CONTEMPORARY FINANCIAL & INTEGRATED REPORTING
CONTEMPORARY FINANCIAL & INTEGRATED REPORTING COMPREHENSIVE STUDY GUIDE (SHORT NOTES ON ALL TOPICS)
Contents Regulation ..................................................................................................................................................................................... 3 Management Accounting .............................................................................................................................................................. 3 Users.............................................................................................................................................................................................. 3 Main Bodies Regulating Accounting Disclosure in Australia ......................................................................................................... 3 International Accounting Standards Board, how does it affect financial reporting in Australia? ................................................ 4 Process of Development and Revision of Accounting Standard by IASB ...................................................................................... 4 Use and Role of Audit Report........................................................................................................................................................ 4 Argument for and against Regulation? Is it necessary? ................................................................................................................ 4 Conceptual Framework of Accounting and its Relevance to Financial Reporting ......................... Error! Bookmark not defined. Users of General Purpose Financial Statements ............................................................................ Error! Bookmark not defined. Critical Review of Conceptual Framework ..................................................................................... Error! Bookmark not defined. Property, Plant, Equipment............................................................................................................... Error! Bookmark not defined. Asset measurement ....................................................................................................................... Error! Bookmark not defined. The cost of an item of property, plant and equipment comprises ................................................ Error! Bookmark not defined. Revaluation & Impairement Testing of Nca ................................................................................... Error! Bookmark not defined. Economic consequences of asset revaluations .............................................................................. Error! Bookmark not defined. Intangible Assets ............................................................................................................................... Error! Bookmark not defined. Identifiable vs unidentifiable intangible assets.............................................................................. Error! Bookmark not defined. Goodwill- Internally generated versus purchased goodwill .......................................................... Error! Bookmark not defined. Research and Development-According to AASB 138, .................................................................... Error! Bookmark not defined. Is the new approach to intangible and improvement to accounting?........................................... Error! Bookmark not defined. Leases ................................................................................................................................................. Error! Bookmark not defined. Accounting issue ............................................................................................................................ Error! Bookmark not defined. New Standard- AASB 16 Leases ..................................................................................................... Error! Bookmark not defined. Old Standard .................................................................................................................................. Error! Bookmark not defined. Lease Accounting by lessor ............................................................................................................ Error! Bookmark not defined. Accounting for lessor who are manufacturing dealers of leased asset ......................................... Error! Bookmark not defined. Accounting for Taxes (AASB 112) ...................................................................................................... Error! Bookmark not defined. Accounting for income tax ............................................................................................................. Error! Bookmark not defined. Temporary Difference .................................................................................................................... Error! Bookmark not defined.
1
Tax Base.......................................................................................................................................... Error! Bookmark not defined. Evaluation on Assets & Liabilities................................................................................................... Error! Bookmark not defined. Integrated Reporting ......................................................................................................................... Error! Bookmark not defined. Fundamental Concepts .................................................................................................................. Error! Bookmark not defined. Guiding Principles........................................................................................................................... Error! Bookmark not defined. Content elements........................................................................................................................... Error! Bookmark not defined. Value Creation ................................................................................................................................ Error! Bookmark not defined. Materiality ...................................................................................................................................... Error! Bookmark not defined. Connectivity ................................................................................................................................... Error! Bookmark not defined. Group Accounts ................................................................................................................................. Error! Bookmark not defined. Key Terms ....................................................................................................................................... Error! Bookmark not defined. 1)
Control................................................................................................................................ Error! Bookmark not defined.
2)
Purpose of providing Consolidated Financial Statements ................................................. Error! Bookmark not defined.
3)
Consolidated financial statement defined as (AASB 10): ................................................... Error! Bookmark not defined.
4)
Consolidation Concepts: .................................................................................................... Error! Bookmark not defined.
5)
According to AASB 3, a ‘business combination’ is defined as: ........................................... Error! Bookmark not defined.
6)
Goodwill defined (AASB 3 Business Combinations) ........................................................... Error! Bookmark not defined.
7)
Fair value ............................................................................................................................ Error! Bookmark not defined.
