Accounting Regulation

Topics: International Financial Reporting Standards, Financial statements, International Accounting Standards Board Pages: 7 (1942 words) Published: April 1, 2013
The Financial Reporting Council decided in 2002 that Australian would move to International Financial Reporting Standards (IFRS) in 2005. Prior to that, Australia had its own standard-setting processes. The introduction of IFRS in Australia replaced the original accounting standards and brought several brand new standards. Until now, Australia was the first country with a tradition of its own standard-setting to implement international accounting standards for general purposes. Therefore, the adoption is unexpected and controversial. This essay mainly focuses on the negative side of this accounting standard conversion, which points out a number of potentially serious problems that should be considered when IFRS has been adopted since 2005. The analysis is basically separated into four sections: the cultural influence, cost increment, impacts on domestic companies and impacts on the accounting policies. According to the analysis, conclusion can be reached that the adoption of IFRS has a great influence on Australian economy.

In 2002, the Financial Reporting Council (FRC) announced that Australia would adopt International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), for reporting periods commencing on or after 1 January 2005. The introduction of IFRS in Australia replaced the existing accounting standards in relation to the recognition and measurement of assets, liabilities, equity, revenue and expenses (Haswell& Langfield-Smith 2008, pp46-47). IFRS are currently used in many parts of the world, however, Australia was the first country with a tradition of its own standard-setting to embrace international accounting standards for general purposes, including financial reporting of single companies as well as consolidated reporting (Haswell& Langfield-Smith 2008, p46).The decision to move to an IFRS-based framework was quite controversial. This article mainly focuses on the defects of adopting IFRS.

Background to IFRS
The International Accounting Standards Board is an independent, privately-funded accounting standard setter based in London, which committed to developing understandable and enforceable global accounting standards in general purpose financial statements (Leo et al. 2008, pp20-21). The IFRS standards developed by the IASB follow a process involving various stakeholders that include accountants, users of financial statements and regulators.

When Australia adopted IFRS, a series of process must be gone through based on standard setting process. Treasurer in Australian Government is the head of the whole standard setting process, which has the power to appoint members of Financial Reporting Council and chairman of Australian Accounting Standards Board (AASB). The main role of the FRC is to act as an overseer and advisory body to the standard setter, the AASB, and give advice on the standard-setting process (Leo et al. 2008, pp16-17). Additionally, FRC has the power to appoint AASB members and determine the AASB’s broad strategic direction (Leo et al. 2008, pp16-17). The major policy direction of the FRC that has affected the agenda of the AASB is the formalization of a policy of adopting the accounting standards of the IASB for application to reporting periods beginning on or after 1 January 2005 (Leo et al. 2008, pp16-17). The major role of AASB is to develop a conceptual framework for the purpose of evaluating proposed accounting standards and international standards and make accounting standards for the purpose of the Corporations Act (Leo et al. 2008, pp17-19). The external groups, such as lobby groups and Australian Securities Exchange Institute of Directors (ASIC), can also have a significant influence on the standard-setting process (Leo et al. 2008, p20).

IFRS was strongly influenced by US FASB. FASB is the American accounting standard board, which put pressure on IFRS to allow IFRS to become a product of...
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