines in order to compliance with the principles of general accounting and incorporating of
qualitative aspects of the financial statements so that people who require information can use the
same. There are several features which makes information more useful for the user (AL-
Shatnawi, 2017). The first such feature is understandability; it is important that information
should be readily available and understandable to the users of financial statements. It is also a
good practice to present information with certain additional notes that makes it possible to clarify
the information in case of any confusion. Another aspect is the relevance, the information
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provided is required to be relevant for its users, and the information should influence the
economic decision of users.
It is also important that information should be free from all kinds of material errors and bias, it
should not be misleading to its users. Thus information is requiring presenting all the financial
events in a faithful manner. Information provided is required to be material which means if it is
omitted it could influence the decisions of users about a specific business organization (Stickney,
Weil, Schipper and Francis, 2009). It is an entity specific aspect if a business organization.
Another important characteristic is faithfulness; financial reports present the performance of
business organization in a figures and numbers. So in order to be relevant it also requires
presenting the information in a faithful manner. It is important to effectively implement the
qualitative characteristics in order to gain maximum information (Amendments to the Australian
Conceptual Framework, 2013).
AASB has carried out various amendments in relation to its guidelines in order to make it
easier for the business organizations to follow and work in compliance with the procedures
without any difficulty. The major objective of financial information is to report about the
financial status of a business entity which can be useful for its existing and potential investors,
lenders and other creditors in making decisions about the resources of the business organization.
Information plays an important role for investors as it helps the investor to decide whether to
hold or to sell shares or to hold equity or debt instruments (Amendments to the Australian
Conceptual Framework, 2013). It is quite common that many investors, lenders and other
creditors do not reporting organizations to provide the direct information to them, instead they
rely more on the financial statements and annual reports which is quite helpful as they provide
them the required information (Burton and Jermakowicz, 2015). They are the primary users
which require information for general purpose. General purpose financial reports are designed
not to show the performance of the business organization in the market but they are helpful in
providing information which can be used effectively by the lenders, investors and shareholders to
estimate the value of the business entity.
Apart from the lenders and investors, the management of the business entity is also
interested in the financial reports of the company because it is quite helpful in framing the future
strategies and planning. In addition to this, regulators and public may also find general purpose
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financial reports useful. The financial reports are based on a wide spectrum of estimations,
projections and judgments rather than on exact figures. It provides an idea about the performance
of company on wide scale (Alexander, Britton and Jorissen, 2007). It provides information about
the financial position of the business entity, in addition to this it also provides information about
the economic resources of the company (Porter and Norton, 2007). Both the types of
information provide useful data for decisions about providing resources to the entity. The
objective of AASB is to provide information that can help investors and lenders to decide their
future course of action. The economic resources and claims of a business entity can be change
due to various reasons other than financial performance such as issue of additional shares.
Information regarding this change is essential to provide users a complete understanding as to
why the business entities economic resources got changed; in addition to this the information
also helps in analyzing the future consequences on the performance of the business organization
(Amendments to the Australian Conceptual Framework, 2013). AASB has made it mandatory for
all the business entities to comply with the qualitative characteristics provided by the agency.
This was done in order to maintain international accounting and reporting standards in the
country.
Conclusion
The role of information has become quite important in the dynamic environment, as lack
of information can be quite harmful for business organizations and the parties associated with it.
Information is helpful in deciding the future courses of action. The report has analyzed the
various aspects of information in context of AASB. General financial reports are helpful for
investors and lenders, but adding a qualitative touch to the same can enhance the information
provided by the reporting agency. Various aspects that make information qualitative are
discussed in the report. The information helps the investors, lenders, general public and even
management to decide the future prospects.
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References
Alexander, D., Britton, A. and Jorissen, A. 2007. International Financial Reporting and
Analysis. Cengage Learning EMEA.
AL-Shatnawi, H.M. 2017. Measuring the Quality of the Interim Financial Reports Using the
Qualitative Characteristics of the Accounting Information and its Effect on the Investment
Decisions According to the IAS 34. Vol 9, No 5.
Amendments to the Australian Conceptual Framework. 2013. AASB Framework.
Birt, J.L., Muthusamy,K. and Bir, P. 2017. XBRL and the qualitative characteristics of useful
financial information", Accounting Research Journal, Vol. 30 Issue.
Burton, G.GF. and Jermakowicz, E.K. 2015. International Financial Reporting Standards: A
Framework-Based Perspective. Routledge.
Porter, G.A. and Norton, C.L. 2007. Financial Accounting: The Impact on Decision Makers.
Cengage Learning.
Stickney, C.P., Weil, R.L., Schipper, K. and Francis, J. 2009. Financial Accounting: An
Introduction to Concepts, Methods and Uses. Ed. 13th ,Cengage Learning.
Whittington, G. 2008. Fair Value and the IASB/FASB Conceptual Framework Project: An
Alternative View. Vol 44, Issue 2.
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