The roles and objectives of AASB

The roles and objectives of AASBThe AASB is hardly an independent shopworn telescope body. Its policies and activities ar subjected to the summons and supervision by at least two big br early(a)s the IASB and the FRC, non to mention the ASIC.A critical evaluation of this statement has been done in the promiscuous of the present accountancy regulatory environment in Australia. This study had a detailed analysis within the concerned Government websites of Australia, annual reports, journal and documents.This study will discuss the various roles and objectives of AASB as an accounting standard setting body and its congenericship to FRC, IASB and ASIC in achieving its task. Finally helps to reach a conclusion whether accord or not to agree with the above statement.The Australian write up Standard Board (AASB)AASB is an independent Australian Government agency under the Australian Securities and Investments bearing Act 2001. It has responsibility for the study of accounting standards for masking by companies and by other entities in the private and public sectors, and for the provement of Statements of accounting Concepts. (Lundqvist k, 2003)AASB (2009, pp 23-24) in the yearbook report 2009, describes the function, mission, vision and objectives of AASBStatutory functions of AASBTo develop a conceptual frame die for the purpose of evaluating proposed standardsTo make accounting standards under section 334 of the Corporations Act 2001To formulate accounting standards for other purposesTo participate in and kick in to the development of a single set of accounting standards for worldwide useTo advance and promote the main objects of embark on 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete efficaciously overseas and maintaining investor confidence in the Australian economy.Vision of AASBTo be treasure as a global centre of excellence, delivering a truly distinctive contribution to the develop ment of high-quality monetary account standards.Mission of the AASBTo develop and maintain high-quality monetary describe standards for all sectors of the Australian economyTo contribute, through leadership and talent, to the development of global financial reporting standards and to be recognised as facilitating the inclusion of the Australian community in global standard setting.The major standard-setting objectives of the AASB, as set out in its 2006-07 annual report, are toissue Australian versions of foreign Accounting Standards Board documentsproduce standards that treat like transactions consistentlysignificantly influence the development of foreign Financial reportage Standardsidentify areas requiring fundamental suss out and introduce standards to cover those areas andpromote globally consistent application and interpretation of accounting standards.The Standard-Setting ProcessThe followingdiagramis a simplified view ofthe standard-setting process.Organisational body structureThe followingdiagramshows the relationships between other bodies and the AASB.Source Adapted from AASB (2009)As an independent standard setting body, AASB is responsible for the development of accounting standards for application by companies and by other entities in the private and public sectors, and for the development of Statements of Accounting Concepts.(Lundqvist k, 2003)The policies and activities of AASB are subject to the supervision of an advisory body, FRC. AASB implemented the broad strategic explosive charge from FRC to adopt internationalistic Accounting Standards Board(IASB) standards for financial reportingFinancial Reporting Council (FRC)FRC (2009) in its website makes a broad understanding on its responsibilities, functionsand objectives.The Financial Reporting Council (FRC) is a statutory body under the Australianas amendedby the incorporated jurisprudence Economic Reform Program (Audit Reform and Corporate Disclosure)Act 2004.FRC is responsible for p roviding broad forethought of the process for setting accounting andauditing standards as substantially as supervise the lastingness of auditor independencyrequirements in Australia and giving the Minister reports and advice on these matters.Responsibilities of FRC on accounting standard setting functionsappointing the members of the AASB (other than the Chairmen)approving and monitoring the AASBs priorities business plans budgets and staffing arrangements (including level, structure and composition of staffing)determining the AASBs broad strategic directionsgiving the AASB directions, advice or feedback on matters of general policy and on the AASBs proceduresmonitoring the development of international standards that apply in major international financial centresfurthering the development of a single set of accounting standards for world-wide use with appropriate regard to international developmentspromoting the continued adoption of international best practice accounting standa rds in the Australian accounting standard setting processes if doing so would be in the best interests of both the private and public sectors in the Australian economymonitoringthe operation of accounting standards to assess their continued relevance and their effectiveness in achieving their objectives in respect of both the private and public sectors of the Australian economythe effectiveness of the consultative arrangements used by the AASBseeking contributions towards the costs of the Australian accounting standard setting processesmonitoring and periodically reviewing the level of funding, and the funding arrangements, for the AASBObjectives of the FRC in relation to Accounting standardsThe FRC operates within a frame use set out in the ASIC Act.Main objectives areAccounting standards should require the provision of knowledge thatallows users to make and prize decisions about allocating scarce resourcesassists directors to discharge their obligations in relation to financial reportingis relevant to assessing performance, financial position, financing and investmentis relevant and