Accounting management help on : AASB

Q?? Write a framework on AASB??Frame work developed by AASB or by any country, objective will be for safeguard of public money. In current situation, law is there but it is not enforceable by law or it is not mandatory for company to adopt in their accounting practice, it is only voluntary practice. Before moving towards enforceability it is necessary to understand condition or situation under which it can be made enforceable in eyes of law. Only discussion or thinking of an individual or group can not be make law and précised corporates to follow. Universal practice is very clear and state, governing body need to consider in meet that is general or extraordinary, then after use it as trial after getting open feed back from expert and laymen then think to enforced it as a law (Michaely, Roni & Womack, 1999).

Role of frame work:

Role of frame work will be to consider these factor and then analyze the framed rule which is suited or not for overall industry.

1. Professional discipline expertise: By this we mean expert knowledge of the techniques, methods and conventions of accounting and finance.

Does the financial team have the requisite skills in appropriate fields from the base disciplines of accounting and finance; financial accounting, management accounting, finance, auditing, taxation, etc.? Is there sufficient expertise and experience in professional ethics and corporate governance? Frame work role will be entirely depends upon team member their work and then finally result.

What about supporting knowledge in information technology, systems design, knowledge management, risk management? How relevant is the knowledge and experience? Are there any gaps? Are individuals keeping up to date? Are the members of the financial function learning as a team? Could certain activities be sourced outside of the team – in shared service centres or to third parties?

2. Manpower:

Importance of people is known matter, but here people we are considering, target audience. When someone is making or framing rule, application of such rule and its post result should be in scence prior to make it obligatory. Rule relates to accountancy   is going to affect whole industry at large, how will they react it will be more important.In case of rule of accountancy a slight change of rule can cause companies overall profit in a loss or valuation which is looking attractive can be damp.

3. Organisation prospective:

At a time of framing rule, one needs to understand not only subjectivity but also human psychology into consider. Big business house works as a pressure group, now regulator also need to consider their point of view into picture .Framing rule ,making it enforceable by law all are excellent but you cannot ruled out pressure group and their interest.

Ultimately they are main growth force of economy and rules can hamper overall growth.

Regulatory need to think out of box prior to judging or making any rule obligatory.

Another way of thinking is practical application part of rule .Once it will come, how it is going to affect employee and their work (Levine, 1991).

4. Business specific context:

Business is crux of whole gamit.And success and failure of business depends upon transparency from regulator as well as organisation both. As a framer regulatory needs to come with whole detail regarding its objective ,time given for trial ,open feed back towards main contents of law relates to accountancy.

It will not only increase transparency but also increase faith among players towards regulatory. Forcefully adoption of accountancy rules always leads to corportaes heading towards wrong practices.Enron is a leading example of that.

There should not be conflict of clashes between accounting standard body and companies. If there will be companies than you need rules otherwise everything will be over.

Criticism of frame-work: Criticism is very likely scenario which can not be ruled out.

In case of framework role their approach responsibility falls upon framer so in this case it will be following.

Member; Skill: one and general criticism related to frame work can be Member; capability towards framing constitution relates to accountancy. Committee should consider only expert with sound academics or experience or both (Lin & Nichols, 1998).

Universal acceptability: Another criticism can be regarding its acceptability in industry.It happens always that sometimes framer frame rules in consideration of specific industry only, it can cause severe criticism from industry as a whole. So framer of committee should take these things carefully prior to making it legal or enforced by law.

Mechanism: Changes in law or framing new law can change overall maneuver of working in a industry .Frame work committee should understand that enough time need to be putted in all these area ,prior to make it force able by law (Greenwood & Jovanovic, 1990).

Costing: Framing of constitution should not increase costing of overall business .In case of such happening it became hazardous for industry to accept and ultimately severe criticism is down the line is likely.

Three inconsistencies or internal logical error:

Technical Error: Technical error is deemed to be common error as well as very rigid in nature error. In case of drafting a constitution a spelling mistake or using of dual meaning can change whole aura in confusing state.

These things are already being addressed frequently by International accounting standard board in its bulletin. But another concern is in spite of well aware and growing frequency, it is still in business (Hannan, Kagel, & Moser, 2002). Once it happens, it will change whole new meaning of law. In case of accountancy related technical error chances are more to crop. Lack of appropriate linkages between general-purpose financial reporting and regulatory reporting: Another error which can likely arise in interlinking with already framed law. Sometimes it happens and happens badly that one rule in accountancy is already function another crop up without any information. One need to look after this matter very carefully it’s not about criminal law or civic law it’s a regulatory framework .One single change and everything washed out (Easterbrook, Frank & Daniel, 1984).

