The topic of the paper is the “The development of the accounting standards of the Australian Accounting Standard Board after the end of the G4+1.”
I want to summarise the recent standardisation progress both international and in the view of Australia, and have a closer look on the Australian accounting environment. What was the G4+1, and why did it disband? What was the Australian reaction on the End of the G4+1. What will the future of international and Australian accounting look like?
I have chosen the topic because I am currently staying at the Australian Defence Force Academy and studying at the University of New South Wales. Australia has been one of the major standard setters in the world and has had a deal of influence on international accounting standards, although it is a relatively small economy in the world.
Hardly a day passes without problems of financial reporting appearing in the international press. Recent events like the scandals of Enron, Worldcom, and Xerox show the need for reasonable accounting. International accounting is an actual problem to be solved and a future chance for all kinds of businesses.
After the introduction I will first present the accounting environment of Australia and its institutions. Then I will discuss the development of international accounting and the G4+1 group and its dissolution. I will have a look on the “Harmonisation Project” and what happens in Australia after the end of the G4+1. At the end I will illustrate the relation between IAS and AAS, and give a conclusion.
For my work I used several recent books on Australian financial accounting that are used by institutions across Australia, various Journals on accounting, government reports, and especially Publications of the standard setting bodies.
Contents
Abbreviations
1. Introduction
2. Accounting in Australia
3. Development of International Accounting
3.1 The End of the G4+1
3.2 The IASB
3.2 Integration of Australia into international economy and accounting
4. “Harmonisation Project”
4.1 Australia – New Zealand Harmonisation
4.2 International Harmonisation
4.3 Contra Harmonisation
4.4 Public Sector
5. Conclusion
Abbreviations
Abbildung in dieser Leseprobe nicht enthalten
The Development of the Australian Accounting Standards after the end of the G4+1
1. Introduction
The topic of the paper is the “ The development of the accounting standards of the Australian Accounting Standard Board after the end of the G4+1.”
I want to summarise the recent standardisation progress both international and in the view of Australia, and have a closer look on the Australian accounting environment. What was the G4+1, and why did it disband? What was the Australian reaction on the End of the G4+1. What will the future of international and Australian accounting look like?
I have chosen the topic because I am currently staying at the Australian Defence Force Academy and studying at the University of New South Wales. Australia has been one of the major standard setters in the world and has had a deal of influence on international accounting standards, although it is a relatively small economy in the world.
Hardly a day passes without problems of financial reporting appearing in the international press. Recent events like the scandals of Enron, Worldcom, and Xerox show the need for reasonable accounting. International accounting is an actual problem to be solved and a future chance for all kinds of busineses.
After the introduction I first present the accounting environment of Australia and its institutions. Then I will discuss the development of international accounting and the G4+1 group and its dissolution. I will have a look on the “Harmonisation Project” and what happens in Australia after the end of the G4+1. At the end I will illustrate the relation between IAS and AAS, and give a conclusion.
For my work I used several recent books on Australian financial accounting that are used by institutions across Australia, various Journals on accounting, government reports, and especially Publications of the standard setting bodies.
2. Accounting in Australia
Until 1981, each state and territory of the Commonwealth of Australia had its own way to deal with incorporated companies and their external financial reporting. In 1978 the state governments and the federal government agreed to develop a national legislation. The Securities Industries Act was enacted by the federal government in 1980. The development of a national harmonisation was not completed before 1990 and the Australian Corporations Law came into force on 1 January 1991.
The Corporations Law[1] requires that directors of public companies as well as of private sector companies must present shareholders a “true and fair financial statement.”[2] Financial Statements are defined in the law as “a profit and loss statement for the year; and a balance sheet as at the end of the year; and a statement of cash flows for the year; and if required by the accounting standards, a consolidated profit and loss statement, balance sheet and statement of cash flows.”[3] The “true and fair” requirement is a general criterion without a definition in the Corporations Law. But for accountants “true and fair” has to deliver all information of a material nature for the financial report.[4]
The Australian Securities and Investments Commission (ASIC), established in 1989, is solely responsible for administering the Corporation Law. The ASIC reports directly to the Commonwealth Parliament and is therefore independent of State ministers and State parliaments.
