Accounting Standards and Bodies (ACF) PDF

Accounting Standards - Standards are instructions and guidelines for financial reporting policies and practices - They are technical documents that outline how business should complete specific elements in recording transaction - They are mandatory (legally required) fo...

Accounting Standards - Standards are instructions and guidelines for financial reporting policies and practices - They are technical documents that outline how business should complete specific elements in recording transaction - They are mandatory (legally required) for all reporting entities Purposes and Advantages of Accounting Standards 1. Protecting External users - Help external users by ensuring that the accounting reports of public companies contain relevant and faithfully represented information on the performance of the company - Assisting external users such as creditors and investors, to analyse and make informed judgements about entities, facilitating the provision of financial information, providing for comparable reports 2. Assisting directors - Assist the directors of companies in performing their duties - The director of a reporting entity must take reasonable steps to ensure that the financial statements accurately reflect the performance of a company - Assisting prepares of financial reports by giving them a framework and benchmarks, facilitating accountability, promoting accurate reporting - Ensure that the directors of public companies are held accountable for the large amounts of money that are usually invested in these organisations 3. Providing confidence to investors in the Australian capital markets - Concern for shareholders, reflected in high quality standards, will have a profound effect on performance of individual companies and the health of the economy - Enabling Australian entities to compete effectively overseas, helps reducing the cost of capital Accounting Bodies (1) Financial Reporting Council (FRC) - Oversees appointments and budgets for AASB and provides it with broad strategic direction - Has a major indirect influence on the development of the Accounting Standards that companies are required to follow Functions - Oversees accounting standard setting process in Australia - Acts as an advisory body to the AASB - It monitors the process for adopting international standards (2) International Accounting Standards Board (IASB) - Appointed, funded and overseen by IASCF. Functions - Develop a set of high quality global accounting standards which are transparent and comparable (Standards are IFRS) - It works with national accounting standards setters around the world such as Australia’s AASB (3) Australian Accounting Standards Board (AASB) - Independent accounting standards organisation, based in Melbourne Functions - Develop a conceptual framework, which does not have the force of an accounting standard, for the purpose of evaluating proposed standards - Develop and issue accounting standards that have the force of laws for all reporting entities in Australia - AASB makes accounting standards for purpose of Corporations Act and must refer to IASB in the preparation of Accounting Standards for use in Australia - Participates in and contributes to the development of a single set of Accounting Standards for worldwide use (4) Australian Securities and Investments Commission (ASIC) Functions - ASIC issues interpretations of accounting standards in the form of Practice Notes - It monitors compliance with the standards in relation to companies which as reporting entities - ASIC may refer practice issues to the AASB to consider possible amendments and changes to accounting standards - It efficiently receives, processes and stores information given to them, - ASIC regulates and informs the public about Australian companies (5) Australian Securities Exchange (ASX) Functions - ASX provides for the listing and transfer of equalities of listed public companies - ASX has a detailed set of regulations called Listing Rules - Provides regulation of public companies and surveillance to ensure that regulations are followed (6) Lobby groups - Lobbyists are group which attempt to influence standard setting with reference to their industries goals or interests Lobby groups work through 1. Being appointed as member of FRC or AASB 2. Being appointed to a committee or advisory group established by AASB or FRC 3. Being involved in the standard setting process 4. Engaging in public debate on issues relating to accounting standards