The roles and goals of AASB

"The AASB is hardly an unbiased standard setting body. Its regulations and activities are put through the dictation and supervision by at least two big brothers - the IASB and the FRC, not forgetting the ASIC. "

A critical analysis of this declaration has been done in the light of the present accounting regulatory environment in Australia. This review had a detailed research within the concerned Administration websites of Australia, total annual information, journal and documents.

This newspaper will discuss the many roles and objectives of AASB as an accounting standard environment body and its own marriage to FRC, IASB and ASIC in achieving its process. Finally really helps to reach a final result whether agree or not to buy into the above affirmation.

The Australian Accounting Standard Table (AASB)

AASB is an independent Australian Federal government company under the Australian Securities and Purchases Commission Act 2001. They have responsibility for the introduction of accounting requirements for program by companies and by other entities in the private and public sectors, as well as for the introduction of Statements of Accounting Concepts. (Lundqvist k, 2003)

AASB (2009, pp 23-24) in the Annual report 2009, describes the function, objective, vision and objectives of AASB

Statutory functions of AASB:

To create a conceptual framework for the intended purpose of evaluating proposed requirements;

To make accounting specifications under section 334 of the Businesses Action 2001;

To formulate accounting requirements for other purposes;

To participate in and contribute to the introduction of a single set of accounting requirements for worldwide use;

To move forward and promote the main items of Part 12 of the ASIC Take action, which include reducing the cost of capital, allowing Australian entities to remain competitive effectively abroad and maintaining investor self-assurance in the Australian current economic climate.

Vision of AASB

To be recognized as a global centre of excellence, delivering a distinctive contribution to the introduction of high-quality financial reporting standards.

Mission of the AASB

To develop and maintain high-quality financial reporting requirements for all sectors of the Australian economy

To add, through control and expertise, to the introduction of global financial reporting specifications and also to be accepted as facilitating the addition of the Australian community in global standard setting up.

The major standard-setting goals of the AASB, as lay out in its 2006-07 annual record, are to:

issue Australian editions of International Accounting Standards Table documents;

produce specifications that treat like transactions consistently;

significantly influence the development of International Financial Reporting Specifications;

identify areas needing fundamental review and introduce standards to pay those areas; and

promote globally consistent program and interpretation of accounting requirements.

The Standard-Setting Process

The pursuing diagram is a simplified view of the standard-setting process.

Organisational Structure

The following diagram shows the romantic relationships between other bodies and the AASB.

Source: Adapted from AASB (2009)

As an unbiased standard setting up body, AASB is responsible for the development of accounting benchmarks for program by companies and by other entities in the private and open public sectors, as well as for the introduction of Assertions of Accounting Principles.

(Lundqvist k, 2003)

The plans and activities of AASB are at the mercy of the supervision of your advisory body, FRC. AASB carried out the broad strategic direction from FRC to choose International Accounting Requirements Table (IASB) benchmarks for financial reporting

Financial Reporting Council (FRC)

FRC (2009) in its website makes a broad understanding on its duties, functions

and aims.

The Financial Reporting Council (FRC) is a statutory body under the Australian as amended

by the Corporate Legislation Economic Reform Program (Audit Reform and Corporate Disclosure)

Act 2004.

FRC is responsible for providing wide-ranging oversight of the process for placing accounting and

auditing specifications as well as monitoring the potency of auditor independence

requirements in Australia and offering the Minister accounts and advice on these matters.

Responsibilities of FRC on accounting standard setting functions:

appointing the customers of the AASB (other than the Chairmen);

approving and monitoring the AASB's priorities; business programs; finances; and staffing plans (including level, composition and structure of staffing);

determining the AASB's wide strategic directions;

giving the AASB guidelines, advice or responses on concerns of general insurance plan and on the AASB's steps;

monitoring the introduction of international benchmarks that apply in major international financial centres;

furthering the development of a single set of accounting requirements for world-wide use with appropriate respect to international developments;

promoting the continued adoption of international best practice accounting benchmarks in the Australian accounting standard environment processes if doing so would maintain the needs of both private and general public industries in the Australian market;


the operation of accounting standards to determine their continuing relevance and their performance in reaching their objectives in respect of both private and public industries of the Australian economy;

the performance of the consultative agreements used by the AASB

seeking efforts towards the expenses of the Australian accounting standard setting processes;

monitoring and occasionally reviewing the amount of money, and the funding plans, for the AASB

Objectives of the FRC in relation to Accounting standards

The FRC performs within a construction set out in the ASIC Function.

Main targets are:

Accounting specifications should require the provision of information that:

allows users to make and assess decisions about allocating scarce resources;

assists directors to release their obligations in relation to financial reporting;

is highly relevant to assessing performance, budget, financing and investment;

is relevant and reliable;

facilitates comparability; and

is conveniently understandable.

