Changes in Accounting and Financial Reporting by AASB

This article discusses the changes in accounting and financial reporting by AASB from 1 December 2018 to 31 March 2019. It covers amendments in the accounting standards, onerous contracts, and the importance of specific financial statements. The article also provides an answer to question 2 regarding the standards of AASB 101 and the evaluation of financial statements of Whirl Limited.

Running head: ACCOUNTING AND FINANCIAL REPORTING
Accounting and Financial Reporting
Name of the Student
Name of the University
Author’s Note

2ACCOUNTING AND FINANCIAL REPORTING
Table of Contents
Answer to question 1..................................................................................................................3
Answer to Question 2.................................................................................................................5
References::................................................................................................................................7

3ACCOUNTING AND FINANCIAL REPORTING
ANSWER TO QUESTION 1
CHANGES IN ACCOUNTING FROM 1 DECEMBER 2018 TO 31 MARCH 201 9 BY
AASB
AUSTRALIAN
AASB 2019-X
AMENDMENTS IN
THE ACCOUNTING
STANDARDS OF
AUSTRALIA (DATE:
24.01.2019)
This proposed standard of
AASB 2019-X includes
significant changes to
provide support to AASB
to publish Conceptual
Framework for Financial
Reporting (aasb.gov.au,
2019). Apart from this, as
per AASB, it is possible
for different users of the
financial statements to
comment on any
loopholes associated in
this proposed standard by
March 22, 2019. This
new standard will be for
the companies in private
sector having
accountability and it is
voluntary requirements
for other not-for-profit
firms to apply this
(aasb.gov.au, 2019).
ONEROUS
CONTRACTS – COST
TO FULFILL A
CONTRACT (DATE:
08.01.2019)
The intention of onerous
contracts is altering
AASB 137 to stipulate
the fact that the fulfilling
cost considers the
incremental costs
(aasb.gov.au, 2019). This
cost consists of material
and other costs that have
direct connection with the
contracts such as
depreciation changed on
the plant being used for
the contract (aasb.gov.au,
2019).
NOT-FOR-PROFIT
LESSEES’S RIGHT
OF USE ASSETS
(DATE: 20.12.2018)
AASB is considering
amending a specific
standard for providing a
provisional substitute for
not-for-profit lessees to
measure the right-of-use
assets under
concessionary leases at
cost price instead of fair
value (aasb.gov.au,
2019). The expected date
for the publication of this
standard is December 24,
2018. Concessionary
leases are the leases with
below market terms and
conditions to allow the
firms to advance their
objectives (aasb.gov.au,
2019). The standard of
this draft is based on
AASB Exposure Draft
ED 286 Amendments to

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Australian Accounting
Standards- Right-of-Use
Assets of Not-for-Profit
Entities”. Ensuring
additional disclosure in
AASB 16 is the prime
objective of this standard.
Due to this, the users will
be able in gaining
additional information to
the financial statements’
users on concessionary
leases in the absence of
fair value information
(aasb.gov.au, 2019).
NEW AUSTRALIAN
ACCOUNTING
STANDARD (DATE:
20.12.2018)
AASB’s two new
standards have provided
clarification on business
and material definition;
and it is known as
“AASB 3 Business
Combination’ to help the
firms to determine
whether they need to
consider a transaction as
business combination or
as acquisition of assets
(aasb.gov.au, 2019). In
addition, another standard
“AASB 2018-7” assists in
clarifying the definition
of material and its
application in the AASB
standards and other
pronouncements. These
changes will be presented
in “AASB 101
Presentation of Financial
Statements”. The date of
applying these two
standards is January 1,
2019 (aasb.gov.au, 2019).
RESULTS OF
SURVEY ON THE
IMPORTANCE OF
SPECIFIC PURPOSE
FINANCIAL
STATEMENTS (DATE:
13.12.2018)
AASB has conducted a
survey to determine the
usefulness of special
purpose financial
statements. As per 78
percent of primary users,
it is needed to address the
issue that raises from the
failure to consider
measurement and
recognition of accounts.
For this reason, there is
need for additional
transitional relief to help
the equity and
consolidation accounting
in the companies
(aasb.gov.au, 2019).