Parent Vs Subsidiary....................................................................................................................... Error! Bookmark not defined. Non-controlling interest ................................................................................................................. Error! Bookmark not defined.
2
Regulation- Finance Accounting- is a process of identifying and recording financial information for various internal and external users for decision making. This is highly regulated by sources such as ASX, ASIC, AASB, FRC, IASB.
Management Accounting – Analyses financial and non-financial information for decision making and in is largely un regulated. This is for internal purpose only.
Users- There are two types of users; 1) Those who can’t Command-General Purpose Financial Statement (Comply with AASB/IASB Conceptual Frameworks and accounting standards, meet need for information to common users, represents financial statement with more information given in the notes of annual report. Example, employees, investors, customers, etc) These are prepared by large prop, listed and unlisted public companies (disclosing entities) 2) Can command- Special Purpose Financial Statement (design to meet need specific group of people. For example Tax Authorities, MD of companies)
Main Bodies Regulating Accounting Disclosure in Australia 1) Australia Securities and Investment Commission - ASIC responsible for enforcement of accounting standards - Is an independent Commonwealth Government Body - Administers the Corporations Act as per s.296 - Function is to make sure that companies prepare the financial statement in accordance to the accounting standards issued by AASB and that financial statement represent a True and Fair view - For example; ASIC needs a Directors’ of large & listed companies need to attached a 1) Director’s Declaration 2) Director’s Report 3) CEO’s Declaration to mention non-financial inform as well 2) Australia Securities Exchange - ASX provides numerous disclosure requirement of entities listed in ASX- this reduces the likelihood of individual prospering through privilege information - Listing Rule 3.1 mentions, that once an entity becomes aware of any information that has material effect of price and value of its securities should immediately inform ASX - ASX also established the Corporate Governance Council which released the Corporate Governance Principles & Recommendations where companies should inform in their annual report to the extend they have followed this Principle, if not they have to give the reasons to not following them 3) Australian Accounting Standard Body - Role of AASB develop Conceptual Framework - Develops Accounting standards for the use of Corporation Act, for reporting entities not governed by the corporations act inclusive of all disclosing entities (ASX listed comp.) and inclusive of Notfor profit organisations and public sector - AASB report to FRC - Majorly the conceptual framework and accounting standards released by IASB is been minor changed by AASB to Australian standards, so every IASB/IFRC standard has a correspond AASB standard - Responsible for Interpretation Advisory, focus group and project advisory panels - Participate developing a single set of International accounting standard for world wide use 4) Financial Reporting Council - Overseas operation of AASB - Not direct control in setting accounting standards - Reports to the Federal Treasurer on the process of setting accounting standards - Appoint members of AASB except the chairman
3
International Accounting Standards Board, how does it affect financial reporting in Australia? -
-
IASB releases/develop Int Fin Reporting Standards (IFRS) bringing transparency, efficiency, and accountability in to financial markets around the world enhancing international comparability. Thus reducing the cost of capital and international reporting costs due to standardised accounting language and increase inflow of foreign capital -vs- internalising cost, cultural difference and enforcement mechanism is a problem IFRS is adopted by some countries where in Australia released standard based on the standards issued by IASB Although many counties claim to be applying IFRS it really depends in the enforcement and compliance policies place within respective countries Doesn’t not have direct enforcement in Australia, only ASIC has power over Australian standards IASB has a committee called IFRS Interpretation Committee where they involve in setting standards when there is absence of authority guidance
Process of Development and Revision of Accounting Standard by IASB -
Initially established Advisory Committee for a particular issue Taking the advice in to accounting releases a Discussion document for public review This will then be following by an Exposure Draft for public review and comment Following this process IASB release an IFRS Following this there is a ‘post-implementation review’ to determine whether the standard is being followed accordingly, or any amendment necessary or release and Interpretation through IFRS Interpretation Committee
Use and Role of Audit Report -
Provides independent opinion of financial information regarding; true and fair view, compliance with Corporations Acts and accounting standards. Credibility of financial information Auditing standard have legal backing the way accounting standards have.
