Essays on Advanced Financial Accounting Essay

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“AUSTRALIAN ACCOUNTING STANDARDS BOARD FRAMEWORK with a detailed analysis of the different Measurement Bases. ”(word count: 2,485)ABSTRACTThe conceptual framework provided for by the Australian Accounting Standards Board (AASB) addresses the preparation and presentation of general purpose financial statements which caters to a wide array of users. Users of financial information include investors, employees, lenders, suppliers and other trade creditors, customers, government and its agencies and the general public. These users are considered stakeholders because their reliance to the reported financial information by the business entity will have a great impact to the decision they will be making.

Decision making is a critical process to be made by the entity and its stakeholders because this process can either make or break the entire chain as a whole. Comprehension about the financial information presented is a must, so that a good decision can be made. The financial reports made by the reporting entity should have the attributes of understandability, reliability, relevance and comparability. Measurement is the process of assigning financial values to the elements of the financial statements which provides understandable, relevant, reliable and comparable financial information appropriate for making and assessing decisions about the allocation of scarce resources of the entity.

There are several measurement bases provided for by the AASB Conceptual Framework and it include but not limited to; historical cost, value in exchange (fair value), value in use (entity-specific value), net realizable value and present value. The use of any of the measurement bases aforementioned should help the firm prepare and present their financial reports in the most understandable, relevant, reliable and comparable way possible. INTRODUCTIONIn accordance with the Australian Accounting Standards Board (AASB) Conceptual Framework, the framework caters to general purpose financial statements that a business entity prepares and presents annually (or for interim periods) to meet the common information needs of a wide range of users external to the entity.

Hence, the framework does not necessarily apply to special purpose financial reports such as reports to tax authorities, reports to governmental regulatory bodies, prospectuses prepared in connection with securities offerings, and reports prepared in connection with business combinations. The principal classes of users of financial statements are present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the general public.

All of these categories of users rely on financial statements to assist them in decision making. The common interest of the users of these financial statements is to know the ability of an enterprise to generate cash and cash equivalents and of the timing and certainty of those future cash flows. The primary responsible for preparing and presenting the entity’s financial statements is the management of the enterprise. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.

There are four (4) qualitative characteristics that financial statements should possess. These attributes are understandability, relevance, reliability and comparability which help the users of financial information to see the clear picture of the entity’s financial position and performance as well as the cash inflows and outflows.

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