Changes in Accounting Standards by AASB and Analysis of Financial Statements of Blake Limited

This article discusses the changes in accounting standards by AASB and analysis of financial statements of Blake Limited. It covers the necessary requirements for depicting financial statements, asset and liability classification, equity accounting, and more.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

2FINANCIAL ACCOUNTING
ANSWER TO QUESTION 1:
CHANGES IN ACCOUNTING STANDARD BY AASB FROM 1 DECEMBER
2017 TO 31 MARCH 2018
AUSTRALIAN
REPORTING
FRAMEWORK OF
WEBINAR
AUSTRALIA (7
DECEMEBER 2017):
With special adherence to
the outreach stations that
have occurred in
November in Brisbane,
Sydney and Melbourne, a
webinar has been
conducted on the part of
AASB for sharing
feedback obtained during
such sessions. As a result,
the kind and nature of
enhancements have been
investigated and they are
taken into account as well
(Aasb.gov.au, 2018).
EXPOSURE DRAFT:
GUIDANCE OF
IMPLEMENTATION IN
RELATION TO
LICENSORS OF NFP
PUBLIC SECTOR (21
DECEMBER 2017):
The revenue obtained
from licences that the
public sector has issued
comprises of a significant
portion of revenue related
to the public sector.
However, it could be
viewed in the form of
treatment of accounting
for the licences under
AASB 15, which is not
clear at all. For extending
support to the public
sector organisations of
NFP providing licences,
amendments of ED 283
have been issued on the
part of AASB (He, Evans
& He, 2016). As a result,
the licensors in the public
sector could segregate
licenses from taxes.
Along with this, such
differentiation helps in
obtaining a clear
overview of the
obligations, which are
necessary to the licence
arrangements related to
the public sector. Hence,
this section ascertains the
nature pertaining to the
licences issued along with
recording the critical
records of accounting.
NEW STANDARD
RELATED TO
AUSTRALIAN
ACCOUNTING
(23/02/2018))
Various amendments
have been carried out in
AASB 2018-1 within the
standards of Australian
accounting present in its
website. With the help of
this standard, the
amendments are aligned
with the past-held
interests within a joint
operation, which is
amendment of AASB 11
Joint Arrangements and

3FINANCIAL ACCOUNTING
AASB 3 Business
Combinations. In
addition, the effects of
income tax related to
financial instruments are
classified in the form of
equity under “AASB 12
Income Taxes” coupled
with the cost of
borrowing. This cost is
highly effective for
capitalisation in
accordance with “AASB
123 Borrowing Costs”
(Henderson et al., 2015).
SUBMISSION OF
AASB:
LEGISLATIVE
REVIEW OF ACNC
(7 MARCH 2018):
When the opinions of the
charitable stakeholders
are obtained via
considerable outreach, the
AASB has conducted its
submission to ACNC
Legislative Review in the
beginning of March 2018.
Thus, AASB and ACNC
are required to perform
additional work by
consulting with the sector
(Holland, 2016). The
reason is to create
applicable framework of
reporting in relation to all
the registered charities.
MEETING
CONDUCTED
BETWEEN ASBJ AND
AASB
REPRESENTATIVES
(26 MARCH 2018):
There are certain
representatives in
“Australian Accounting
Standards (AASB)” and
“Accounting Standards
Board of Japan (ASBJ)”
and they have conducted
a meeting in Melbourne.
This type of meeting was
held for the first time
(AASB, 2014). In this
meeting, updates were
provided in the fields of
respective frameworks
related to financial
reporting, operations and
exchanged viewpoints on
the cooperative
opportunities. Both
AASB and ASBJ have
discussed on various
technical aspects, in
which both of them are
willing to express
concerns related to the
implementation of IFRS.
The main issues discussed
in this meeting have been
concentrated on the
sections of the test of
impairment, intangibles
like goodwill, virtual
currencies and business
communications having
identical control. In
addition, this takes into
consideration the method
of equity accounting and
comprehensive income.
As per the outcome of the
meeting, both the boards
have decided to develop
additional opportunities
for associating with ASBJ
on various beneficial
projects. A thorough
understanding of the
viewpoints of ASBJ could
enable in the
recommendation of
internationally acceptable
solutions to various
accrued concerns of
accounting.

