Proposed Changes by Iasb

The Australian Accounting Standards Board (hereafter known as AASB) regulates, develops and maintains Australian accounting standards, such as the Statement of Accounting Concepts 1 (SAC 1): Reporting Entity (AASB, 2010). As of 2005, AASB collaborated with the International Accounting Standards Board (IASB) to comply to the Financial Reporting Councils strategic direction (AASB, 2004; Leo, K., Hoggett, J., Sweeting, J., & Radford J., 2009). This would enable reporting entities applying AASB standards to be used globally (AASB, 2004). As of March 2010, IASB and the US Financial Accounting Standards Board (FASB) have released an exposure draft, “Conceptual Framework for Financial Reporting: The Reporting Entity” as part of their drive to promote a common and improved conceptual framework for developing future accounting standards worldwide (Journal of Accountancy, 2010; FASB, 2010). By following the conceptual framework, AASB’s actions would be considered to be consistent with the specifications of the Australian Securities and Investments Acts Commission 2001, Part 12 (AASB, 2004). In short, it advocates standards that aid decision-making, fulfilment of obligations and other necessary actions that are necessary for the proper running of an economic entity.

Comparing the two stances taken on accounting standards, SAC 1 has a narrower, precise view towards the definition of reporting entities, whereas the IASB and Financial Accounting Standards Board (FASB)’s recent publication states reporting entities “are the circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders and other creditors who cannot directly obtain the information they need in making decisions about providing resources to the entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided” (Deloitte Touche Tohmatsu,...