Argument for and against Regulation? Is it necessary? -
GPFS heavily regulated by Corp Act, AASB & ASX Need to comply with all rules and costly when standards are released/revised Opinion for regulations vary between, below;
4
Contents Regulation ..................................................................................................................................................................................... 3 Management Accounting .............................................................................................................................................................. 3 Users.............................................................................................................................................................................................. 3 Main Bodies Regulating Accounting Disclosure in Australia ......................................................................................................... 3 International Accounting Standards Board, how does it affect financial reporting in Australia? ................................................ 4 Process of Development and Revision of Accounting Standard by IASB ...................................................................................... 4 Use and Role of Audit Report........................................................................................................................................................ 4 Argument for and against Regulation? Is it necessary? ................................................................................................................ 4 Conceptual Framework of Accounting and its Relevance to Financial Reporting ......................... Error! Bookmark not defined. Users of General Purpose Financial Statements ............................................................................ Error! Bookmark not defined. Critical Review of Conceptual Framework ..................................................................................... Error! Bookmark not defined. Property, Plant, Equipment............................................................................................................... Error! Bookmark not defined. Asset measurement ....................................................................................................................... Error! Bookmark not defined. The cost of an item of property, plant and equipment comprises ................................................ Error! Bookmark not defined. Revaluation & Impairement Testing of Nca ................................................................................... Error! Bookmark not defined. Economic consequences of asset revaluations .............................................................................. Error! Bookmark not defined. Intangible Assets ............................................................................................................................... Error! Bookmark not defined. Identifiable vs unidentifiable intangible assets.............................................................................. Error! Bookmark not defined. Goodwill- Internally generated versus purchased goodwill .......................................................... Error! Bookmark not defined. Research and Development-According to AASB 138, .................................................................... Error! Bookmark not defined. Is the new approach to intangible and improvement to accounting?........................................... Error! Bookmark not defined. Leases ................................................................................................................................................. Error! Bookmark not defined. Accounting issue ............................................................................................................................ Error! Bookmark not defined. New Standard- AASB 16 Leases ..................................................................................................... Error! Bookmark not defined. Old Standard .................................................................................................................................. Error! Bookmark not defined. Lease Accounting by lessor ............................................................................................................ Error! Bookmark not defined. Accounting for lessor who are manufacturing dealers of leased asset ......................................... Error! Bookmark not defined. Accounting for Taxes (AASB 112) ...................................................................................................... Error! Bookmark not defined. Accounting for income tax ............................................................................................................. Error! Bookmark not defined. Temporary Difference .................................................................................................................... Error! Bookmark not defined.
1
Tax Base.......................................................................................................................................... Error! Bookmark not defined. Evaluation on Assets & Liabilities................................................................................................... Error! Bookmark not defined. Integrated Reporting ......................................................................................................................... Error! Bookmark not defined. Fundamental Concepts .................................................................................................................. Error! Bookmark not defined. Guiding Principles........................................................................................................................... Error! Bookmark not defined. Content elements........................................................................................................................... Error! Bookmark not defined. Value Creation ................................................................................................................................ Error! Bookmark not defined. Materiality ...................................................................................................................................... Error! Bookmark not defined. Connectivity ................................................................................................................................... Error! Bookmark not defined. Group Accounts ................................................................................................................................. Error! Bookmark not defined. Key Terms ....................................................................................................................................... Error! Bookmark not defined. 1)
Control................................................................................................................................ Error! Bookmark not defined.
2)
Purpose of providing Consolidated Financial Statements ................................................. Error! Bookmark not defined.
3)
Consolidated financial statement defined as (AASB 10): ................................................... Error! Bookmark not defined.
4)
Consolidation Concepts: .................................................................................................... Error! Bookmark not defined.
5)
According to AASB 3, a ‘business combination’ is defined as: ........................................... Error! Bookmark not defined.
6)
Goodwill defined (AASB 3 Business Combinations) ........................................................... Error! Bookmark not defined.
7)
Fair value ............................................................................................................................ Error! Bookmark not defined.
Parent Vs Subsidiary....................................................................................................................... Error! Bookmark not defined. Non-controlling interest ................................................................................................................. Error! Bookmark not defined.
