CHAPTER 3 Standard setting LEARNING OBJECTIVES After studying this chapter, you should be able to: 3.1 understand the institutional framework of Australian accounting standard setting 3.2 explain and define an accounting standard 3.3 evaluate the distinction between rules-based and principles-based standards 3.4 apply the concept of regulation to the production of accounting information 3.5 analyse standard setting as a political process 3.6 understand the benefits of harmonisation of accounting standards. Copyright @ 2017. Wiley. All rights reserved. Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-03-05 22:56:18.
Theory Regulation Standard setting Principles and rules --- - Benefits Advantages -- - - Copyright @ 2017. Wiley. All rights reserved. Constraints FRC Political - - Harmonisation 76 Contemporary issues in accounting Institutional framework Accounting standards -- Financial statements Disadvantages AASB Lobbying Professional Convergence Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-03-05 22:56:18.
Previously you will have learned that conceptual frameworks are broad principles used to guide accounting standard setters by providing a base for considering the merits of alternative accounting methods. In contrast, accounting standards provide specific requirements that must be complied with. The international standard setter has no authority to impose accounting standards, as that is left to the authorities in the jurisdictions endorsing the standards. However, some aspects of conceptual frameworks are also pertinent to standards, particularly the ques- tion of whether they should be rules or principles based, as well as the potential influence of political pressures on the standard-setting process. This chapter considers these points and examines the most significant standard-setting development in Australia in recent times: the harmonisation of Australian accounting standards with those issued by the International Accounting Standards Board (IASB). Before examining the issues, however, the chapter considers the context in which the Australian accounting standards are set and the institutional framework that underlies the Australian regulator. 3.1 Institutional framework LEARNING OBJECTIVE 3.1 Understand the institutional framework of Australian accounting standard setting. The Australian Accounting Standards Board (AASB) was established under the Australian Securities and Investments Commission Act 1991 (ASIC Act), and was designed to improve the quality and independence of the accounting standard-setting process in Australia. Previously, accounting standards were developed and administered by the accounting profession through various professional bodies, particularly the Insti- tute of Chartered Accountants in Australia and CPA Australia. The AASB is designed as a neutral, independent body, with full legislative backing to enforce the standards it publishes. It is overseen by the Financial Reporting Council (FRC) and is aided in its work by several advisory groups, including interpretations advisory panels and user groups. The structure of this institutional framework is shown in figure 3.1. FIGURE 3.1 Australian accounting standard setting: organisational structure The Minister Financial Reporting Council Australian Accounting Standards Board Office of the Australian Accounting Standards Board Focus groups Project advisory panels Copyright @ 2017. Wiley. All rights reserved. Interpretation advisory panels Source: Australian Accounting Standards Board,