An overview of Australian external reporting regulationFinancial accounting is a course of action that involves collecting and processing financial information to enhance decision making within an organization and other external parties. Financial accounting is heavily controlled to safeguard the information rights of outsiders who are not engaged in the day –to-day running of an organization. According to the framework of grounding and presenting financial statements discharged by the Australian Accounting Standards Board (AASB) in July 2004, users of general finance statements include; governments and government agencies, financiers, suppliers, investors (present and potential), employees, customers and the general public.
Some users do not have the influence to command exact information to satisfy their requirements. They rely on general purpose financial statements that generally meet the information requirements of common users towards satisfying their information needs. The statements need to meet the terms and accounting standards outlined by the AASB. An example is the financial statements and the corresponding notes contained inside an annual report issued to shareholders in an annual general meeting (Deegen 2010). Principal bodies involved in formulating, interpreting and/or putting into effect accounting policies in Australia are; the Australian Securities and Investments Commission (ASIC), the Financial Reporting Council (FRC), the Interpretations Agenda Committee, the Australian Securities Exchange (ASX) and the Australian Accounting Standards Board (AASB).
Over a period of the past 10-13 years, the government of Australia has been regulating the development of accounting standards. The elimination of bodies such as the Australian Accounting Research Foundation (AARF) has reduced Australian accounting profession self-governance. The commonwealth parliament passed the new accounting standards development deal effective from 1 January 2000 in October 1999.
They increased the functions of the AASB by disbanding the Public Sector Accounting Standards Board. However, the AASB currently depends on standards formed by the International Financial Reporting Standards (IFRS) (Deegen 2010). The Australian Securities and Investments Commission (ASIC) was established in July 1998 with an intention to increase its mandate. It replaced the Australian Securities Commission (ASC) that was founded in 1969 replacing the National Companies and Securities Commission (NCSC). ASIC is in charge of corporation regulation in Australia. The commission is self-governing of state parliaments or state ministers and accounts directly to the commonwealth parliament and the treasurer.
ASIC administers the corporations act. The act outlines the duties of company directors. This includes their character, order of preparation, lodgment and circulation of financial statements (Deegen 2010). The Australian Accounting Standards Board (AASB) was established on 1 January1991. The board consists of a consultative group, focus groups, project advisory panels and interpretation advisory panels. The board’s functions are outlined in the ASIC act under section 227. According to section 334 of the corporations act, the main function of the board is to craft accounting standards that can be legally enforced.
Other functions are; development of an abstract framework, and to take part in and add to the enactment of a unified position of accounting standards worldwide. As a result of the disbandment of the PSASB in 2000, the AASB standards apply to all types of entities. Majority of the standards were reviewed in 2003-2004. The board reports to the FRC. The board has one fulltime chairperson and nine other members selected by the FRC. The Interpretations Agenda Committee oversees and evaluates matters of enclosure in the AASB’s job plan (Deegen 2010).