Financial Reporting Council: the Use of a Sector Neutral Framework for the Making of Australian Accounting Standards

The issue of adoption of international financial reporting standards (IFRSS) in Australia has been controversial issue since the first time Australian Financial Reporting council (FRC) announced the policy in 2002. Many believe that IFRSS adoption will lead to great advantages such as enhance financial report comparability, improve quality of financial reporting, attract more foreign investor, and other significant advantages. However, some also believe that the adoption merely result in disadvantages and cost for Australian business, accounting profession and even Australian government.

It is an important function of any organisation to regulate the external financial reporting. The legislation that governs the external financial reporting is Financial reporting act 2013 (FRA) and The companies act 1993 (Deegan & Samkin, 2013). The Regulation is required to safeguard the interests of those using the financial information but do not directly participate in the business. These users may be both primary and secondary. The information provided by the financial statements are used for making economic decisions by its users (NZASB, 2016a). The regulation of external financial reporting does not only help the external users

In September 2002 the IASB and the FASB agreed to work together, in consultation with other national and regional bodies, to remove the differences between international standards and US GAAP. (Dorata, 2008) However, the convergence of IFRS and FASB is coming to the end. (Golden, 2013)

* Be familiar with and guided by all relevant standards which further define how legislation is applied.

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

PART A: In this module, we explore how what is deemed right or wrong by society find its way into a law. Sometimes institutionalization occurs as a voluntary standard, an industry standard, or as a requirement by law. Consider an industry such as retail or sales. Give me an example of each of those standards.

The Financial Accounting Standards Board goes through an elaborate information gathering process before issuing their standards. Firstly, an issue is identified and placed on the Board 's agenda by the Emerging Issues Task Force. Secondly, a task force of knowledgeable persons is appointed to advise the Board on the issue. Thirdly, the Board 's technical staff investigates the issue. Fourthly, a discussion memorandum on the issue is then written and distributed to interested parties. Fifthly, the

The purpose of creating FASB is to establish standards of financial accounting that control the establishment of financial reports by nongovernmental organizations. This instance is identified as the number one authority by the SEC and the American Institute of Certified Public.FASB Accounting Standards Codification serves as a reference guide of authoritative standards for accounting and reporting, to be applied by nongovernmental organizations. Some examples are; ASC 830-230-55-1 that can identify as Statement of Cash Flows for Manufacturing Organization with Foreign Operations, ASC 926-330-35-1 can be justified as Products Held for Sale, ASC 954-440-25-2 identified as Continuing Care Retirement Community, ASC 505-20-50–1 means Equity, Stock Dividends and Stock Split and Disclosure, ASC 710-10-05-6 describe as Employees Compensations..

As the business environment grows and companies find new ways to expand into their respective - or even new – markets, it is important that reporting standards stay up to date with changes and continue to assist companies in providing their users with useful accounting information. Information is labelled as being useful when it meets the

The FASB mission is to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernment entities that provides decision- useful information to investors and other users of financial reports.” (www.FASB.org)

Secondly, the claim made by ‘free market’ perspective to treat accounting information as other normal goods should be rejected because accounting information are unlike normal goods such as bread or house. It is a public good because the use of it by one investor does not prevent the usage of others (Hendriksen & Breda 1992, p.247). As non-investors have right to use the accounting information such as income statement and balance sheet as much as investors, investors will not agree to pay for the financial reports because others will become free-rider; thus, this prevent the function of normal pricing system of accounting information. As no income is received by producers of financial reports, they will not willing to produce it or will underproduce it so ‘free-market’ perspective is not applicable. Under this circumstance, Demski and Feltham (cited in Deegan 2009, p.65) states that for public good like accounting information, a more collective approach to its production is more desirable. This can be achieved by legislatively regulating the productions of accounting information so companies will produce the accounting information to meet the demands of external users and thus ensuring efficient capital market.

The country selected for this study is the United Kingdom (UK). UK Generally Accepted Accounting Practice (GAAP) has been in place for a long period of time and was harmonized in 2005 so as to comply with the international accounting standards. The UK embraced the principles of the International Financial Reporting Standards (IFRS) in 2005 after the European Union (EU) mandated that all members that were publicly listed companies be subject to reporting under the International Accounting Standards (IAS). This was to help facilitate that those listed companies could easily be compared to onr other on their performance and transparency was improved since they were now subject to the same principles of reporting. Companies in the United

Regulation is a topic that has been debated for many years and will continue to be debated for years to come. In the business and finance sector, there are many regulators including but not limited to the Australian Securities and Investment Commission (ASIC), Financial Reporting Council (FRC), Australian Prudential Regulation Authority (APRA) and the Australian Accounting Standards Board (AASB). While these are only a few regulatory bodies in the industry, they all have their own set of regulations to enforce. ASIC, for example, regulate the Corporations Act 2001 along with the Australian Accounting Standards. While ASIC ensure that organisations adhere to the regulations laid out before them, the AASB create and develop those

The Financial Reporting Council (FRC) has recently released four new standards: FRS 100 Application of Financial Reporting Requirements; FRS 101 Reduced Disclosure Framework; FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and FRS 103 Insurance Contacts. FRS 100 basically describes who does what with the new UK GAAP. It describes which principles apply to which type of business; when a business can apply the reduced disclosure framework; and when a business should follow a statement of recommended practices, or SORP. FRS 101 lays out a reduced disclosure framework for entities. Certain entities can choose to use this reduced disclosure framework while creating their financial statements. FRS 102

Standards- extent of work needed, rfelative complexity materiality, effectiveness of governance, probability of significant erros, and