There are three other bodies involved in formulating sources of external financial reporting regulations in Australia besides the Australian Securities and Investment Commission. The Australian Accounting Standards Board (AASB), the Australian Stock Exchange (ASX), and the Australian Accounting Research Foundation (AARF).
The institution that is responsible for the development of accounting standards is the Australian Accounting Standard Board. In 1998 the federal Government modified the standard- setting environment in Australia with the Corporate Law Economic Reform Program (CLERP). The Public Sector Accounting Standard Board (PSASB) has been disbanded after CLERP. The AASB took over its function to formulate Accounting Standards for the use in the public sectors. The AASB reports to the Financial Reporting Council (FRC). The FRC has an oversight function and it appoints the nine part- time AASB members. There are 13 people within the FRC who are nominated by a number of interest groups. The full- time chairperson of the AASB is appointed by the Federal Treasurer.[5] (see Figure 1) The Board affirmed a commitment to open processes, including public meetings on all technical matters and greater use of the Board’s website for communicating with constituents.[6] There were no public meetings until 2000. Another new function of the AASB is “to participate in and contribute to the development of a single set of accounting standards for world-wide use.”[7] That shows the governments commitment to the international harmonisation of accounting standards.
The Australian Stock Exchange Ltd was established in 1987 as a private organisation. Prior to that each state and territory of Australia had its own stock exchange, although they were collectively known as the Australian Association of Stock Exchanges (AASE). The ASX has trading floors in each capital city of Australia. For entities that have securities listed on the ASX there are further reporting requirements above those provided by the law, but only according to the AASB standards. Corporations have to provide at least four reports. A half-yearly report, continuous reports, a preliminary final statement, and an annual report. Failure to comply with these rules may lead to the removal from the Board.
The fourth body involved in developing regulations, the Australian Accounting Research Foundation was funded by the accounting profession. The body was responsible for providing technical support to the AASB in the development of Australian Accounting Standards until 30 June 2000. The recent changes give the AASB, which is government controlled, more power to develop standards on its own.
The AARF has lost most of its power. It has maintained its role in setting auditing standards.
Traditionally Australia and New Zealand are closely aligned in many economic, cultural, and financial matters. New Zealand has its own standard setting body, the Financial Reporting Standards Board (FRSB). Singapore, Hongkong and other former British colonies have taken over the Australias Corporations Law or a very similar one. But here is no other country in the Pacific region that uses the AASB for financial reports.
3. Development of International Accounting
There are a number of reasons that led to the development of international accounting.
There have to be reasons, because harmonisation is time- consuming and costly. In the short run cost are higher than the benefits of harmonisation. But in the long run according to the AASB, the benefits of harmonisation will include:
First, increasing comparability of financial reports in different countries.[8] Investors would have to be aware of the accounting policies and procedures of all different countries a company operates in. Investors require transparency and must have confidence that financial information accurately reflects economic performance.
Second, harmonisation would remove barriers to international capital flows.[9] International or national Stock Exchanges often have different reporting requirements than the Business` national legislation has. Australian entities that ie, wish to enlist on the New York Stock Exchange have to use the US-GAAP for their financial reports and performance. German entities willing to enlist on the “Neuer Markt” also need IAS or US- GAAP.
[...]
[1] The Corporations Law
[2] Section 297 The Corporations Law
[3] section 295 (2) The Corporations Law
[4] Craig Deegan “Australian Financial Accounting”, 3rd Edition, McGraw Hill Pty Limited, Australia, 2002 p.6
[5] Michelle A. Sims, “Australian Corporate Accounting”, McGraw Hill Pty Limited, Australia, 2001 p.155
[6] Australian Accounting Standard Board, Media Release, 30 May 2000 found on www.aasb.com.au 13.08.02
[7] section. 227 Australian Securities and Investments Commission Act
[8] Policy Statement 6: “International Harmonisation Policy” paragraph 3
[9] Policy Statement 6: “International Harmonisation Policy” paragraph 3
- Citar trabajo
- Stefan Greite (Autor), 2003, The development of the Australian accounting standards after the end of the G4+1, Múnich, GRIN Verlag, https://www.grin.com/document/32600
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