David answered on Dec 20 2021
The accounting of a company is highly influenced by the environment in which it
operates. Countries have different histories, values, cultures, and political and economic systems,
and they are also in various stages of economic development, these are the factors which highly
affects the development as well as the practice of the financial accounting practices of the
country. With these differences the financial accounting standards that are being adopted by
different nations vary significantly.
The financial report of the countries is generally prepared with a motive to help the
primary users of the financial statements. In the past, most users were residents of the same
country as the corporation issuing the financial statements. The emergence of multinational
corporations and organizations such as the European Union (EU), the General Agreement on
Tariffs and Trade (GATT), and the North American Free Trade Agreement (NAFTA) has made
transnational financial reporting more commonplace. Transnational financial reporting requires
users to understand the accounting practices employed by the company, the language of the
country in which the company resides, and the cu
ency used by the corporation to prepare its
financial statements. When an company was wanting to operate at an international level than
then there were several issues that came up which resulted in harmonizing the accounting
standards across the globe.
In Australia, the Australian Accounting Standards Board is responsible for setting and
maintaining accounting standards (refe
ed as AASB) for both the private and public sectors.
Australia has forty-one accounting standards, which are adopted directly from the international
accounting standards. In addition, Australia has focused on developing different domestic
standards which takes into consideration the economic conditions and social system within its
economy, such as AASB 1004 Contribution, AASB1023 General Insurance Contracts, AASB
1031 Materiality, AASB 1038 Life Insurance Contracts, AASB 1039, Concise Financial Reports,
AASB 1046 Director and Executive Disclosures by Disclosing Entities, and AASB 1048
Interpretation and Application of Standards. These standards, which were created specifically
for the domestic context of Australia, were not included in this study because their contextual
application would make them automatically different from the India’s accounting standards.
Instead, this paper focuses on AASBs which were direct adoption of the international accounting
standards, and they are AASB 3 Business Combinations, AASB 5 Non Cu
ent Assets Held for
Sale and Discontinued Operations, AASB 6 Exploration for and Evaluation of Mineral
Resources, AASB 7 Financial Instruments: Disclosures, AASB 101 Presentation of Financial
Statements, AASB 138 Intangible Assets, AASB 129 Financial Reporting for Hyperinflationary
Economies, and AASB 141 Agriculture. (AASB, 2004)
Financial Reporting framework:
Objective of financial reporting:
The objective of financial reporting is the first concept statement presented by AASB
which states that the objective of the financial statement is for general purpose external reporting
i.e. the financial reporting concerns to the external users as well as internal users. The objective
of the financial reporting goes from a general purpose to the more specific purpose.
General Purpose: Information useful in making decision
The general purpose of the financial reporting states the financial statements should
provide relevant and useful information to its present as well as potential stakeholders which
includes investors, creditors, customers and other external users to help them in making different
decisions in respect to investment and other related decisions. It also takes into account the
eporting entity’s economic resources, claims and changes in the resources and claims.
Derived external user objective: Information relevant to the external users so as to
assess future cash receipts:
The financial reports should focus on providing information to the stakeholders so as to
access the amount,...