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Accounting Assignment

In: Business and Management

Submitted By Volks24
Words 337
Pages 2
Date issued: 4 July 2011
The Centro Case has shone the spotlight on the duties of directors after the court found in favour of the Australian Securities and Investments Commission (ASIC) and ruled that the directors breached their duty of care in the preparation of the company’s financial statements.
As the reporting season begins, members who are directors, chief financial officers or who are involved in preparing financial statements, will need to carefully consider the key messages in this judgment in the coming weeks.
On Monday 27 June, Justice Middleton of the Federal Court handed down his decision in ASIC v Healey [2011] FCA 717 (the Centro Case). He found that each director knew of the interest-bearing liabilities and debt guarantees, and should have been aware of the relevant accounting principles that would have alerted each director to the apparent error in the proposed financial statements. Each director could, and should, then have made enquiries to fulfil the steps required of them. This decision focused on financial accounts, signed off by directors in 2007, which were found to have failed to disclose billions of dollars of short-term debt.
Directors and other relevant parties will need to consider the key outcomes of the judgment as they prepare, scrutinise and settle company financial accounts. The judgment affirms that, while board members do not have to be experts in accounting standards, they must carefully scrutinise financial statements.
While the judgment is based on the specific facts of the case as they relate to classification of liabilities as current and non-current, it has implications for a broad range of accounting issues. The judgment reinforces the need for directors to be familiar with accounting standard requirements and terms used in financial statements. Armed with this knowledge, directors are better placed to question...

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