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Framework for the Preparation and Presentation of Financial Statements Essay Sample

Framework for the Preparation and Presentation of Financial Statements Pages
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The Australian Accounting Standards Board (AASB) is implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005. The AASB is replacing relevant existing AASB Standards with Australian Standards equivalent to those of the IASB. Consequently, the parts of the existing Australian conceptual framework (SAC 3 Qualitative Characteristics of Financial Information and SAC 4 Definition and Recognition of the Elements of Financial Statements) that overlap with the Framework for the Preparation and Presentation of Financial Statements issued by the IASB are being replaced by this Framework to ensure that there is consistency when: (a) the Australian equivalents to IASB Standards refer to the Framework. For example, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors outlines a hierarchy to be followed in developing an accounting policy when an Australian Accounting Standard does not specifically address the transaction. The Framework developed by the IASB is an integral part of this hierarchy; and

(b) the AASB evaluates proposed Standards for application in Australia. The AASB has decided it will continue to issue sector-neutral pronouncements, that is, pronouncements applicable to both for-profit and not-for-profit entities, including public sector entities. Except for pronouncements that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB pronouncements as the “foundation” pronouncements to which it adds material detailing the scope and applicability of a pronouncement in the Australian environment. Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB pronouncement and domestic, regulatory or other issues.

Main Features of this Framework
Citation
The Framework for the Preparation and Presentation of Financial Statements is cited in Australian Accounting Standards as the Framework.

Application Date
The Framework is applicable to annual reporting periods beginning on or after 1 January 2005. To promote comparability among the financial reports of Australian entities, early adoption of the Framework is not permitted. Main Issues

The Framework sets out the:
(a) objective of financial reports;
(b) assumptions underlying financial reports;
(c) qualitative characteristics of financial reports;
(d) elements of financial reports; and
(e) recognition criteria for the elements of financial statements.

COMPARISON WITH INTERNATIONAL
PRONOUNCEMENTS
This Framework and the IASB Framework
This Framework is equivalent to the Framework for the Preparation and Presentation of Financial Statements issued by the IASB. Paragraphs that have been added to this Framework (and do not appear in the text of the IASB Framework) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering. This Framework and IPSASs

International Public Sector Accounting Standards (IPSASs) are issued by the Public Sector Committee of the International Federation of Accountants. At present, there is no equivalent IPSAS that specifically contains a framework. However, the definitions of the elements of financial statements in IPSASs are, in many cases, equivalent to the definitions in the Framework. The main differences between the IPSAS definitions and the Framework relate to the notion of income (which includes gains) and the notion of revenue, and the notion of expense (which includes losses).

FRAMEWORK FOR THE PREPARATION AND
PRESENTATION OF FINANCIAL STATEMENTS
Application
Aus1.1 The concepts in this Framework are not set out as requirements for the purpose of preparing general purpose financial reports. This is consistent with the:
(a) purpose of Statements of Accounting Concepts set out in Policy Statement 5 The Nature and Purpose of Statements of Accounting Concepts;
(b) non-mandatory status of Statements of Accounting Concepts under Professional Statement APS 1 Conformity with Accounting Standards; and
(c) Australian Securities and Investments Commission
Act 2001, section 227(1).
Aus1.2 This Framework applies to periods beginning on or after 1 January 2005.
Aus1.3 This Framework shall not be applied to annual reporting periods beginning before 1 January 2005.
Aus1.4 When applicable, this Framework supersedes:
(a) Statement of Accounting Concept SAC 3 Qualitative
Characteristics of Financial Information as issued in
August 1990; and
(b) Statement of Accounting Concept SAC 4 Definition and
Recognition of the Elements of Financial Statements as issued in March 1995.
Aus1.5 SAC 3 and SAC 4 remain applicable until superseded by this Framework.
Aus1.6 The term financial statements in the title of this Framework means a financial report.

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