The AASB sets a Benefits costs precedent on all evaluations and expenditures. Article 7.1 of the standards requires that an organization’s accounting when dealing with exploration and evaluation must base their expenditures on the interest returns of the process of exploration. The costs must also reflect the expenses as incurred in the exploration either partially or fully capitalised on the investment. Further, the board outlines that entities must decide on the projected costs by basing the expenses on each separate area of interest without treating the whole process of exploration as a whole single unit. The board underlines the importance of setting a benefits protocol designed and harmonized with the expected returns on capital by recognizing companies that comply with the board’s tenure requirements. By so doing, the board promotes the utilization of relevant financial information in assisting users to make and evaluate decisions about the allocation of scarce resources (AASB, 2006).
Presentation
Proper presentation of financial information is the baseline for assisting the AASB in making predictions about the financial health of the entities in question and their future situations. The board has a declaration that requires all entities to classify exploration and evaluation assets within their estate into meaningful terms as either tangible or intangible. The express clause also requires such assets to be defined by the manner in which they were acquired. The board aims at reducing inconsistencies in the way in which information is presented financially thus preventing loopholes for illegal exploitation of the resource by setting this precedent (Fleet, Summers & Smith, 2006). This method of presentation also promotes tracking of expectations and setting a confirmatory role during evaluations. About liquid assets and the conversion of tangible to intangible assets, the board requires that all assets classified either as tangible or intangible traced in their conversion and reported as in their original form. Classifying information in this form enables objective evaluation because of relevance (Deegan, 2006).
AASB Disclosure of Estimation Provision
The Australian Accounting Standards Board places an emphasis on organizations in both the private and public sectors to follow a strict protocol write in defined accounting standards. These standards are based on the provision of disclosure that outlines transparency and accountability to the larger public (Llewelyn, 2003). The disclosure provisions require that all sources of estimation in implementing accounting policies should be disclosed individually in all financial reports. The board has an existing precedent requiring all entities to disclose information identifying and explaining the amounts recognized in their financial reports. It also requires that the sensitivity analysis associated with such estimates should accompany the disclosure of the nature of estimates. Furthermore, the board requires that all judgments with respect to the nature and amounts should be relevant to organizations’ operation as they are critical in enforcing accounting policies (AASB, 2006).
References
Australian Accounting Standards Board (AASB). 2006. Accounting for the revaluation of noncurrent assets. Australian accounting Research Foundation (AARF). Melbourne.
Deegan C. 2006. Financial Accounting Theory. McGraw-Hill, North Ryde.
Fleet W., Summers J. & Smith B. 2006. Communication Skills Handbook for Accounting. Kindersley Publishing.
Llewelyn S. 2003. What Counts as ‘Theory’ in Qualitative Management and Accounting Research? Accounting, Auditing and Accountability Journal