reliablefacilitates comparability andis promptly understandable.Accounting standards should facilitate the Australian economy by reducing the cost of capital and enabling Australian entities to compete effectively overseas.Accounting should facilitate the Australian economy by having accounting standards that are clearly stated and easy to understand.Accounting standards should maintain investor confidence in the Australian economy, including its capital merchandises.Functions and Objectives of FRC clarifies its limitations on standard setting.According to Leo et.al (2008, pp 16) FRC has the power to do all things necessary to perform its functions, including establishment of committees and advisory groups. In particular FRC has to ensure that standards set by AASB are in harmony with standards established in international level so that there is no competitive disadvantage ov erseas for Australian businesses.To ensure that AASB as an independent standard setter there is a provision under the ACT that expressly limits the FRCs ability to become involved in the technical deliberations of the AASB. It provides that the FRC does not amaze power to direct the AASB in relation to the development, or making, of a particular standard, or to veto a standard formulated or recommended by the AASB .(FRC,2009)Bowrey G (2007) in his article has a significant argument on the independence of AASB. In ASIC Act 2001 the role of the FRC could be summarised as providing broad oversight for setting accounting standards in Australia. Indeed section 225 of the ASIC Act 2001 outlines that the FRC does not have the ability to be become involved in the technical deliberations of the AASB, nor does it have power to direct the AASB in the development of a particular standard and nor does the FRC have the power to veto a standard made or recommended by the AASB. These limitations p laced on the FRC are to ensure the independence of the standard setter.The notion of independence of the AASB is eroded by the fact of direct control on the denomination of the members. The notion of independence is as yet further eroded because the FRC sets the AASBs priorities, its business plans, budgeting and even it staffing arrangements. The government through department, Treasury, has financial and operational control of the FRC and in turn the AASB.In this article again question of independence arises where, the budgets of all government organisations go through a significantly in-depth evaluation process through the Senate Estimates. So even though the FRC sets the AASBs budget, before either money is provided the budget estimates need to go through the senate for approval. So how is it possible for the AASB to be independent? The fact that current and electromotive force government (opposition) members have the power to subside for what and how oftentimes to fund the board certainly supports the argument about the lack of independence. at that place doesnt appear to be any independence on the contrary the AASB seems to be highly dependent on both FRC and the Parliament.The argument in this article ended without reaching a item conclusion as there is specific legislation this government has enacted to ensure there is independence in the accounting standard setting process.Hockey J (1999) in his speech addressing to the Group of 100 Executive Dinner Meeting in Sydney suggested that the FRC might have too much power and too much control over the standard setter. He verbalize that even though 225 of the ASIC Act 2001placed some limitation over FRC the new AASB, though independent, will be fully accountable to the FRC in much the same way that the UK Accounting Standards Board is to the UK Financial Reporting Council and the US Financial Accounting Standards Board is to the US Financial Accounting Foundation.Under a strategy adopted by the Financ ial Reporting Council 1 in July 2002, the Australian Accounting Standards Board (AASB) is obliged to work towards the full implementation of the International Accounting Standards (IAS) (now known as International Financial Reporting Standards (IFRS) 2) in Australia.(Hay A, 2004).The primary objective of the new accounting standards is the expect force of the capital markets that will arise from the existence of a set of globally acceptable accounting standards that result in high quality comparable to(predicate) and transparent financial reporting. In short, an objective of the harmonisation of international accounting standards is a worldwide effort to restore confidence in corporate reporting and create a free flow of capital worldwide. A second objective is the facilitation of cross border comparison of accounts by investors, leading to a minify cost of capital for Australian companies and assisting them to raise capital or list overseas.From this it is clear that IASB is not directing to adopt any standard but it is for the efficiency of capital market and for a reduced cost of capital AASB does so.In an article, Brown AM et.al (2007) consider AASB, as one of the operating bodies of FRC which does the functions of FRC.In this article it is said that FRC oversees the activities of AASB and has no technical role on the standard setting .In adoption of international accounting standards when started from 2005 FRC said that the Australian Accounting Standards Board would decide the appropriate time at which future amendments to those standards would be made law in Australia. (Tom, R 2006).This also an indication of the AASBs independence in standard setting and the amendments of those standard set.TheInternational Accounting Standards Board(IASB)TheInternational Accounting Standards Board(IASB) is an independent, privately-funded accounting standard-setter based inLondon, England. The IASB is committed to developing in the public interest, a single set of high quality ,understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statement .In addition IASB cooperates with national accounting standard setters o achieve convergence in accounting standards around the world.