Accounting benchmarks should accomplish the Australian current economic climate by reducing the cost of capital and enabling Australian entities to compete effectively abroad.

Accounting should aid the Australian current economic climate insurance agencies accounting requirements that are obviously stated and easy to understand.

Accounting expectations should maintain entrepreneur self-assurance in the Australian market, including its capital market segments.

Functions and Objectives of FRC clarifies its limitations on standard environment.

According to Leo et. al (2008, pp 16) FRC gets the capacity to do all things essential to perform its functions, including establishment of committees and advisory teams. In particular FRC has to ensure that standards established by AASB are in harmony with standards founded in international level so that there surely is no competitive disadvantage abroad for Australian businesses.

To ensure that AASB as an unbiased standard setter there's a provision under the Work that expressly restricts the FRC's capacity to become mixed up in specialized deliberations of the AASB. It provides that the FRC does not have power to guide the AASB in relation to the development, or making, of a specific standard, or to veto a standard formulated or advised by the AASB. (FRC, 2009)

Bowrey G (2007) in his article has a significant discussion on the independence of AASB. In ASIC Work 2001 the role of the FRC could be summarised as providing broad oversight for arranging accounting criteria in Australia. Indeed section 225 of the ASIC Take action 2001 outlines that the FRC does not have the ability to be become involved in the technological deliberations of the AASB, nor is there power to guide the AASB in the introduction of a particular standard and nor will the FRC have the energy to veto a standard made or advised by the AASB. These limits located on the FRC are to guarantee the independence of the typical setter.

The idea of freedom of the AASB is eroded by the actual fact of direct control on the visit of the members. The notion of independence is even further eroded because the FRC pieces the AASB's priorities, its business strategies, budgeting and even it staffing plans. The federal government through team, Treasury, has financial and functional control of the FRC and subsequently the AASB.

In this post again question of independence develops where, the costs of all federal organisations go through a significantly in-depth evaluation process through the Senate Quotes. So even although FRC models the AASB's budget, before hardly any money is provided the budget quotes need to undergo the senate for approval. So how is it possible for the AASB to be independent? The fact that current and potential federal government (opposition) associates have the power to choose for what and how much to invest in the plank certainly supports the argument about having less independence. There doesn't 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 specific article ended without attaining a specific conclusion as there may be specific legislation this government has enacted to ensure there is independence in the accounting standard setting up process.

Hockey J (1999) in his conversation handling to the Group of 100 Executive Supper Reaching in Sydney suggested that the FRC may have too much power and too much control over the standard setter. He said that even though 225 of the ASIC Action 2001placed some limitation over FRC the new AASB, though independent, will be completely responsible to the FRC in much the same way that the united kingdom Accounting Standards Table is to the UK Financial Reporting Council and the united states Financial Accounting Standards Mother board is to the united states Financial Accounting Groundwork.

"Under a strategy adopted by the Financial Reporting Council [1] in July 2002, the Australian Accounting Specifications Table (AASB) is obliged to work towards the full execution of the International Accounting Specifications (IAS) (now known as International Financial Reporting Standards (IFRS) [2]) in Australia. "(Hay A, 2004).

The primary purpose of the new accounting standards is the expected efficiency of the administrative centre marketplaces that will arise from the existence of a couple of globally appropriate accounting expectations that bring about high quality similar and translucent financial reporting. In a nutshell, a target of the harmonisation of international accounting requirements is an internationally effort to revive confidence in commercial reporting and create a free of charge flow of capital worldwide. A second objective is the facilitation of cross border comparison of accounts by shareholders, leading to a reduced cost of capital for Australian companies and helping them to raise capital or list abroad.

From this it is clear that IASB is not directing to look at any standard but it is perfect for the efficiency of capital market and for a lower life expectancy cost of capital AASB will so.

In articles, Brown AM et. al (2007) consider AASB, as one of the operating systems of FRC which does indeed the functions of FRC. In this specific article it is stated that FRC oversees the activities of AASB and has no specialized role on the standard setting.

In adoption of international accounting standards when started from 2005 FRC said that the Australian Accounting Requirements Board would make a decision the appropriate time at which future amendments to the people standards would be produced legislations in Australia. (Tom, R 2006). This also an indication of the AASB's self-reliance in standard environment and the amendments of these standard set.

The International Accounting Specifications Table (IASB)

"The International Accounting Specifications Board (IASB) is an indie, privately-funded accounting standard-setter based mostly in London, Great britain. The IASB is focused on developing in the general public interest, a single set of high quality, understandable and enforceable global accounting benchmarks that require clear and comparable information in general purpose financial statement. Furthermore IASB cooperates with national accounting standard setters o achieve convergence in accounting expectations surrounding the world". ( Leo et. al (2008, pp 21))

IASB as an independent, private-sector body develops and approves International Financial

Reporting Expectations. The IASB runs under the oversight of the International Accounting

Standards Committee Base. The IASB was formed in 2001 to replace the International

Accounting Expectations Committee.