2
Regulation- Finance Accounting- is a process of identifying and recording financial information for various internal and external users for decision making. This is highly regulated by sources such as ASX, ASIC, AASB, FRC, IASB.
Management Accounting – Analyses financial and non-financial information for decision making and in is largely un regulated. This is for internal purpose only.
Users- There are two types of users; 1) Those who can’t Command-General Purpose Financial Statement (Comply with AASB/IASB Conceptual Frameworks and accounting standards, meet need for information to common users, represents financial statement with more information given in the notes of annual report. Example, employees, investors, customers, etc) These are prepared by large prop, listed and unlisted public companies (disclosing entities) 2) Can command- Special Purpose Financial Statement (design to meet need specific group of people. For example Tax Authorities, MD of companies)
Main Bodies Regulating Accounting Disclosure in Australia 1) Australia Securities and Investment Commission - ASIC responsible for enforcement of accounting standards - Is an independent Commonwealth Government Body - Administers the Corporations Act as per s.296 - Function is to make sure that companies prepare the financial statement in accordance to the accounting standards issued by AASB and that financial statement represent a True and Fair view - For example; ASIC needs a Directors’ of large & listed companies need to attached a 1) Director’s Declaration 2) Director’s Report 3) CEO’s Declaration to mention non-financial inform as well 2) Australia Securities Exchange - ASX provides numerous disclosure requirement of entities listed in ASX- this reduces the likelihood of individual prospering through privilege information - Listing Rule 3.1 mentions, that once an entity becomes aware of any information that has material effect of price and value of its securities should immediately inform ASX - ASX also established the Corporate Governance Council which released the Corporate Governance Principles & Recommendations where companies should inform in their annual report to the extend they have followed this Principle, if not they have to give the reasons to not following them 3) Australian Accounting Standard Body - Role of AASB develop Conceptual Framework - Develops Accounting standards for the use of Corporation Act, for reporting entities not governed by the corporations act inclusive of all disclosing entities (ASX listed comp.) and inclusive of Notfor profit organisations and public sector - AASB report to FRC - Majorly the conceptual framework and accounting standards released by IASB is been minor changed by AASB to Australian standards, so every IASB/IFRC standard has a correspond AASB standard - Responsible for Interpretation Advisory, focus group and project advisory panels - Participate developing a single set of International accounting standard for world wide use 4) Financial Reporting Council - Overseas operation of AASB - Not direct control in setting accounting standards - Reports to the Federal Treasurer on the process of setting accounting standards - Appoint members of AASB except the chairman
3
International Accounting Standards Board, how does it affect financial reporting in Australia? -
-
IASB releases/develop Int Fin Reporting Standards (IFRS) bringing transparency, efficiency, and accountability in to financial markets around the world enhancing international comparability. Thus reducing the cost of capital and international reporting costs due to standardised accounting language and increase inflow of foreign capital -vs- internalising cost, cultural difference and enforcement mechanism is a problem IFRS is adopted by some countries where in Australia released standard based on the standards issued by IASB Although many counties claim to be applying IFRS it really depends in the enforcement and compliance policies place within respective countries Doesn’t not have direct enforcement in Australia, only ASIC has power over Australian standards IASB has a committee called IFRS Interpretation Committee where they involve in setting standards when there is absence of authority guidance
Process of Development and Revision of Accounting Standard by IASB -
Initially established Advisory Committee for a particular issue Taking the advice in to accounting releases a Discussion document for public review This will then be following by an Exposure Draft for public review and comment Following this process IASB release an IFRS Following this there is a ‘post-implementation review’ to determine whether the standard is being followed accordingly, or any amendment necessary or release and Interpretation through IFRS Interpretation Committee
Use and Role of Audit Report -
Provides independent opinion of financial information regarding; true and fair view, compliance with Corporations Acts and accounting standards. Credibility of financial information Auditing standard have legal backing the way accounting standards have.
Argument for and against Regulation? Is it necessary? -
GPFS heavily regulated by Corp Act, AASB & ASX Need to comply with all rules and costly when standards are released/revised Opinion for regulations vary between, below;
4
