1. 13.1PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. ACCOUNTING Financial and Organisational Decision Making Chapter 13 Sources of authority in accounting Slides written by Sandra Porritt designed by Tony Van Eekelen

2. Chapter 13: Sources of authority in accounting 13.2 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Learning Objectives In this chapter you will be introduced to –the different sources of accounting regulation in Australia –th nature and purpose of accounting standards –the types of accounting standards that have so far been issued in Australia –the role of various institutions involved in setting accounting standards

3. Chapter 13: Sources of authority in accounting 13.3 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Learning Objectives –the relationship between Australian and international accounting standards –why standard setting has become an increasing political activity both in Australia and overseas

4. Chapter 13: Sources of authority in accounting 13.4 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. –the limitations of existing standard setting processes –recent attempts by the Commonwealth government to reform accounting standard setting –the pros and cons of adopting international accounting standards as the basis of accounting practice in Australia Learning Objectives

5. Chapter 13: Sources of authority in accounting 13.5 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Introduction accounting is governed by regulation regulations come from legislation and the bodies with whom business deals.

6. Chapter 13: Sources of authority in accounting 13.6 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Sources of authority in accounting Corporations Law Australian Stock Exchange listing regulations Accounting standards

7. Chapter 13: Sources of authority in accounting 13.7 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Corporations Law Companies legislation administered by the Australian Securities Commission (ASC) Profit and Loss statements and balance sheets are required for shareholders These reports need to comply with accounting standards

8. Chapter 13: Sources of authority in accounting 13.8 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Australian Stock Exchange (ASX) conduct is governed by securities legislation that forms part of th Corporation Law concerned with timely disclosure relies on compliance with the accounting standards

9. Chapter 13: Sources of authority in accounting 13.9 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Accounting standards give detailed accounting principles and rules

10. Chapter 13: Sources of authority in accounting 13.10 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Structure and format of accounting standards an explanation of the main features - what the standard broadly requires which entities the standard applies to when the standard takes force the purpose for the standard the detailed requirements

11. Chapter 13: Sources of authority in accounting 13.11 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The role of international accounting standards the growing worldwide importance of various accounting issues and events concerns about divergences in the disclosureand financial practices of companies tries differences due to cultural, legal, political and economic factors foreign-based or multinational operations

12. Chapter 13: Sources of authority in accounting 13.12 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Some benefits of Australia adopting IASC standards savings in money time and resources improvement in foreign investment the profession in Australia gains prestige could legitimise Australias status in the international community

13. Chapter 13: Sources of authority in accounting 13.13 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Problems from adopting IASC standards IASC standards viewed by some countries as too flexible and permissive wholesale adoption of IASC standards could stifle debate unique political and economic arrangements of some countriesie: income tax laws

14. Chapter 13: Sources of authority in accounting 13.14 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. the setting of Australian Accounting Standards the setting of Australian Accounting Standards INSTITUTIONS INVOLVED –(AARF) Australian Accounting Research Foundation –(AASB) Australian Accounting Standards Board –(IACC) Institute of Chartered Accounts in Australia

15. Chapter 13: Sources of authority in accounting 13.15 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Institutions involved continued –(ASCPA) Society of Certified Practicing Accountants –Government - Federal Attorney-General’s Department

16. Chapter 13: Sources of authority in accounting 13.16 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The Australian Accounting Research Foundation provision of relevant technical advice on accounting and policy matters influencial in providing policy recommendations

17. Chapter 13: Sources of authority in accounting 13.17 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The Australian Accounting Standards Board responsible directly to government created under legislation and functioons defined by statute standards issued by AASB are legally enforceable

18. Chapter 13: Sources of authority in accounting 13.18 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The Public Sector Accounting Standards Board responsible for developing accounting standards for the public sector and not-for- profit entities Australia is one of the few countries - to develop a common set of accounting standards for the private and public sectors

19. Chapter 13: Sources of authority in accounting 13.19 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Other Boards of the ARF The Auditing Standards Board (AuSB) - Auditing The Legislative Review Board (LRB) - review legislation for consistancy and applicability

20. Chapter 13: Sources of authority in accounting 13.20 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Urgent Issue Group Formed in 1995 by AARF and its boards because :- major criticism –slowness (due process procedures) part-time members, reduces their capacity to work speedily

21. Chapter 13: Sources of authority in accounting 13.21 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Limitations of the present system –found - major deficiencies with Australian standard setting on the basis of the differences, the Peirson Report made recommendations

22. Chapter 13: Sources of authority in accounting 13.22 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Impending changes:- to institutional arrangements for standard setting in Australia –In early 1997 the Federal Treasurer, Mr. Peter Costello, announced a wide-ranging reform program :- CORPORATE LAW ECONOMIC REFORM PROGRAM

23. Chapter 13: Sources of authority in accounting 13.23 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Corporate Law Economic Reform Program important issue of international harmonisation to what extent should Australia adopt IASC standards the position statement recommendations would see the fundamental restructure of standard-setting arrangements in Australia

24. Chapter 13: Sources of authority in accounting 13.24 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. The politicisation of accounting standards Impact on competing economic interest in society Governments interested in regulation matters Costs of compliance Standard setters - obliged to consider the impact on a wide range of conflicting economic interests in society

25. Chapter 13: Sources of authority in accounting 13.25 PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. Summary a number of bodies and their function were discussed –their limitations, other influences and involvements were reviewed debate in Australia about adoption of the IASC standards the consequences of the accounting standards to a wide range of people have led to a political influence