Australian Companies are required to adopt International Accounting Standards by 1st January 2005. What are the reasons for this move and what problems does it cause for financial reporting by these companies?

Before we touch on the reasons and problems on financial reporting by Australian Companies, I shall give a brief introduction of International Accounting Standards and its impact on Australian Companies.

Introduction

Under the strategy announced by the Financial Reporting Council (FRC) at its meeting on 28 June 2002 and publicly announced on 3 July 2002 (refer FRC Bulletin 2002/4, 3 July 2002, www.frc.gov.au), the Australian Accounting Board is obligated to work towards the full implementation of International Accounting Standards in Australia in respect of financial years commencing on or after 1 January 2005.

The objective for creation of a set of international accounting standards is premised very much on the assumed resultant enhancement to the efficiency of the capital markets and the consequent reduced cost of capital that would result from the existence of a set of globally acceptable accounting standards that resulted in high quality, comparable and transparent financi...