BAO2202 Financial Accounting Assignment Sample
Here’s the best sample of BAO2202 Financial Accounting Assignment, written by the expert.
Introduction
This paper will develop in-depth understanding regarding the financial accounting system of Australia. In addition, this study will also help in understanding the measurement and recognition issues that is found in financial accounting and reporting process.
Answer 1
The main sources of regulations of financial reporting in Australia are government legislation, Australian accounting standards board (AASB), Australian Securities Exchange (ASX) Listing Rules and Australian Securities and investments commission (ASIC).
Government Legislation
In today’s developing private sector, the most important legislation related to financial reporting requirement is corporation Act 2001. This corporation act 2001 specifies the general requirements related to financial reporting which is complied with accounting standards and also to present true & fair picture of facts and figures.
Australian accounting standards board (AASB)
The role of AASB in financial accounting is to develop a conceptual framework which is responsible for making and formulating accounting standards that have power of law under the legislation act of corporation (Australian Government, 2018). The developed or formulated accounting standards are used by the reporting entities but are not governed by the corporation legislations but it includes those entities that operate in the private sector and not-profit sector respectively.
Australian Securities Exchange (ASX) Listing Rules
The ASX listing rules only applies on those entities whose securities are listed in the security exchange of Australia. The ASX provides various disclosure requirements for entities and the main aim is to ensure that financial information is circulated in a proper and efficient manner on time.
Australian Securities and investments commission (ASIC)
ASIC is a regulatory body which is responsible for monitoring the Company Law in Australia. This source of financial accounting is separate from state government and this body reports directly to the Commonwealth Parliament and Treasure (Henderson et al., 2015). In addition, the company law defines the directors’ responsibility in relative to how the transaction should be recorded and what actually director should present or disclose in financial reports.
Answer 2
The procedure for preparing accounting standards in Australia is made and issued by the Australian Accounting Standards Board (AASB). There is multiple step of process which AASB follows to develop or frame new accounting standard which regulate and restricts the business entities to adopt any kind of ineffective and irrelevant financial standards. This is major task for the AASB to prepare the accounting standards and for that there is participation or contribution is provided by the Institute of Chartered Accountants (ICAI) and other accounting regulatory bodies too. At the same time, while preparing the draft, the government and public sector organizations and other private entities to provide or ascertain their views (Lall, 2015). The accounting standards draft is prepared and issues by the members of AASB for the receiving the comments. In addition, the draft is sent to various outside regulatory bodies such as FICCI, SCOPE, ICSI, CBDT, C&AG, etc for asking their views. After taking consideration from bodies, final draft is prepared by the AASB and submitted to Council of ICAI for further approval (Leung et al., 2014). After that, the final accounting standard is issued under the authority of council and made mandatory after some times.
Answer 3
The accounting standards are enforced in Australia by the three different groups who are responsible for enforcing the standards which are issues by AASB. The three groups named as follows: government, accounting bodies and Australian Securities and Investments Commission (ASIC). However, the enforcement mechanism is employed by these three groups which are considered in turn in the financial accounting system.
Government
Government plays a very significant role in enforcing the entities to adopt or use the accounting standards efficiently and effectively. The government legislation helps entities to follow financial requirements and present all financial facts and figures in true and fair manner (Chua et al., 2012).
Accounting Bodies
There are different accounting bodies which provide support to the entities in managing and handling the financial accounting by enforcing them to use accounting standards. Nowadays, accounting profession attitude towards the accounting standards have changed efficiently (Lall, 2015). The Australian Profession and Ethical Standards Board (APESB) was established in year 2006 which was an initiative of CPA Australia encourages the appropriate professionals to follow the ethical standards for managing the financial reporting efficiently.
Australian securities and investments commission (ASIC)
The ASIC is responsible for developing the enforcement of accounting standard which is issued by the AASB and this help in regulating the company and financial services in order to protect from any future uncertain financial calamities.
Answer 4
The users found very useful the financial information for making the financial decisions very efficiently. The main objective of financial reporting is to provide the fair and true financial information about the business entity for the use to the potential investors, creditor and other lenders in order to make decisions respectively (Nobes, 2014). Generally, it is seen that potential investors, creditors and lenders are the key players or users to whom financial reports are disclosed and directed. The users require the useful financial information in order to assess the future cash flows of the business entity to whom they are evaluating.
In other words, Rahman (2013) clearly stated that financial reports are not designed or prepared for the general purpose use or to show the reporting entity value in the competitive market. Normally, the reporting entity not just prepares the financial reports for the use of management, regulatory bodies or for other public members but also for making the financial investment decisions. For the business entity, financial reporting provides a huge opportunity to attract a large number of investors to invest in the business if business is disclosing a true and fair picture of the financial accounting.
