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Abstract
Discussion on harmonization is started quite long time ago. Its impact on the countries
economy is good or bad is the central idea of this essay. This essay is written specifically
on the accounting standard used in Australia. This essay starts with introduction on various
topics such as conceptual framework, IASB, Sacs then it discussed the issue of
harmonization. Harmonization will have positive impact on the economy because it
attracts overseas investors to invest in Australia. This essay covers difference between
conceptual framework developed in Australia and IASB framework. There are given lot of
difference such as treatment of non for profit entity is same as the public entity in A-IFRS.
Reporting entity concepts and valuation of non current assets is also different in A-IFRS
.AASB framework is more prescriptive in nature as compare to IASB. Changes made in
SAC4 are given at the end like the issues of operating dates and transitional provisions.
Introduction
Every country has economic activities. To measure these economic activities fairly and
free form any bias accounting standards are necessary. So every country has specific
accounting standards .in the context of Australia there are also accounting standards which
are made by AASB. This essay tells about Australian accounting standards developed in
Australia and also discuss the IASB (International accounting standards board). After that
this essay made comparison between these two set of standards. These essays also gave
their views about IASB standard should be followed or not. After that there is discussion
about changes made in SAC4 in the year 1992 and 1995.
Purpose
The purpose of this essay is to make comparison between Australian standards set by
AASB(Australian accounting standard board) and Australian equivalent of IASB
framework (International accounting standard board) .this report fed light on the topics like
should Australia adopt these standards set by IASB and what are the long term results of
adopting these IASB standards .this standard . There is also the discussion about changes
made in SAC4 between 1992 and 1995.
Overview of the essay
In this essay there is discussion about conceptual frameworks and SAC1 SAC2 SAC3
SAC4 .then there is discussion about IASB and comparison between two standards. There
is also a lot of discussion about changes made in SAC4 after that there is paragraph about
implication of adopting international accounting standards. There is lot more discussion
about harmonization of accounting standards.
Conceptual framework in Australia:
According to Belkaoui A. R., and S. Jones, 2002 Conceptual framework is a set of
concepts that specify the function, scope and purpose of financial accounting. There are
two types of frameworks one is descriptive and another is prescriptive. A descriptive
framework is that which tends to explains present financial reporting practice on the other
hand prescriptive framework attempts to develop concepts for accounting that should be
there. Prescriptive framework seeks more changes in the accounting system as compare to
descriptive framework.
In Australia conceptual framework has made progress in 1980 when six exposure drafts
were released. These drafts have considered the issues like objective of the financial
reporting qualitative characteristics of the financial report, definition and recognition of the
assets and definitions and recognitions of the liabilities. These drafts are released at the
same time. In 1987 two more drafts are added one is definition of the reporting entity and
definition and recognition of the expenses. In 1990 SACs are released theses SACs are:
SAC1 for definition of the reporting entity, SAC2 definition of general purpose financial
reporting and SAC3 qualitative characteristics if financial information. In 1992 one more
SAC, SAC4 was released which is for definition and recognition of elements of financial
statements .these SACs are given in detail in the later part of this essay(Belkaoui A. R.,
and S. Jones,2002).
Merits of conceptual framework
According to Belkaoui A. R., and S. Jones, 2002 Conceptual framework is like a
constitution for standard setting process. It is the concepts to define nature, subject, and
purpose, of the financial report. it has many advantages to have a conceptual framework
for than company for example when there is a conceptual framework implemented in the
country then all business bodies follows that framework and so there is better
communication between different business entities. Otherwise it is not possible if there is
no conceptual framework in the country. The AARF (Australian accounting research
foundation) has discussed many different benefits of having conceptual framework as
follows all financial reports will be in consistent with others. Setting conceptual
framework is also economical for the country. More advantages are given below:
" Those who made the framework are now more responsible and accountable for their
actions .entities are now more accountable if they do not proved any disclosure or giving
false information. CF provides a means of communicating key concepts to financial report
to preparers and users, as well as providing guidance to reporting entities when no specific
standards address a particular issue.
" Financial reports made by the help of conceptual framework are consistent and more in
logical manner so that there is more understandability in the financial reports.
" Because standard-setters will have harmony on many important issues, the Development
of standards for accounting will be more economical.
There are also some disadvantages linked with conceptual frameworks like development of
conceptual framework is under the influence of the political power .so political power can
divert the conceptual framework which is not always good. Conceptual framework is
costly to develop. (Belkaoui A. R. and S. Jones, 2002)
Conceptual framework defines and discussed topics such a definition of financial reporting
