Australian Accounting Standards

Accounting standards under the Corporations Act

Under the Corporations Act 2001 (the Act), an Australian entity’s financial report must comply with the accounting standards that have been developed by the Australian Accounting Standards Board (AASB). An accounting standard is a technical pronouncement that delineates the requirements for reporting various types of events and transactions of an entity.

The purpose of an accounting standard is to create consistency across entities’ financial reports. By following the same rules, financial statements of organisations are comparable across industries and sectors. Each organisation’s statements should – through compliance with the relevant accounting standards – accurately and fairly present its financial position, including its performance and cash flow.

Accounting standards and the board

Ensuring an entity’s financial reports are compliant with accounting standards is a core element of a board’s role in finance governance.

Directors must take care to ensure that financial statements depict a ‘true and fair’ picture of the position of an entity. Where financial statements and notes do not naturally give a true and fair view, further information must be provided in the notes to make them so, in accordance with the Act and the Australian Accounting Standards.

An organisation’s financial statements are essential in communicating the position and performance of an organisation with its stakeholders. A board is held accountable to business or share owners through financial statements. So too are boards of public sector organisations and not-for-profit entities in the private sector held accountable. Other stakeholders of a business such as regulators, creditors, buyers, employees, analysts also rely on the accuracy of this information.

Fulfilling your duties

It is not necessary for all directors to have a financial background, yet they must have the financial literacy to sufficiently understand the results and financial positions of their organisation, and to fulfil their obligations as a director.

To help you develop your knowledge of a director’s role in finance governance, we have a number of resources available.

Resources

Read our report on the 'Impacts of COVID-19 on annual report disclosures'.

AICD's publication Financial Fundamentals for Directors, authored by S. Dianne Azoor Hughes, aims to help directors better understand financial reports and improve their financial literacy. It can be purchased in e-book or in print from our online Bookstore.

In our set of NFP Director Tools, there are a number of documents which provide information and prompts to help directors in this sector understand and develop their capabilities in finance governance.

Courses on the board's role in finance governance

We have a range of courses designed to increase the foundational knowledge and the advanced financial skills used by directors in the governance of their organisation:

• Finance for Directors
• Boardroom Financial Confidence
• Mastering Financial Governance

Discover our webinars

We hold interactive webinars on pertinent issues of governance. Check our list of upcoming webinars to learn more about director concerns related to the role of the board in meeting the Australian Accounting Standards.