FINANCIAL ACCOUNTING

Financial Accounting



Financial Accounting

Question 1: An overview of the Australian external reporting regulation?

Ans1- The importance of Australian external reporting regulations have been quite high. There are five main bodies which are involved in accounting regulation in Australia. The five main bodies are Australian Securities and Investments Commission (ASIC), Australian Accounting Standards Board (AASB), Interpretations Agenda Committee (IAC), Financial Reporting Council (FRC) and Australian Securities Exchange (ASX). ASIC have a vital task for administering the legislation of corporation's in Australia. It includes the preparation and lodgement of financial statements and the behavior of directors. Australian Accounting Standards Board (AASB) has an important role for producing Australian accounting standards also known as AASBs that conform to international standards. Interpretations Agenda Committee (IAC) is part of the AASB responsible which has a vital task for meeting the urgent issues related to financial matters of the organization. Financial Reporting Council (FRC) keeps a record of the activities that takes place in the AASB Australian Securities Exchange (ASX). ASX has a task of completing the additional reporting requirements for those organisations which are listed in the stock exchange.

i) Three arguments for international standardization of financial reporting

The international standardization of financial reporting provides a clear framework of accounting standards in Australia in several companies.

The finance executive finds it easier in taking the help of financial reporting principles listed in the documents given to the companies. There is an expectation in the future that the international standardization would become a key factor in the decision making process of several companies (http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/IFRS_9_financial_instruments.pdf).

Three arguments against international standardization of financial reporting

The over dependence on the international standardization of financial reporting must not be there in Australia because the other concepts are also getting developed to assist various investors.

Some of the financial experts have a strong argument against many interpretations and concepts covered in the international standardization of financial reporting.

The international standardization of financial reporting is meeting a strong opposition from many domestic financial organizations that are preparing their own standards in Australia (http://www.aasb.gov.au/admin/file/content105/c9/AASB1_07-04_COMPjun07_01-08.pdf).

ii) Three arguments for the need of excessive regulation for a capital market

There are various financial stakeholders who believe that the excessive regulation is necessary for a capital market in Australia.

Most of the independent financial experts and researchers believe that the excessive regulation for a capital market in Australia is very important in shaping their future.

The Central Bank in Australia also believes that the excessive regulation of a capital market in Australia can help in monitoring the entire financial transactions in the country (http://eprints.qut.edu.au/5972/1/5972.pdf).

Three arguments against the need of excessive regulation for a capital market

All the private investors feel that the excessive regulation of a capital market in Australia is a big hurdle for them to conduct their business operations in a transparent way.

The foreign investors also do not feel very comfortable with the idea of the excessive regulation for a capital market because of the fear for conducting their transactions in a better ...