IAS Plus International Accounting Requirements, explains the targets of IASB

To develop, in the public interest, an individual set of high quality, understandable and enforceable global accounting benchmarks that want high quality, clear and equivalent information in financial claims and other financial reporting to help members in the world's capital market segments and other users make economic decisions;

To promote the utilization and rigorous application of those expectations;

To fulfil these objectives and, to consider bill of, as appropriate, the special needs of small and medium-sized entities and rising economies; and

To lead to convergence of nationwide accounting requirements and International Accounting Standards and International Financial Reporting Specifications to high quality solutions.

Adoption of IASB Requirements by AASB

Adoption of IASB Requirements by AASB is explained by AASB(2009) in its website.

AASB made Australian equivalents to International Accounting Expectations Board

(IASB) standards on 15 July 2004. The overall methodology of AASB is to adopt the content and words of IASB benchmarks, accommodating the Australian legislative environment with only the words being modified.

Main focus of IASB is on for-profit entities whereas AASB is accountable for setting accounting standards for all sorts of confirming entities. Suitably determined additional text, is roofed in the AASB standards to cope with those limited instances where there's a have to have different or additional requirements for not-for-profit entities. These enhancements do not impact on the requirements with regards to for-profit entities

There are circumstances when a not-for-profit entity complying with the Australian

equivalents to the IASB standards will not be able to concurrently comply with the IASB

standards because the excess requirements for not-for-profit entities are inconsistent with the IASB requirements.

In some cases, existing AASB specifications contain helpful commentary that's not included in

the equivalent IASB criteria. The AASB retains this commentary as guidance that is not

part of the benchmarks where it is known as to be of benefit to users of AASB criteria and

provided it does not contradict the content of Australian equivalents to IASB requirements.

Thus AASB is targeting the best quality financial reporting in implementing IASB benchmarks.

Australian Securities and Purchases Commission (ASIC)

According to ASIC(2009), ASIC is Australia's commercial, market segments and financial services regulator, which can be an 3rd party Commonwealth Government body create under and administer the Australian Securities and Assets Commission Function (ASIC Action), and perform most of work under the Firms Act.

ASIC ensures that Australia's financial marketplaces are fair and transparent, backed by confident and informed investors and consumers.

ASIC regulate Australian companies, financial marketplaces, financial services organisations and specialists who offer and recommend in purchases, superannuation, insurance, deposit taking and credit.

ASIC's Statutory Role and Responsibilities

Cameron A (2000) discuss the role and duties of ASIC

ASIC's role in the financial reporting system is not well understood

Responsibilities and Obligations in regards to financial reporting imposed on ASIC by the Companies Rules are as follows

Monitoring and enforcing conformity with financial reporting requirements of the Law, like the accounting benchmarks.

Powers to exempt companies from the requirements of Accounting Expectations and other provisions of regulations, and to alter the use of regulations.

Relationship Between ASIC and the AASB

ASIC is in full support of the AASB's standard setting up process. Both companies share

information and regulatory concerns. ASIC gives information of concerns of accounting practices that come to their attention under their activities and means that the Board knows the views on the proposals for new standards and revisions to existing ones, as

market regulator. All contributions made by ASIC need to be considered by the Board on making your final decision on Expectations. (Cameron A, 2000)

ASIC's role is to contribute to the introduction of high quality expectations to market market integrity generally, also to enforce the individual Standards created by the Panel.

Even though ASIC doesn't have authority to determine or veto accounting benchmarks, ASIC does have the energy to exempt or change them.

ASIC also builds up policy on making use of financial reporting requirements of the Law in

new and problem areas. For example, development of transitional reporting requirements of building societies, credit unions and friendly societies.

Functions under Australian Securities and Purchases Commission Act 2001 (ASIC, 2009)

Maintain, facilitate and enhance the performance of the economic climate and entities in it

Promote positive and informed participation by shareholders and consumers in the financial system

Administer regulations effectively and with reduced procedural requirements

Enforce and give effect to the law

Receive, process and store, successfully and quickly, information that is given to us

Make information about companies and other systems available to the public when practicable.


To conclude the aforementioned declaration can be arranged only to some extent. The assertion specifies the actions of AASB are under the guidance of FRC, which is the function of FRC to oversee the process of arranging accounting standards, but the Act has put limitations on FRC to guarantee the independence of the standard setter. AASB seeks for the high quality financial reporting in implementing IASB criteria. The role of ASIC is to contribute for the development of criteria by AASB. In short, the combined work of the body will help develop and maintain high-quality financial reporting standards for all sectors of the Australian economy

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