( Leo et.al (2008, pp 21))IASB as an independent, private-sector body develops and approves International FinancialReporting Standards. The IASB operates under the oversight of the International AccountingStandards Committee Foundation. The IASB was formed in 2001 to replace the InternationalAccounting Standards Committee.IAS Plus International Accounting Standards, explains the objectives of IASBTo develop, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the worlds capital markets and other users make economic decisionsTo promote the use and rigorous application of those standardsTo fulfil the above objectives and, to take account of, as appropriate, the special needs of small and medium-sized entities and emerging economies andTo bring about convergence of national accounting standards and International Accounting Standards and International Financial Reporting Standards to high quality solutions.Adoption of IASB Standards by AASBAdoption of IASB Standards by AASB is explained by AASB(2009) in its website.AASB made Australian equivalents to International Accounting Standards Board(IASB) standards on 15 July 2004. The overall approach of AASB is to adopt the content and manner of speaking of IASB standards, accommodating the Australian legislative environment with only the words being changed.Main focus of IASB is on for-profit entities whereas AASB is responsible for setting accounting standards for all types of reporting entities. Suitably identified addition al text, is included in the AASB standards to speak with those limited cases where there is a need to have different or additional requirements for not-for-profit entities. These additions do not impact on the requirements in relation to for-profit entitiesThere are circumstances in which a not-for-profit entity complying with the Australianequivalents to the IASB standards will not be able to simultaneously comply with the IASBstandards because the additional requirements for not-for-profit entities are inconsistent with the IASB requirements.In some cases, existing AASB standards contain helpful commentary that is not included inthe equivalent IASB standards. The AASB retains this commentary as guidance that is notpart of the standards where it is considered to be of benefit to users of AASB standards andprovided it does not contradict the content of Australian equivalents to IASB standards.Thus AASB is aiming for the highest quality financial reporting in adopting IASB standards .Australian Securities and Investments Commission (ASIC)According to ASIC(2009) ,ASIC is Australias corporate, markets and financial function regulator, which is an independent Commonwealth Government body set up under and administer the Australian Securities and Investments Commission Act (ASIC Act), and carry out most of work under the Corporations Act.ASIC ensures that Australias financial markets are fair and transparent, supported by confident and informed investors and consumers.ASIC regulate Australian companies, financial markets, financial services organisations and professionals who deal and discuss in investments, superannuation, insurance, deposit taking and credit.ASICs Statutory Role and ResponsibilitiesCameron A (2000) discuss the role and responsibilities of ASICASICs role in the financial reporting system is not well understoodResponsibilities and Obligations in regard to financial reporting imposed on ASIC by the Corporations Law are as followsMonitoring and enfo rcing compliance with financial reporting requirements of the Law, including the accounting standards.Powers to exempt companies from the requirements of Accounting Standards and other provisions of the Law, and to modify the application of the Law.Relationship Between ASIC and the AASBASIC is in full support of the AASBs standard setting process. some(prenominal) agencies shareinformation and regulatory concerns. ASIC gives information of concerns of accounting practices that come to their attention under their activities and ensures that the Board is aware of the views on their proposals for new standards and revisions to existing ones, asmarket regulator. All contributions made by ASIC have to be considered by the Board on making a final decision on Standards. (Cameron A, 2000)ASICs role is to contribute to the development of high quality standards to promote market integrity generally, and to enforce the individual Standards made by the Board.Even though ASIC does not have str ength to establish or veto accounting standards, ASIC does have the power to exempt or modify them.ASIC also develops policy on applying financial reporting requirements of the Law innew and problem areas. For example, development of transitional reporting requirements of building societies, credit unions and friendly societies.Functions underAustralian Securities and Investments Commission Act 2001(ASIC, 2009)Maintain, facilitate and purify the performance of the financial system and entities in itPromote confident and informed participation by investors and consumers in the financial systemAdminister the law effectively and with minimal procedural requirementsEnforce and give effect to the lawReceive, process and store, efficiently and quickly, information that is given to usMake information about companies and other bodies available to the public as soon as practicable.ConclusionTo conclude the above statement can be agreed only to some end .The statement specifies the activitie s of AASB are under the supervision of FRC, and it is the function of FRC to oversee the process of setting accounting standards, but the Act has placed limitations on FRC to ensure the independence of the standard setter.AASB aims for the high quality financial reporting in adopting IASB standards. The role of ASIC is to contribute towards the development of standards by AASB.In short, the combined effort of the bodies will help develop and maintain high-quality financial reporting standards for all sectors of the Australian economy