Difference Between IFRS and AASB

IFRS vs AASB
 

An accounting standard can be defined as a set of rules and procedures that need to be followed in preparing financial statements at the end of a financial year. This article evaluates the purposes and the importance of AASB accounting body and IFRS standards that are linked with the international accounting standards and the difference between IFRS and AASB.

What is AASB?

The Australian Accounting Standards Board (AASB) is the Australian governing body who engages in developing, implementing and maintaining the accounting standards by adhering to the Australian company law. The main functions of the Board are set out according to the Australian Securities and Investments Commission Act 2001.

Difference Between IFRS and AASB

Main Functions of AASB

Under the ASIC Act 2001, the main functions of AASB can be illustrated as follows:

  • Developing a conceptual framework to evaluate the proposed standards.
  • Making the accounting standards under section 334 of the Corporations Act 2001
  • Formulating the accounting standards for other purposes
  • Participating and contributing to the development of a single set of accounting standards for worldwide use.
  • Promoting the main objects of Part 12 of the ASIC Act, in order to reduce the cost of capital, enable the Australian entities to compete globally and to maintain the confidence with the investors in the Australian economy.

The vision of the AASB is to become a global centre of excellence who are capable of delivering high quality financial reporting standards. The mission of the AASB is to develop and maintain high-quality financial reporting standards for all the sectors of the Australian economy which will ultimately contribute to the development of global financial reporting standards.

Objectives of AASB

The primary standard setting objectives of AASB can be illustrated as follows:

  •  Issuing the Australian versions of International Accounting Standards Board documents.
  • Developing standards to maintain consistency in transactions.
  • Considering about the development of International Financial Reporting Standards (IFRS)
  • Identifying the areas which require the fundamental review and introduce standards to cover those areas.
  • Globally promote the consistent applications and interpretation of accounting standards.

What is IFRS?

International Financial Reporting Standards (IFRS) can be considered as a set of international accounting standards issued by the International Accounting Standards Board (IASB) with the objective of maintaining equal accounting standards among all the countries. Business organizations are following these standards when preparing the financial statements at the end of the period.

The IFRS framework provides a set of principles for financial reporting. IFRS allows management a greater flexibility in preparing the financial statements of the company. When competing in the international market, it would be highly beneficial to have the financial statements according to the international standards.

Objectives of IFRS

According to IASB, there are four specific goals for developing IFRS that can be listed as follows:

  • To develop global accounting standards which require transparency, high quality and comparability in financial statements.
  • To encourage in following global accounting standards.
  • To address the requirements of emerging markets in implementing the global accounting standards.
  • To match the various national accounting standards with the global accounting standards

What is the difference between AASB and IFRS?

 

Topic

IFRS

AASB Standards

 
 

1. Presentation of financial statements

Income Statement

Income Statement

 

Balance Sheet

Balance Sheet

 

Cash flow Statement

Cash Flow Statement

 

Statement of Changes in Equity

 

 

2. Accounting for Inventories

Follow the normal procedures for inventory calculations

LIFO method is not used in calculations

 
 
 
 
 

3. Preparations of the Cash Flow Statements

Comply with the AASB standards

Additional closures are required when compared with IFRS

 
 
 
 
 

4. Preparation of the Income Statement

Changes in the accounting policies must be made only for the legal requirements

Changes in the accounting policies must be made only if there’s any requirement to match with another accounting standard

 
 
 
 
 

 

In conclusion, it can be said that both the AASB, which is the Australian accounting standards governing body and IFRS accounting standards have been useful in preparing financial statements in accordance with the international standards.

 

Photo By: epSos .de (CC BY 2.0)

Further Reading:

  1. Difference Between GAAP and IFRS
  2. Difference Between IFRS and Canadian GAAP