Australian Accounting Standards


  • What are Australian Accounting Standards?
  • What is IFRS?
  • The importance of accounting standards in Australia
  • Key Australian Accounting Standards
  • Implementation and enforcement of AAS

What are Australian Accounting Standards?

Australian Accounting Standards (AAS) are principles and guidelines that regulate financial reporting in Australia. The objective of AAS is to ensure that financial statements are prepared consistently, can be compared easily, and provide a transparent view of an entity’s financial position.

AAS lay out specific rules and criteria for how financial information should be recognised, measured, presented, and disclosed.

These standards in Australia are categorised into two tiers for reporting financial events in an entity’s records:

  • Tier 1: Australian Accounting Standards
  • Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements

The development of Australian Accounting Standards (AAS) is overseen by the Australian Accounting Standards Board (AASB). This is an independent organisation responsible for establishing and maintaining accounting standards within Australia. The AASB operates under the regulatory framework provided by the Australian Securities and Investments Commission (ASIC).

The AASB is composed of a group of experts who have the responsibility of creating and issuing these accounting standards. They actively engage with various stakeholders, including government entities, professional accounting associations, and the business community, to ensure that the AAS accurately reflect current accounting practices and meet the needs of the Australian accounting profession.

Accountant Using E Invoice Software At Computer In Office.

What is IFRS?

International Financial Reporting Standards (IFRS) are a set of authoritative guidelines and principles established by the International Accounting Standards Board (IASB).

IFRS includes two main series of standards: International Financial Reporting Standards (IFRS) and the older series known as International Accounting Standards. Additionally, it includes interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and the former Standing Interpretations Committee (SIC) of the IASB.

In Australia, the adoption of IFRSs is carried out by the Australian Accounting Standards Board (AASB).

The primary objective of this adoption is to ensure that general-purpose financial statements, prepared by for-profit entities in accordance with AASB standards, align with IFRSs.

The AASB adheres to a transaction neutrality policy, which means that similar transactions and events should be accounted for in a consistent manner across all types of entities. This consistency applies whether the entities operate in the for-profit sector, the not-for-profit private sector, or the public sector, unless specific circumstances warrant differentiation.

When preparing new and revised IFRSs for adoption in Australia, the AASB also takes into consideration the unique requirements of not-for-profit entities in both the private and public sectors.

International Financial Reporting Standards (IFRS) are a set of authoritative guidelines.

The importance of accounting standards in Australia

Accounting standards serve as the backbone of financial reporting. They provide a consistent framework that ensures the comparability and reliability of financial statements, which is crucial for investors, creditors, and other stakeholders in making informed economic decisions.

In Australia, these standards serve as a vital link between theoretical financial concepts and their practical application.

The following points shed light on the need for Australian accounting standards:


Accounting standards play a pivotal role in ensuring uniformity and consistency in financial reporting across all types of entities, including both public and private entities.

These standards adhere to a standardised format, facilitating the work of auditors. Regardless of an organisation’s size or scale, everyone has an equal opportunity to monitor their financial progress. This uniformity also lends credibility and authenticity to financial records.


Accounting standards, particularly in Australia, are tailored to the specific economic environment of the country. They cater to the requirements of both profit and non-profit organisations.

Understanding these standards enables individuals to comprehensively analyse how entities operate and conduct transactions. In comparison to global accounting standards, the AASB offers a more specialised framework.


Accounting standards, although focused in scope, are highly reliable because they are government-approved and incorporate IFRS. Stakeholders, creditors, and investors place trust in this data, considering it trustworthy and valuable.

Present and prospective investors rely on this information for informed decision-making, as it presents a comprehensive view of an entity’s financial status. The basic principles outlined in AASB delineate the roles and responsibilities of auditors.

Preventing accounting fraud

Common accounting standards significantly reduce the risk of financial fraud and facilitate the detection and prevention of calculation errors, ensuring accurate results. Students can reference these accounting standards to elucidate how and why an entity adjusts its financial records.

Proper citation of these accounting theories, along with supporting case studies and research papers, is advisable, with recommended referencing styles like APA or Harvard for statistical documents.

Monitoring financial progress

Accounting standards empower students to conduct in-depth comparative studies by placing the financial records of two or more companies side by side for profit margin and investment comparisons. This also significantly influences market research and analysis.

Financial statements prepared in accordance with AASB offer valuable insights into a entity’s performance in the current business world, making them a valuable reference for students.

Determining managerial accountability

Accounting standards play a crucial role in assessing the overall performance of an organisation within its jurisdiction. Year-end company accounts shed light on the internal workings of the organisation, highlighting whether it is well-managed or facing mismanagement.