5ACCOUNTING AND FINANCIAL REPORTING
ANSWER TO QUESTION 2
The standards of AASB 101 puts the obligation on the Australian listed companies to
prepare their financial reports while complying with the current laws and regulations
(aasb.gov.au, 2019). One major law is the general purpose financial reporting representations
that helps in comparing the financial information of the current and previous year. Thus, this
particular standard provides the firms with the requirements for representing the financial
statements in a proper structured manner.
The evaluation of the financial statements of Whirl Limited indicates towards the fact
that the accountant failed in separating the items before reporting them to the financial
statements’ users. It can also be seen at the same time that the accountant also failed in
categorize the assets into two different sections of current assets and non-current assets. In
the same manner, it is needed for the accountants to segregate the liabilities of the companies
into current liabilities and non-current liabilities.
According to AASB 101, Section 66 to 76, there is scope for the accountants in
categorizing the assets and liabilities into both short-term and long-term (aasb.gov.au, 2019).
Moreover, the accountant needs to present the work-in-progress inventories, raw materials
and finished goods in one single head and they need to disclose receivables separately. These
transactions need to be considered as input product parts that possess major importance in the
manufacturing processes (Henderson et al., 2015).
In addition, AASB 101, section 54 puts the obligation on the companies to use the
equity methods to treat share investments (aasb.gov.au, 2019). However, as per the provided
scenario, the accountant of Whirl Limited has failed in recording the share investments at
cost that is evident from the provided profit or loss statements. At the same time, the

6ACCOUNTING AND FINANCIAL REPORTING
accountant has considered both the current and deferred tax together when AASB 101,
Section 54, Points (n) and (o) puts the obligation on the firms to separately recognize these
liabilities (Hodgson & Russell, 2014).
The accountant is needed to make the categorization of receivables as the amounts to
be recovered before and after twelve months as the balance sheet demands the receivables to
be classified as both short-term and long-term. Thus, it become possible for the management
of Whirl Limited to obtain the required information that can be provided to the users of the
financial statements when there is appropriate segregation of these liabilities in the presence
of the needed disclosures (aasb.gov.au, 2019).
Lastly, it can be seen from the profit or loss statement of Whirl Limited that the
accountant has reported the dividend payment in the profit and loss statement when the
accountant should not report this dividend payment as business expenses. In actual, the
accountant needs to record the payment of dividend in the section of shareholder’s equity in
the balance sheet of the company. Apart from this, the dividend payable per share needs to be
reported in the financial report. In the assistance of this information, the shareholders would
be able in obtaining clear and concise information of return on investments. Moreover,
accumulated depreciation needs to be represented by subtracting the value from non-current
assets instead disclosing as liability (aasb.gov.au, 2019).
At the same time, it can be seen from the provided information that the accountant has
prepared the income statement in a single statement format where the actual rule states that
they need to follow certain specific steps. Cost of sales need to be subtracted from income to
get gross profit. After that, operating expenses need to be subtracted to get the operating
income and then, the administrative expenses need to be subtracted to get the net profit.

7ACCOUNTING AND FINANCIAL REPORTING
Changes need to be done in balance sheet and statement of change in equity of the company.
These statements are shown below:

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REFERENCES::
Aasb.gov.au. (2019). Presentation of Financial Statements. Retrieved 5 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Aasb.gov.au. (2019). Onerous Contracts – Cost of Fulfilling a Contract. Retrieved 5 April
2019, from https://www.aasb.gov.au/admin/file/content105/c9/ACCED287_01-19.pdf
Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income. Australian
Accounting Review, 24(2), 100-110.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
News . (2019). Aasb.gov.au. Retrieved 5 April 2019, from
https://www.aasb.gov.au/News/Fatal-flaw-review-draft---Proposed-Standard-AASB-
2019-X-Amendments-to-Australian-Accounting-Standards---References-to-the-
Conceptual-Framework?newsID=310721
News . (2019). Aasb.gov.au. Retrieved 5 April 2019, from
https://www.aasb.gov.au/News/New-Accounting-Standard--Right-of-Use-Assets-of-
Not-for-Profit-Entities?newsID=310718
News . (2019). Aasb.gov.au. Retrieved 5 April 2019, from
https://www.aasb.gov.au/News/New-Australian-Accounting-Standards?
newsID=310717

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News . (2019). Aasb.gov.au. Retrieved 5 April 2019, from
https://www.aasb.gov.au/News/How-special-are-special-purpose-financial-
statements---For-profit-User-and-Preparer-Survey-Results?newsID=310714