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australian accounting standards

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Introduction

1. Give a brief summary of the purpose for the accounting surveillance program undertaken by the Australia Securities and Investment Commission (ASIC) ASIC introduced an accounting surveillance program targeting company accounts, mainly focusing on three areas - capitalization of expenses, non-consolidation of controlled entities and the non-recognition of revenue. After previous attempts to monitor company's financial reports, the Parliament of Australia is wary that this attempt will result in a success.1 The Australian Securities and Investments Commission (ASIC) expressed some concerns about the way companies were complying with their disclosure obligations after it surveyed the financial reports of listed companies. ASIC carried out the surveillance programs to identify problems and areas where the accounting profession and business community need to improve their future reporting methods. The major problems identified by this surveillance activity were: � Amortisation of intangible assets � Abnormal items � Directors' and officers' emoluments 2 The surveillance programs also aims to find directors who fail to maintain books and records, an activity which puts creditors and employees at risk if the company is forced to close. The program will target small businesses after ASIC became concerned about the poor level of record keeping reported to it by company liquidators and accounting professionals. The surveillance will start with those directors who have had failed companies in the past and are now running new companies and companies which have recently failed to lodge financial reports with ASIC. ASIC said "The aim of the surveillance was to encourage directors to protect themselves and their creditors by keeping accurate records about their companies." ...read more.

Middle

Firms that capitalise such expenditures will report higher depreciation/amortisation charges and therefore lower profits in future periods. Like mentioned earlier, certain expenditure is not always clearly defined and it is not easy to generally classify expenditure as an asset or an expense. Choosing one or another also affects the outcome of the financial statements that may be positive or negative to users of these statements; therefore, a high degree of professional judgement is necessary. AASB 136 Impairment of an Asset Write-off of expenses to retained earnings AASB 108 The objective of the Standard AASB108 is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies changes in accounting estimates and correction errors. The Standard is intended to enhance the relevance and reliability of an entity's financial report and the comparability of those financial reports over time and with the financial reports of other entities. [Pr.32] As a result of the uncertainties inherent in business activities, many items in a financial report cannot be measured with precision but can only be estimated. Estimation involves judgements based on the latest available, reliable information. For example. Estimates may be required of: * Bad debts; * Inventory obsolescence; * The fair value of financial assets or financial liabilities; * The useful lives of, or expected pattern of consumption of the future economic benefits embodied in, depreciable assets; and * Warranty obligations Premature recognition of revenue for example through attaching all revenue to one component of a contract involving multiple deliverables. ...read more.

Conclusion

Like mention earlier, there are no set rules for achieving good corporate governance but principles that might help achieve this concept. Accounting standards are basically on the same lines as those of achieving good corporate governance. They are a set of 'rules of the road' that govern the way in which financial statement are prepared so that different financial statements are comparable. Historically, they have been drawn up on a national basis at an individual country level, similar to rules of the road. However, with the increasing globalisation of business, there has been a need to make financial statements comparable across national boundaries and this was the driving force behind the adoption of the international standards in Australia in 2005. Furthermore, accounting standards are there to help entities comply with the laws governed in the Corporations Act and consecutively eliminate fraud. Although these standards are not compulsory and abiding to appropriate standards is not either, but failing to do so may lead to consequences. REFERENCE Australian Securities and Investment Commission 2000, ASIC Accounting Focus Promasic Accounting Focus Promotes Investor Confidence, viewed 22 April 2008, <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/99-220.pdf/$file/99-220.pdf> Australian Securities and Investment Commission 2000, New ASIC Surveillance Targets Books and Records, viewed 23 April 2008 <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/98-250.pdf/$file/98-250.pdf> Australian Securities and Investment Commission 2000, Surveillance of Company Financial Reports, viewed 23 April 2008, <http://www.fido.asic.gov.au/asic/pdflib.nsf/LookupByFileName/00-100.pdf/$file/00-100.pdf> Parliament of Australia 2006, Chapter 2 - Report on Annual Report and the activities of ASIC, viewed 22 April 2008, <http://www.aph.gov.au/SENATE/COMMITTEE/corporations_ctte/asic/asic_03/report/c02.htm> Wikipedia 2008, Corporate Governance, viewed 24 2008, <http://en.wikipedia.org/wiki/Corporate_governance> 1 http://www.aph.gov.au/SENATE/COMMITTEE/corporations_ctte/asic/asic_03/report/c02.htm 2 http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/99-220.pdf/$file/99-220.pdf - 4k - [ pdf ] - 14 Jun 2000 3 http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/98-250.pdf/$file/98-250.pdf - 5k - [ pdf ] - - 14 Jun 2000 4 http://www.fido.asic.gov.au/asic/pdflib.nsf/LookupByFileName/00-100.pdf/$file/00-100.pdf - 2k - [ pdf ] - 7 Mar 2000 5 http://en.wikipedia.org/wiki/Corporate_governance ?? ?? ?? ?? ...read more.

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