CHAPTER 1 Introduction to accounting and business decision making 27International Financial Reporting Standards (IFRS) developed by the International Accounting Stand-
ards Board (IASB). The Australian Accounting Standards Board (AASB) is responsible for devel-
oping and maintaining high-quality financial reporting standards in Australia and contributing to the
ongoing development of international accounting standards by the IASB. In Australia, there are two
main professional associations: CPA Australia and Chartered Accountants Australia and New Zealand
(CAANZ). The professional associations provide feedback on exposure drafts and forward any com-
ments to the AASB. They also inform their members of any developments in accounting standards
through newsletters and by conducting continuing professional education (CPE) sessions.1.8 Evaluate the role of the Conceptual Framework and illustrate the qualitative characteristics
of financial statements.
The Conceptual Framework is designed to assist in the preparation and presentation of financial
statements, to guide the standard setters in developing future accounting standards, and to help users
interpret information in the financial statements. It specifies the objective of financial statements,
their desirable qualitative characteristics, and the definition and recognition of elements in the finan-
cial statements. The two fundamental qualitative characteristics of financial statements are relevance
(including materiality) and faithful representation. The enhancing qualitative characteristics are com-
parability, verifiability, timeliness and understandability. Cost is a constraint on financial reporting.
1.9 Give examples of the limitations of accounting information.
The limitations of accounting information include the time lag between production of the report
and distribution to the users, and the historical nature of financial statements. Costs associated with
releasing accounting information include the costs of preparing and disseminating the information,
and any losses from the potential release of proprietary information to competitors.1.10 Provide examples of exciting opportunities for careers in accounting.
Accountants are employed in public accounting roles, private and public sector accounting roles, and
government and not-for-profit sector accounting roles. New opportunities for accountants exist in for-
ensic accounting, environmental accounting, e-commerce, insolvency, and international accounting.Key terms
Accounting The process of identifying, measuring and communicating economic information about an
entity to a variety of users for decision-making purposes.
Asset A resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity.
Australian Accounting Standards Board (AASB) Australian body responsible for developing
accounting standards for application to Australian entities.
Australian Securities Exchange (ASX) Australian marketplace for trading equities, government
bonds and other fixed-interest securities.
Australian Securities and Investments Commission (ASIC) Government body responsible for
regulating companies, company borrowings, and investment advisers and dealers.
Balance sheet Statement that reports on the assets, liabilities and equity of an entity at a particular
point in time.
Business transactions Occurrences that affect the assets, liabilities and equity items in an entity and
must be recognised (recorded).
Corporations Act 2001 (Cwlth) National scheme of legislation, administered by ASIC, dealing with
the regulation of companies and the securities and futures industries in Australia.
Disclosing entity An entity that issues securities that are quoted on a stock market or made available
to the public via a prospectus.
Due process Course of formal proceedings that is carried out in accordance with established rules and
principles for protecting and enforcing different individual views associated with standard setting.