Australia s new differential reporting framework is aimed at relieving these organisations of some of the disclosure requirements whilst remaining consistent with the basic objective. The purpose of this essay is to evaluate the objective of financial reports from a users and preparers perspective with particular reference to Australia s new differential financial reporting framework.
Findings are that the qualitative characteristics that have evolved over time play an important role in determining the meaning of usefulness and that the differential financial reporting framework will have both positive and negative impacts on users and preparers of financial reports. Financial accounting is the process of summarising the transactions that occur within an entity and presenting them in the form of financial reports. In preparing the reports, organisations are subject to various regulators, in particular the Australian Accounting Standards Board (AASB).
The AASB has developed a set of accounting standards that are consistent with those developed by the international regulator – International Accounting Standards Board (IASB), with minor differences for use in the Australian context (Leo 2011). It has also developed Statements of Accounting Concepts (SAC) that defines a reporting entity and outlines the objective of general purpose financial reporting (GPFR). Furthermore, it has issued a framework for the preparation and presentation of financial statements. SAC2 (1990) and the AASB Framework (2009) both highlight usefulness as the basic objective of financial accounting.
The implications of this objective will be discussed from a preparers and users perspective, within the context of a new framework of differential reporting. SAC2 (1990) outlines the objective of GPFR. It acknowledges GPFR as a means of communicating relevant and reliable information about a reporting entity to users (SAC21990). GPFR is focused on providing information to meet the needs of users who do not have the power to request the specific information they require to assist them in making decisions concerning the allocation of scarce resources.