What It Is About Government and Not-for-Profit Entities That Mean They Are Unable to Meaningfully Apply the Same Set of Standards as Do Business Entities

Topics: Generally Accepted Accounting Principles, Business, Balance sheet Pages: 4 (1284 words) Published: July 6, 2013
Introduction The Australian Accounting Standards Board (2013) makes the Australian Accounting Standards, including Interpretations. The neutral Standards was adopted when AASB merged with Public Sector Accounting Standards Board and it is now to be applied to all types of entities that are required to prepare financial reports by the Corporations Act 2011, the General Government Sector (GGS) and entities in the for-profit or not-for-profit private or public sectors that are reporting entities. However when the first standards came out it was applied to for-profit organisations only. Today, most standards still focus on business entities that make government and not-for-profit entities unable to meaningfully apply the same set of standards as do business entities for many different reasons. Some of the reasons are: different purposes, objectives and mission, budget and accounting for assets.

Some of the Issues Government, not-for-profit and business entities have a vastly different purposes and objectives. A government entity is defined by the Australian Business Register (2013), as an organisation that is established by the Commonwealth, a State or a Territory (whether under a law or not) to carry on an enterprise or established for a public purpose by an Australian law. While, Chang & Tuckman (1994) describes notfor-profit entity as a form of entity that does not operates for profits, all of the income of a not-for-profit entity is used to persuade the entity's objectives. On the other hand, business entity is also known as for-profit entity and as the name says, its main objective is to generate profit for its owners, investors and shareholders. The main objective of financial reporting is to provide information about the entity’s performance (Granof & Wardlow, 2011) by providing its income, expenses, profit, asset, liability and equity. However, because of the different purpose and objectives

of Government, Not-for-Profit and Business entities, as...
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