These standards maintain consistency within the entity, serving as a benchmark for measuring the brand’s performance and reach while simplifying error detection and rectification for enhanced accuracy.

Market research reports and income statistics, Financial and Accounting concept.

Key Australian accounting standards

Australian Accounting Standards include a wide range of financial reporting areas. Key standards among these include:

AASB 101 - presentation of financial statements

This standard prescribes the basis for presentation of general-purpose financial statements, ensuring comparability both with the entity’s financial statements of previous periods and with those of other entities.

It sets out overall requirements for the presentation of financial statements, guidelines for their structure, and minimum requirements for their content. This includes the requirement for a balance sheet, income statement, statement of changes in equity, cash flow statement, and notes. It emphasises the need for comparability and consistency in financial reporting.

AASB 102 – inventories

This standard outlines the accounting treatment for inventories. It provides guidance on determining the cost of inventories and subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulae that are used to assign costs to inventories, such as FIFO (First-In, First-Out) or weighted average cost.

AASB 107 - statement of cash flows

This standard requires the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows. It categorises cash flows during the period from operating, investing, and financing activities. This standard enhances the comparability of the reporting of cash flows by different entities.

AASB 108 accounting policies, changes in accounting estimates and errors

This standard prescribes the criteria for selecting and changing accounting policies, along with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates, and corrections of errors.

It emphasises consistency in the application of accounting policies and requires full disclosure of any changes and their effects.

AASB 116 property, plant and equipment

This standard highlights the accounting treatment for property, plant, and equipment (PPE). It covers recognition of assets, determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them. It requires entities to assess the carrying value of PPE and account for any changes, such as through depreciation or impairment.

AASB 16 leases

The standard of Leases sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. It defines how to classify leases and how to account for lease income and expenses.

AASB 136 impairment of assets

The impairment of Assets standard ensures that assets are not carried at more than their recoverable amount.

It mentions the procedures for assessing whether assets are impaired, how to measure recoverable amount, and when to recognise an impairment loss.

AASB 137 provisions, contingent liabilities and contingent assets

This standard ensures appropriate recognition and measurement of provisions, contingent liabilities, and contingent assets.

It defines what constitutes a provision and when it should be recognised, how to measure it, and the related disclosure requirements.

AASB 138 intangible assets

The Intangible Assets standard prescribes the accounting treatment for intangible assets not addressed in other AASB standards.

It covers the recognition criteria, measurement after recognition, and disclosure requirements for intangible assets. It distinguishes between internally generated and acquired intangible assets.

AASB 139 financial instruments: recognition and measurement

To establish principles for recognising and measuring financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

It addresses the classification of financial instruments, their initial recognition, subsequent measurement, and the treatment of gains and losses. It also deals with date-recognition and hedge accounting.

Hence, all these standards are integral to ensuring transparency, consistency, and comparability in financial reporting across different entities. They are continually updated to respond to new challenges and changes in the business environment.

Businessman working on desk office with using a calculator to calculate the numbers.

Implementation and enforcement of AAS

The adoption of Australian Accounting Standards (AAS) by reporting entities involves a structured process to ensure compliance. Initially, reporting entities identify the relevant AAS that align with their specific financial reporting requirements.

Understanding the specifics of these chosen AAS is essential before updating financial reporting policies to incorporate the pertinent standards. Subsequently, necessary changes to accounting practises and procedures are implemented to align with the AAS.

To maintain compliance with AAS, reporting entities should:

  • Seek professional guidance and training to enhance their understanding of AAS adoption and application by reporting entities.
  • Stay informed about any updates or modifications to AAS by closely monitoring regulatory bodies.
  • Engage in continuous improvement by periodically reviewing and updating financial reporting policies and procedures.

Effective monitoring and enforcement of compliance with AAS are pivotal for upholding the integrity of financial reporting. This responsibility primarily falls on regulatory bodies and the following steps outline their role in monitoring and enforcing compliance:

Regulatory Oversight: Regulatory bodies, such as the Australian Securities and Investments Commission (ASIC), assume the role of overseeing compliance with AAS.

Inspections and Audits: These bodies conduct regular inspections and audits to assess compliance with AAS and identify any instances of non-compliance.

Enforcement Measures: In cases of non-compliance, regulatory bodies take appropriate enforcement actions, which may include issuing warnings, imposing fines, or initiating legal proceedings.

Education and Guidance: Regulatory bodies also extend their support by offering education and guidance to help organisations grasp and adhere to AAS requirements.

Continuous Monitoring: Regulatory bodies continuously monitor developments in accounting standards and adapt their enforcement procedures accordingly.

This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.