Australian Accounting Setting Board Analysis

Decent Essays
The users of the general purpose financial statements of the SMEs are interested in some specific disclosures (Deegan 2014). For example, these disclosures are solvency, liquidity, measurement uncertainties, choices of accounting policy, encountered transactions, short-term cash flows, liabilities recognition, obligations and contingencies (Australian Accounting Standard Board 2010). Following the requirements of IFRS for SMEs, users can interpret the information which they need with less unrelated disclosures. The designation of IFRS for SMEs bring transparency by allowing users to improve economic decisions due to the quality of financial information. Briefly discuss the approach that Australia Accounting Setting Board (AASB) has taken…show more content…
The very first concern relates to the subject of recognizing and measurement requirements compared to the full IFRSs. Moreover, there is criticism about the hierarchies for choosing accounting policies, since its consequence is the disparity of accounting policy choices in different entities (Australian Accounting Standard Board 2010). The other concern is about the training and education costs for both tertiary and profession level. AASB also requires the IFRS for SMEs to include more topics and treatment options in order to meet its stand-alone objective. Several comments about the suitability of IFRS for SMEs for Tier 2 were noted by AASB. For example, favorable accounting policies for Australian companies have been replaced; subsidiaries are forced to adapt to new policies since parents comply with full IFRSs; changing in the requirements of recognition and measurement do not produce any sort of future economies for SMEs in Australia. Therefore, AASB will choose to continue monitor and assess the possibility of adopting IFRS for SMEs in the future, and adopts RDR as an alternative since there are overwhelmingly positive support for it over the IFRS for…show more content…
The first Tier 1 is not for SMEs, since it requires the companies have public accountability. The Tier 2 requirements and disclosures are familiar to IFRS for SMEs, but it cannot be directly compare (Australian Accounting Standard Board 2010). These two Tiers adopted the definition of “public accountability” which is based in the IFRS for SMEs. Even though Tier 2 uses the (RDR) rather than the IFRS for SMEs, RDR is still based on the available requirements and accounting policy options to identify recognition and measurement disclosures. Besides, RDR applies the two basic principles under IFRS for SMEs for determining disclosures, which are “user need” and “cost benefit”, to reduce the required disclosures if there are differences between RDR and IFRS for SMEs in the options of measurement accounting policy and
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