The Corporations Law Accounting Synopsis The Corporations Law which came into effect in January 1991, has made substantial changes to the way business is conducted in Australia. Previously some illegal practices are now legal, and some legal practices are now deemed to be illegal. Under the Corporations Law finical statements have to be made out in accordance to the various accounting standards. AASB 1024 and AASB 1013 are two such standards.
Both these standards have been through a reform process over the last few years, and changes that have been made to them, have determined the level of compliance to the Corporations Law. The formulation of accounting standards is based on the premise that financial information should be available to users of these statements to enable them to make decisions about the allocation of scarce resources and in the evaluation of such decisions. The ASC is the sole administering body of the Corporations Law, and it is directly accountable to the Commonwealth Attorney-General and the Commonwealth Parliament. Prior to the changes of the Corporations Law in 1991, compliance with applicable Accounting Standards as not necessary, provided that the financial statements gave a true and fair view. Yet after 1991 changes, the compliance with the applicable Accounting Standards increased. Section 298 (1) of the Corporations Law requires that a companies directors shall ensure that the company s financial statements for a financial year are made out in accordance with applicable accounting standards.
The Essay on Fair-value accounting change
The role played by the financial market in determining the levels of performance that can be recorded by the economy is not in doubt. The 2008 economic crisis is a vivid reminder to all policy makers and even governments to ensure that issues that affect the economy are objectively addressed. The Financial Accounting Standards Board (FASB) which is a key player in the financial sector appears to ...
By the interaction of section 298 (1) and 299 (1), where the accounts are made out in accordance with applicable accounting standards but do not otherwise give a true and fair view of the matters … the directors must add such information and explanations as will give a true and fair view of those matters. Under section 224 of the Australian Securities Commission Act 1989, saw the establishment of the Australian Accounting Standards Board (AASB).
The AASB supports an accounting regulatory system whereby legislation provides a framework under which accounting regulation can be developed and implemented by a thorough due process AASB 1024 Consolidated Accounts is one such standard. AASB 1024 requires the consolidation of companies which are controlled even if there is less than majority ownership. The effects of most intra-group transactions will then be eliminated a part of the consolidation process (Henderson & Peirson 1994).
A company is required to present consolidated accounts only when it is the parent entity of an economic entity which is a reporting entity.
The consolidated accounts are comprised of a consolidated profit and loss account and a consolidated balance sheet. This balance sheet includes all the entities controlled by the reporting entity at the end of the financial year. Compliance with AASB 1024 became mandatory for financial statements published on and after December 31, 1991. In 1991 changes were also made to definitions in the wording of AASB 1024. To remove the option to de consolidate one or more subsidies of the reporting entity, The definition of group accounts was replaced by consolidated accounts. The Corporations Law also broadened the base of the economic entity to which consolidated accounting applies, no longer allowing other forms of group accounting reporting.
In the Editorial of the Australian Financial Review on August 5, 1991, appeared the following paragraph: The recently introduced standard on consolidations (AASB 1024) aims at producing a clear picture of the financial health of reporting companies. It will certainly catch a lot of off-balance sheet devices The functions of consolidation or group accounting is not universally accepted. AASB 1024 and the relevant sections of the Corporations Law presume that the functions is to depict the affairs of an economic entity or group of companies. One would expect consolidated accounts to contain the data in separate accounts, but not including data which are not sourced nor excluding data which are. There is concern as to the utility of the consolidated financial statements. One such event, the $2.
The Essay on Financial Reporting Differences Accounting Companies
As we know that, there are major international differences in accounting practices is not obvious to all accountants, let alone to non-accountants. This also includes the differences in the ownership and financing of companies that could lead to differences in financial reporting. One of the differences in the ownership and financing of companies could lead to differences in financial reporting is ...
2 billion bail out of the State Bank of South Australia, confirmed the presence of doubt regarding the accounting data about groups. The recent introduction of AASB 1024 Consolidated Financial Statements and the consequential amendments to the Corporations Law may play a significant role in determining off balance sheet financing, but these reforms have been long overdue and there still remains doubt as to their effectiveness Prior to the changes, where the operations of a subsidiary were totally different from those of its parent company it was argued that it would be misleading to consolidate the accounts of the companies. One immediate way of establishing the impact of AASB 1024 on companies reporting practices would be, if investments, which formerly were not reported as subsidiaries, were reported as such after December 31, 1991. If compliance with AASB 1024 has had any impact on company reporting practices it could be expected that former associates as well as former subsidiaries for which separate sets of accounts were prepared, would now be included in the consolidated accounts.
