Financial Statements Essay

Submitted By Kelvindang0989
Words: 1531
Pages: 7

The Accounting Standard AASB 101 Presentation of Financial Statements was made under section 334 of the Corporations Act 2001 and it prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities. It also sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. By reviewing the current AASB framework, this essay will firstly provide a critical analysis of different measurement bases which is involved in the “Framework for the Preparation and Presentation of Financial Statement”. Secondly is the explanation about the implications of different measurement base use by Commonwealth Ltd and Woolworth Ltd which were chosen from ASX. Finally, this is an exploration of the relationship between accounting information and free market reaction by using the relevant refereed journals.
First, this is a looking back about the AASB Framework. On 15 July 2004, The AASB issued the Framework for the Preparation and Presentation of Financial Statements and then begin to present the complied version of this framework was applied for accounting report in annual period on 1 January 2009. In addition, the concepts of framework is become a foundation to prepare and presentation the financial statement for external users such as investor, government, employee, Suppliers, Lenders, customer, public, etc. There are several purposes of AASB Framework: Firstly, in order to develop the future of Australian Accounting Standards, AASB framework is contributed and reviewed all of the existing Australian Accounting Standards. It is also included evaluating proposed International Accounting Standards Board pronouncements. Secondly, so as to promote harmonisation of regulations, accounting standards and procedures concern with the presentation of financial statements, AASB framework is assisted and provided a basis for decreasing the number of alternative accounting treatments authorized by Australian Accounting Standards. Thirdly, it is deleted by the AASB. Fourthly, preparers of financial statements are assisted to apply Australian Accounting Standard and deal with issues that have to form the subject of an Australian Accounting standard. Fifthly, one more purpose of AASB Framework is to assist Auditors how to use structure to declare information on Financial Statement, it help the users of financial statement have clearly understand the information which was prepared in the financial statement in conformity to Australian accounting standard.

Moreover, there also has some important characteristic of the information in the financial statements: “Reliability” means the financial information which consider is the useful must be reliable; it should be free from bias and material error. Besides that, it needs to be “relevance” and “understandability” to help the users making decision and easy to understand which mean to be considered relevance when it correct or confirm their evaluation or predict the outcome of past, present or future events and then users can look at the financial statement which information they need for making decision. The last characteristic is “comparability” in which provide the comparable whenever the users who use this information can identify and discriminate the differences and similarities between the nature and effects of transaction and events in single time or over time.

Specially, one of the important parts of the presentation of financial statements in the measurement base, which is focus on the process of determining the monetary amounts at which the elements of the financial statement are to be recognized and carried in the balance sheet and income statement” ( AASB 2012, p. 39). There are also some different measurement bases which are used in financial statement in