Question

A legal wrangle developed between the Australian Taxation office and Hampton Ltd (HL) concerning the treatment of disputed income tax payments. This prompted Australian Securities and the Investments Commission (ASIC) to seek a formal ruling on the dispute and call for full disclosure of the effects of tax disputes in the company’s financial statements.

The excerpts of the letter received from ASIC stated that: If you are a preparer of financial statements, or a company director, you need to ensure that the general purpose financial reports you are releasing are in compliance with accounting standards released by the AASB. Please also note that these standards are the result of a long and extensive due process which directly involved in public consultation.

Having read this letter, one of the Board of Directors directed the Company Finance Director to send him a brief explanation about accounting standards due process.

The Finance Director in the company for which you are an accountant has required you to:

1. Explain general purpose financial statements. ​​​​​

2. Explain the due process employed by the AASB in the preparation of accounting standards.​​​​​​​​​​​​

3. Briefly describe how to obtain public consultation.​​​​​ (6 mark

Answer 1

1.

General purpose financial reports are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs. General purpose financial reports include those that are presented separately or within another public document such as an annual report or a prospectus.

More specific financial reports like production flow processes and market analyzes are not included in a set of general-purpose financial statements. These types of reports are only available to company managers.

2.

The Standard-Setting Process

(a) identifying the accounting or external reporting issue to be addressed, the scope of the issue and the rationale for needing a standard-setting solution. A formal agenda consultation process is held at least once every 5 years;

(b) debating proposals in one or more public meetings;

(c) using an evidence-informed approach to standard-setting to ensure regulatory action is warranted, including completing before finalisation a Regulation Impact Statement or similar assessments in the Basis for Conclusions;

(d) exposing for public comment a draft of any proposals

(e) making public submissions received, summaries of outreach events and other targeted consultations;

(f) considering in a timely manner the feedback received from comment letters and other outreach events and addressing in the Basis for Conclusions of any final pronouncement how the feedback has been addressed;

(g) considering whether the proposals should be exposed again; and

(h) reporting to the Financial Reporting Council on the due process followed.

3.

Process of obtaining public consultation

1.Introduction

2. Assessing the fitness of the EU public reporting framework overall

3.The EU financial reporting framework applicable to all companies (Accounting Directive: companies with cross border activities, SMEs, and content of the information)  

4. The EU financial reporting framework for listed companies

5. The EU financial reporting framework for banks and insurance companies

6. Non-financial reporting framework (Non-Financial Reporting Directive, Country-by- Country Reporting for extractive and logging industries and integrated reporting)

7. Other comments

8. Acronyms and Abbreviations

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