Another observation is laws are framed or regulator comes into action once panic signal spread all over. In that scenario rules which will be come will be bit hazy.AASB has done these thing so many time. Even IASB has done same thing after Enron saga. More recently Satyam industries then come into picture regulatory.

What it seems is don’t make or amend on the basis of current happening, but to consider overall affectivity of such changes.

Another aspect of accounting standard changes is its peer comparison. Countries try to match with IASB, which is not always good.IASB rules regulation or changes are based on overall efficiency it’s a complete set of parameter you can say like six sigma approach. But again question is what about domestic environment is? How far country is prepared for new changes. Efficiency and effectiveness depends upon domestic circumstances which always play very vital role.

So in short proper linkage between theoretical and application procedure of regulation should be there, in case it will be not be happen chances of growing dissatisfaction will be more and can cause bigger problem for overall accounting Atmosphere.

No one want companies like Enron or satyam will remember for their wrong doing ,there was a time when they were darling of  all .but one plunder and everything gone out of pocket. Who was ultimate sufferer, definitely people at large?

Non-observability of compliance: We always care about either regulator or companies but what about share-holders. How regulator will save their interest. Have they checked application of new law upon investor? Will it be positive or negative? How far it will be feasible to applied or even make it compulsory by leagalise it, without knowing the fact and figure of post effect. In normal   regulator want to give simple lesson that is transparency and for large interest of investor these things are taking place, but in reality such things rarely happen. Either regulator want to make regulation at par with global standard or just for the sake of transparency amendment happen (Dechow, Patricia & Meulbroek, 2000).

In my all observation relates to Australian accounting standards Board or even international accounting standard boards,I found such error from regulatory and even they rectify it in some times by withdrawing some clauses or taken back whole.

Question is very clear and million Dallor? Without knowing effect upon observatory or third party, stakeholder and shareholder, it’s not at all feasible to amend law or come with fresh law and make it mandatory.

Recommendation

Based on my findings: on Australian accounting standard board and comparative study with International accounting standard Board. I think regulatory should take into consideration my following recommendation.

1. Background—Prior to come with any law it is necessary to prepare background or atmosphere for that. Let realize practioner companies, business house first then apply for industry.  Industry should be mentally as well as technically prepared for adoption. Regulatory should give ample time to practitioner and then apply as a law (Barth, 1991).

2. Scope. —There should be scope of amendment in every Law especially if it is related to accountancy .In accountancy there is always a chance of modification.

If regulatory comes with such obligatory procedure there should be a window of change or window of modification.

3. Existing Standards—Existing standards should not be overlap with new one.so prior to make it obligatory it should be remember that existing standard and new standard remain different. If it happens can cause error of omission or commission and in any case it will be harmful (Bencivenga & Smith, 1991).

It’s better to study in a proper way first then prepares or draft rule and send it to govt for making it obligatory.

In case of AASB it was found that 450 and 280 overlaps. Same thing happen with American accounting standard board in case of law relates to auditing.

If we consider GAAP there also exit twice such thing in section 45 and 1(2) where same thing happen relates to expenditure (accrued).

4. Disclosure An accounting standard will be more transparent if company’s voluntarily come forward and disclose its every aspect of business with auditors.In case of forcefully or obligatory disclosure it will not be possible for sound atmosphere which can give sound accountancy practices.

So for regulatory as well as company it is necessary to come forward and disclose about things which can set bench mark for new or modern accountancy. Modern accountancy is tech friendly, where hiding can be difficult or easy both. It’s really a catch 22 situation for regulator to how it takes steps towards making it safe accounting aura.

6. Sample Disclosure—Sample disclosure relates to example putted by regulatory on preceding any cases relates to modern rule or law. If aim of regulatory body is to make law for transparency then definitely previous available rules need to look into picture.

If it is totally a new phenomenon for a country then tries to take ample advice not only from expert but also from those countries’ regulator where it is already applicable.

It will make more feasible and practically applicable for legalized it.

Moving towards such a free and smooth accounting policy zone will depends upon think tank objective, co-operation from auditors as well as from industry as a whole.

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