The paper "Australian Accounting Standards" is a wonderful example of a literature review on finance and accounting. It is important for professional accountants to use accounting standards when preparing different financial statements. It helps them make financial reports which can be understood by different accounting information users (Atiase, 1985). The purpose of AASB is to implement the policy of the financial report council by using international accounting standards. There are other sections of the currently available Australian conceptual framework that overlap with the framework used to make and present financial reports introduced by IASB are replaced to increase their consistency.
The introduction of accounting standards ensures that there are uniformity and comparability which enable different companies to compare their financial performance. A) Review current AASB framework AASB is introduced to implement the policies of the council’ s accounting standards which use IASB to be used in the preparation and presentation of accounting information after 1 January 2005. It is meant to replace the available standards with Australian standards that have the same applications as those in IASB. In addition, the part of the Australian conceptual framework (SAC 3 Qualitative Characteristics of Financial Information and SAC 4 Definition and Recognition of the Elements of Financial Statements) that also covers the Framework for the Preparation and Presentation of Financial Statement Introduced by IASB is also replaced by this framework to increase consistency (Kothari, 2001).
The importance of this framework is that it is able to set out the concepts that are can be used in the preparation and presentation of accounting reports to different users who have no accounting knowledge. This framework also helps AASB in the creation of accounting standards to be used in Australia in the future.
It also supports the evaluation of the available standards so that there is an improvement in the existing and proposed accounting standards and their pronouncements. The same framework is also vital to AASB in encouraging the harmonization of all the accounting rules and regulations, procedures, and principles that are used during the preparation of accounting reports (Kothari, 2001). It achieves this by ensuring that there is a proper basis that is able to minimize the number of ways in which accounting principles are treated according to the Australian accounting standards. The introduction of this framework helps different organizations in preparing financial statements when using Australian accounting standards in areas that have not to form part of the Australian accounting standards subjects.
It is also used by the auditors when formulating their audit opinion to determine whether the financial reports are made in accordance with Australian standards (Atiase, 1985). This framework also effective in supporting different users to interpret accounting information that is in the financial report which is made in accordance with the accounting standards of Australia (Bamber, 1986).
It is also important in assisting stakeholders with an interest to work with the accounting board with essential information concerning the best approach that can be used in formulating the accounting standards as required by the Australian Government. B) Review their annual reports for the reporting year 2014. The review of Telstra financial reports This is a telecommunication company in Australia that provides different communication services and has a high competitive advantage with other companies in the same industry. This company provides 16.7 millions mobile services; 7.3 millions fixed voices services and 3.2millions retail fixed broadband services.
The financial reports of this company are prepared in accordance with Australian accounting standards (Kothari, 2001). The net profit for this company for the year 2014 was A$3,661 million after the removal of income tax expenses and the cost of other operating activities. The application of this transaction was done as per the requirement of International accounting standards. The earnings before interest and tax were A$6,216 million which show a decline from that of 2013.
In the financial report of this company, the accrual accounting method was used and it helps to record all the accounting transactions immediately they occur but not when cash is received or paid.
Atiase, R. (1985). Predisclosure information, firm capitalization, and security price behavior around earnings announcements.Journal of Accounting Research 23 (1): 21-36.
Ball, R., and P. Brown. An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research (Autumn 1968): 159-77
Bamber, L. (1986). The information content of annual earnings releases: A trading volume approach. Journal of Accounting Research 24: 40-56.
Bamber, L. (1987). Unexpected earnings, firm size, and trading volume around quarterly earnings announcements. Accounting Review 62: 510-32.
Beaver, W., 1968. The information content of annual earnings announcements. Journal of
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DeFond, M., Hung, M., Trezevant, R. (2007). Investor protection and the information content of annual earnings announcements: international evidence. Journal of Accounting and Economics 43: 37-67.
Griffin, J., Hirschey, N., Kelly, P. (2010). How important is the financial press in global markets? Working Paper, the University of Texas at Austin.
Kothari, S. P. (2001). Capital markets research in accounting. Journal of Accounting and Economics 31: 105-231.