AIFRS and IFRS - Comparing the Differences

AIFRS and IFRS - Comparing the Differences

As more and more nations begin to merge their prior financial reporting standards with those of the International Financial Reporting Standards (IFRS) one country has made great strides in continuing with this trend. Australia has done an exceptional job of matching a majority of their financial reporting standards or Australian International Financial Accounting Standards (AIFRS) with those of the IFRS. This paper will touch on some of the main similarities and differences between the AIFRS and IFRS.

When examining the Australian International Financial Accounting Standards first the accounting body that establishes them must be examined. Just like other countries Australia appoints a government agency to create and preserve financial accounting standards in a manner to best assist their economy. This government agency is called the Australian Accounting Standards Board or AASB. This board follows a process to deal with new accounting standards as well as the altering and changing of previous outdated ones.

The board also assists in the creating of worldwide financial reporting and standard setting with accounting bodies such as the International Accounting Standards Board and insists that their accountants follow these standards to a certain degree. Around 2002 the AASB began to move away from their previous financial accounting standards and head towards that of the IASB and IFRS. This has in turn proved to be a good move for them.

The differences between the AIFRS and IFRS range from small and insignificant to rather large and prominent. When examining how they are both similar and unique from one another it can prove to be very interesting and times a bit confusing. The following are some of the main differences between the two accounting bodies.

The AIFRS mandates that when presenting financial statements any use of another currency besides that of Australia is explained and vindicated where as the IFRS does not require this. Also with the presentation of financial statements the AIFRS mandates information regarding the auditor's remuneration and specifics on franking credits. The remainder of the information required with the presentation of financial statements in the AIFRS is equivalent to that of the IFRS.

In dealing with the reporting of cash flow statements there is a significant difference in what the IFRS demands and that which the AIFRS does. IFRS allows the reporters of cash flow statements to use the indirect method which is viewed as a substitute to the direct method. AIFRS does not allow the use of the indirect method and mandates the use of the direct method. Along with this come the standard that all dividends paid must be classified as a financing cash flow when dealing with the AIFRS.

Another area of difference between the two accounting bodies is the calculating of earnings per share. In accordance with AIFRS the opportunity for a business entity which has been through a significant capital restructure to use an "alternative denominator in calculating basic and diluted earnings per share" (PricewaterhouseCoopers 4) is presented. Along with this comes the mandated disclosure of the "weighted average number of converted, lapsed or cancelled potential ordinary shares" (PricewaterhouseCoopers 4). This opportunity does not exist within the IFRS.

Some of the differences are so small that they seem too insignificant to discuss when comparing differences between these two accounting bodies, an example of this is investments in associates. All remain similar between the two standards of reporting this information other than that the AIFRS forces that additional disclosures be made and issue some supplementary implementation guidance. Although this seems small in the grand scale of things it is an example of the small tweaking of the IFRS that has been done in Australia to better fit their nation's economy.

Other differences that come to light when discussing the two accounting bodies are situations where there are no equivalent standard presented by the AIFRS. An example of this is examined when looking at accounting and reporting by retirement benefit plans. The IFRS has standards when dealing with this but it is not discussed in the AIFRS, therefore making a comparison for the two not available.

These are just a few of the differences presented when discussing these two accounting bodies. One can dig deeper into this topic and test these standards with different scenario's and how they would be treated. It is clear that although these differences have arisen the majority of the financial reporting standards remain equivalents to one another and can be interchanged for similar situations. As the AIFRS and IFRS go on into the future it is clear that they will continue to become more identical and follow in the world trend of a single set of financial reporting standards.

Bibliography

PricewaterhouseCoopers. "AIFRS and IFRS-Similar But Not the Same." (2005): 1+. Web. 5 Apr. 2011. .

"The Accounting Profession in Australia." International Recruitment Services for Australia and New Zealand | Migration Matters Skill Matching. Web. 5 Apr. 2011. .

Deloitte. "A-IFRS vs IFRS." Differences between Australian Equivalents to International Financial Reporting Standards (2005): 1-16. Print.

POST COMMENT

ALBALON: Used to Treat Decongested and Stuffy Nose What Will Be the Fate of Saab and Hummer? Visit Stockholm - One of the Great Museum Cities For a Weekend Cultural Break Alcatel OT800 - A Slim Phone and Easy to Handle Gadget-ki4 Mother's Day Gift Ideas: Magical, Mystical Crystals And Other Good Luck Amulets! Endless Opportunity: Up-Selling and Cross-Selling Rags and riches CAPITALISM IS DEAD - AND WE NEED TO LOOK FOR ITS SUCCESSOR NOW! GAAP and IFRS Property developer expertise helps and support community-based establishments Few Fishing Pointers – Few Fundamental Pointers That Will Make Your Fishing Experience A Soothing One Apple iPods Most Successful Gadget Ever 30 Days to a More Powerful Brain by Bruce Lewolt and Tony Alessandra