Day 5 Writing Practice

The framework of accounting in Australia

It is important for us to understand the major guidelines in Accounting, the accounting standard, and the Accounting Standard Board framework 

The Australia accounting standards were issued by AASB in order to meet both public and private sector needs. With implementing international accounting standards, the AASB produce Australian’s own accounting standards that complied with local situation. However, these accounting standards can not override the concept of international accounting standard. The procedure of producing accounting standard in Australia is called the 'due process’. In this process, the standards are proposed, draft and published by AASB. Then the interested group such as CPA or ICAA will join the public consultation to debate whether this standard show be accepted or rejected. This process can be influenced by the large company who tends to limit the information disclose to the public. Contrast with these large companies, the public community, especially the investor and creditor would prefer a stricter accounting standard in order to reveal more information. Therefore, it assists them to make more accurate decision based on the company’s financial position. 

On the other hand, the conceptual framework is more like the generally accepted rules, which provide directions of measurement procedure and the appropriate method of evaluating and reporting financial information. It defines the entity that needs to prepare general-purpose financial reports to support shareholder/investor with materially information. Hence they can make more precise decisions on allocation of resources. In addition, addition, the framework also outlines the qualitative characteristics of financial reports. Consequently, we can apply these principles on evaluation on the financial report effectiveness. For instance, the understandability can be easily measured if the report is intelligible to you. The report shall be comparable both vertically to other businesses' report and horizontally with reports in different period of time. The report matches the 'relevance' criteria if there is none of the information misstated or not included will significantly affect the decision made by its user. The reliability can be maintained by presenting transaction and other important events faithfully, with prudence and free from bias. 

In conclusion, the accounting standard is enforced by the federal law, and the conceptual framework has the intrinsic of ethical obligation. Nevertheless, both are the foundation of regulation in the accounting system. Therefore, it is crucial for us to master them.