FINANCIAL STATEMENTS

Framework for the Preparation and Presentation of Financial Statements



Framework for the Preparation and Presentation of Financial Statements

Introduction

Australian Accounting Standards Board is an agency which is responsible for developing and maintaining the financial reporting standards. Companies operating in Australia either private or public have to apply these standards while making their financial statements.

This essay will discuss the AASB framework for the preparation and presentation of financial statements along with a critical analysis of different measurement bases. Beside this, there would also be a discussion on the implementation of these frameworks on two companies of different sector. Lastly, there would also be a discussion on the relationship between the accounting information and market reaction with reference to the measurement issues.

Discussion

AASB Framework Preparation and Presentation of Financial Statements

Australian Accounting board has implemented similar standards to the International Accounting Standards Board. Additions have been made in these accounting policies where necessary and those standards which has not yet been address by the IASB. The main features of this framework are as followed:

Citation: The citation for this framework in Australian Accounting Standards is termed as Framework.

Application Date: AASB framework for the preparation and presentation of financial statements is applicable to those companies whose annual reporting period start on or after 1st of January 2005. The reason for this is to encourage compatibility within Australian Entities financial reporting.

Furthermore, this framework has been set out in order cover the main issues that arise due to non compatibility of the information among companies. Companies following this frame work would provide similar standard of information to annual report users. This framework is lay out a common financial report objective, financial report underlying assumptions, financial report qualitative characteristics, financial report basic elements and their recognition criteria (Australian Accounting Standards Board, 2004, pp. 7).

Beside this, the main purpose of this framework is to lay out the concepts that inspire the preparation and presentation of financial reports for external users. It assists in encouraging regulations harmonization; assisting auditors in developing a view that the financial report has been prepared according to the Australian accounting standards.

The concern of this framework is with general purpose of financial reporting that comprise of consolidated financial statements. The preparation and presentation of these financial reports are at-least published once in a year and offer common information to the main users of the company financial information. Few user of the financial information might need and have the power to acquire the confidential information which is not stated in the annual report. There are few users for whom, company annual report is the main source for company financial information and for this purposes company need to prepare and present considering their need (Brown, Tarca, 2001, p. 267).

There are few special purpose financial reports such as reports that are prepared for taxation purpose are not included in this Framework. Therefore, this framework might be applicable for preparation of these special purpose reports where these reports fulfill the requirement of ...