In context to it, it is always mandatory for the reporting entity to use of accounting standards and financial rules & regulations in order to develop or prepare an effective financial report which represents the assets, liabilities, cash inflow and cash outflow and much more of the respective financial year. At the same time, Christensen et al. (2013) also stated that financial reporting information is also used by the reporting entity also for planning any new business idea or bring changes in the existing business scenario and so on. Therefore, it can be stated easily that there is always a need of financial reporting information for making important business decisions related to investment or expansion or diversification of business to large extent.
Answer 5
The present value is defined as the current value of a future sum of money that provides a specified amount of rte of interest on cash flow amount. Moreover, the present value is measured as a fair value measurement method which helps in measuring the future value of the money which taking the risk for achieving a high interest rates on money (Yao et al., 2015). The present value is used by the reporting entity for determining the future value or discounted value or rate of interest on the money as well as found o be very important for measuring the financial value in order to make financial decisions respectively. The best method for measuring the present value is fair value which is treats as market based measurement. This fair value measurement represents the prices of assets on which it is sold or transfers the liabilities.
There are some limitations of using a present or fair value as a measurement base in order to generate the decisions and also to provide the useful information for the users through proper financial statements (Cairns et al., 2011). The major limitation of fair value accounting is to reduce the investor satisfaction level because nowadays, company are using this fair value measurement approach for accounting which develops dissatisfaction among investors because the loss of value results to loss to the income of the investors. The other limitation is that fail value frequently changes with the change in the company earnings and value in the competitive environment (Procházka, 2011). At the same time, the fair value also found to be less relevant, inability to show value of assets and much more affects the business growth and development as this is indicating wrong value of accounting.
Answer 6
AASB 138 “Intangible Assets” distinguishes it as goodwill and as identifiable assets and it include copyrights, patent, trademarks and research & development, television, radio licenses and franchise. Goodwill represents future benefits of the company from assets which are not capable to be identified by any individual and also cannot be recognized separately as well (Halim and Jaafar, 2012). This AASB 138 is followed by the reporting entities in Australia on or after the 1st January, 2005. This AASB 138 helps in comparing the projected measures of intangible assets efficiently.
The limitations of AASB 138 in providing decision-useful information to the users of financial statements are as follows:
- The AASB138 restricts on recognizing the internal generated brands, customer lists, items similar in substance and publishing titles (Hunter et al., 2012).
- The other limitation is related to internal generated intangibles in which it is not allowed to use the fair value as an upper limit on capitalization of cost.
- The definition of intangible assets in AASB 138 states the criteria ‘separately’ in which there is asset i.e., meaningful job conveys useful to society is not considered as intangible assets rather than potential assets such as customer satisfaction & relationship is recognized as a intangible assets (Kang and Gray, 2011).
Conclusion
From the above study, it can be concluded that financial accounting and reporting plays an important role in managing the accounting and financial information for making effective decisions. This study helped me in developing understanding that financial accounting standards and other regulatory bodies are important factors that enforce the business entities to adopt or follow standards as mandatory in their financial reporting.
References
Australian Government. 2018. Accounting Standards. Australian Accounting Standards Board. [Online] Available at: http://www.aasb.gov.au/Pronouncements/Current-standards.aspx (Accessed: 19th May, 2018).
Cairns, D., Massoudi, D., Taplin, R. and Tarca, A., 2011. IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia. The British Accounting Review, 43(1), pp.1-21.
Christensen, H.B., Hail, L. and Leuz, C., 2013. Mandatory IFRS reporting and changes in enforcement. Journal of Accounting and Economics, 56(2-3), pp.147-177.
Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia. Journal of International Accounting Research, 11(1), pp.119-146.
Halim, H.A. and Jaafar, H., 2012. INTANGIBLES DISCLOSURE AND CAPITAL-RAISING IN AUSTRALIA: AN ANALYSIS OF INFORMATION INTENSITY. Asian Academy of Management Journal of Accounting & Finance, 8(2).
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hunter, L., Webster, E. and Wyatt, A., 2012. Accounting for expenditure on intangibles. Abacus, 48(1), pp.104-145.
Kang, H.H. and Gray, S.J., 2011. Reporting intangible assets: Voluntary disclosure practices of top emerging market companies. The international journal of accounting, 46(4), pp.402-423.
Lall, R., 2015. Timing as a source of regulatory influence: A technical elite network analysis of global finance. Regulation & Governance, 9(2), pp.125-143.
Leung, P., Coram, P., Cooper, B.J. and Richardson, P., 2014. Modern Auditing and Assurance Services 6e. USA: Wiley.
Nobes, C., 2014. International Classification of Financial Reporting 3e. UK: Routledge.
Procházka, D., 2011. The role of fair value measurement in the recent financial crunch. Economics, Management and Financial Markets, 6(1), p.989.
Rahman, A.R., 2013. The Australian Accounting Standards Review Board (RLE Accounting): The Establishment of Its Participative Review Process. UK: Routledge.
Yao, D.F.T., Percy, M. and Hu, F., 2015. Fair value accounting for non-current assets and audit fees: Evidence from Australian companies. Journal of Contemporary Accounting & Economics, 11(1), pp.31-45.
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