After AASB 1024 became effective, referencing was no longer made to parent and subsidiary companies, but rather to controlling entities. By this change in definition, resulting from the consolidation of an investment was taken as evidence that introduction of AASB 1024 has influenced management s choice of accounting policy. Consolidated accounts now give an accurate picture as to the profit and loss and provide more meaningful information for users of the accounts, however it would appear that there is substantial compliance with the consolidated accounts standard, yet little influence on the financial statements. The second standard to be examined is AASB 1013 Accounting for Goodwill. Goodwill probably is the most intangible of intangibles because it is difficult to determine just exactly what it is. In practice it has evolved to include everything contributing to an existing business s advantages over a new one or anything that enhances a company s earning potential.
The Term Paper on Political Economic and Social Effects of Accounting Standards
Political, Economic & Social effects of Accounting Standard Setters'The view that accounting standard setters consider the economic, political and social consequences of accounting standards is consistent with the view that accounting reports, if compiled in accordance with accounting standards and other generally accepted principles, will be neutral and objective'SYNOPSISObjectivity and ...
Goodwill defined is as an entity s unidentifiable intangible assets. These assets that are unidentifiable include loyal and efficient employees, an established clientele, suppliers … and a good name and reputation. (Henderson & Peirson 1994).
Goodwill is measured as the difference between the price paid for an entity and the fair value of the identifiable net asset acquired. Fair value is defined as the amount for which an assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm s length transaction. A distinction is drawn between internally generated goodwill and purchased goodwill.
Both internally generated goodwill and purchased goodwill give rise to probable future economic benefits. However only the latter is to be recognised as an assets because internally generated goodwill is not usually capable of reliable measurement… (Henderson & Peirson 1994).
AASB 1013 was approved on April 18, 1988 and the purpose of this was in regard to the acquisition of an entity, is to specify the manner of accounting for goodwill and discount on acquisition … . Prior to the dates before the goodwill standards were introduced, most preparers and their auditors chose to ignore their professional responsibility to ensure compliance with the accounting standards… Prior to the introduction of the standard, little attempt was made to establish that the amount attributed to goodwill actually reflected unidentifiable assets.
This meant the goodwill amounts was inflated by omission of valuable intangible assets. With the omission of these valuable intangible assets from the balance sheet therefore understates the net worth of the reporting entity. The introduction of an accounting standard regarding goodwill had the purpose of appropriate determination and achieving the proper recording of other acquired assets. Since the introduction of the standard, the recognition in the financial reports has reached plague proportion 11 with accounting for intangibles reveals an increase in the numbers of companies recognising and a mortising goodwill. It is now common place to see the recording of … brand names, software, patents and licences and even assets of a more nature like intellectual or sporting property 11. AASB 1013 also served to minor service which was to reminder the reporting entity that the intangible assets, once recognised, attracted the same obligations as that of non-current assets, including depreciation and amortisation.
The Term Paper on Accounting Estimates and Policy
... satisfaction of ASIC reviewers. 2 Requirements in respective accounting standards AASB 101 paragraph 112-133 specifically state the ... accounting estimates and judgments’. Two significant accounting judgments are identified in Note 2, being ‘impairment of non-financial assets other than goodwill ... report, weighted average cost of capital of the entity and business risk specific to the unit ...
Accounting for goodwill has always attracted interest, and all those involved with it have their own view on how it should be reported in the financial statements. The failure of the community to accept readily a single concept of goodwill and to adopt the consequential accounting treatment can only be explained by the nature of the product we are considering – its intangibility 11. Both AASB 1024 and AASB 1013 have received their criticism in the past, yet both of them have many positive aspects. Both these standard have changed management practices in the two fields. There is enough evidence for both standards to suggest that there is compliance with section 298 (1) of the Corporations Law, yet in some cases this compliance is limited to the situation and the reporting entity. AASB 1013 has proven to be (prior to its introduction) a relatively large unknown quantity, now having all but changed, and with regard to AASB 1024, a more informed and detailed reports of corporate groups provide more meaningful information..
