smell of good business

The Challenge of Accounting Standards

In the last few days I have been listening to various podcasts from the Australian Institute of Company Directors in relation to issues of guidance requirements in relation to reporting requirements for boards. See here for their podcasts. The key issue is around the very difficult balancing act between guidance for how boards should report to make the requirements clearer, to actually being specific as to how to run a business. The former is important and the latter clearly inappropriate.

One of the interesting areas is financial reporting. In discussing the issue with my colleagues that recently completed the AICD course, we found the variability in valuing assets (particularly when the values may fluctuate) very interesting, particularly when giving consideration to how valuation decisions affect profit outcomes. Whilst we clearly want true and fair representations of the accounts, understanding anomalies around the way assets are valued (and how that positively or negatively affects performance) is important.

The good news is that a new accounting valuation standard is being adopted and introduced on the 1st of January 2009. Introduced by the Accounting Profession and Ethical Standards Board (APESB), APES 225 Valuation Services provides a consistent approach, definition of terms and will hopefully lead to a common understanding among companies and accounting firms about what constitutes a valuation according to Kate Spargo, APESB Chairman.

You can download a copy of the above at APESB site at this link.

Feedback: Have you experienced any issues around reporting? What do you think the key challenges are?

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