4FINANCIAL ACCOUNTING
ANSWER TO QUESTION 2:
In accordance with AASB 101, all the Australian firms are required to prepare their
financial statements in such a manner that they comply with the prevailing laws and
legislations. One of these legislations is the depiction of general purpose financial statements,
which could be compared between the current and the pas years in the context of an
organisation. Hence, this particular standard specifies the overall requirements needed to
depict the financial statements, assist in guiding their structure and primary requirements for
their content (Aasb.gov.au, 2018).
After analysing the financial statements of Blake Limited, the organisation provided
in the case study, it could be identified that its accountant has failed to divide the items
appropriately before they are presented to the users of the financial statements. In addition to
this, it could be found out that asset classification is not made into two separate heads and
these heads mainly comprise of current assets and fixed assets. In the same manner, the
liabilities of an organisation are required to be divided into current liabilities and non-current
liabilities, as in the case of assets (Joubert, Garvie & Parle, 2017).
As laid out in the “Paragraphs 66-76 of AASB 101”, both assets and liabilities could
be categorised into limited term and long-term. Moreover, the inventories associated with
finished products, work-in-process and raw materials are required to be illustrated in a single
head, while the categorisation of receivables is to be made distinctively. These transactions
would be taken into account in the form of parts of the input goods that are of utmost
importance in the process of production (Zhuang, 2016).
Along with this, in conformance to “Paragraph 54 of AASB 101”, the method of
equity could be utilised in order to account for investment in shares. However, according to
the provided case study, it could be observed that Blake Limited has recorded the investment

5FINANCIAL ACCOUNTING
in shares at cost, which is inherent from the provided income statement. In addition, it could
be found out that current as well as deferred tax liabilities are taken in combination.
However, “Paragraph 54 point numbers (n) and (o) of AASB 101” cites that these tax
liabilities are to be depicted distinctively.
The receivables need to be classified in the form of amounts, which could be
recovered before and after a year. The reason is that the statement of financial position of an
organisation mainly constitutes of short-term receivables as well as long-term receivables.
Therefore, if effective segregation of these liabilities is made along with sufficient disclosure,
the management of the organisation would obtain useful information, which could then be
transferred to the users of the financial statements to provide a clear picture of the financial
position.
Another error detected after careful examination of the balance sheet statement of
Blake Limited is that the accountant of the organisation has disclosed accumulated
depreciation in the liability head. However, as per AASB 101, accumulated depreciation is
required to be recorded in the statement of financial position on the asset side, although there
would not be any fluctuation in results. On the other hand, the effect would be on the income
statement, as this account balance would be debited in the same having direct effect on the
operating expense. As a result, the net operating income of the organisation would be
minimised (Mills & Woodford, 2015).
Finally, it has been found out from the income statement of Blake Limited that
dividend paid is disclosed in the income statement of the firm. However, this should not be
disclosed in the form of business expense. Instead, it needs to be recorded in the head of
shareholders’ equity in the statement of financial position of the organisation. On the other
hand, the accountant of Blake Limited needs to disclose the dividend payable per share in the

6FINANCIAL ACCOUNTING
financial statements. Such information would enable the shareholders to obtain a clear insight
regarding their overall return on investments (Newberry, 2015).

7FINANCIAL ACCOUNTING
REFERENCES::
AASB, C. A. S. (2014). Financial Instruments. Project Summary.
Aasb.gov.au. (2018). Retrieved 4 April 2018, from
http://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Aasb.gov.au. (2018). Retrieved 4 April 2018, from http://www.aasb.gov.au/News/New-
Australian-Accounting-Standards?newsID=262502
He, L., Evans, E., & He, R. (2016). The Impact of AASB 8 Operating Segments on Analysts’
Earnings Forecasts: Australian Evidence. Australian Accounting Review, 26(4), 330-
340.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Holland, D. (2016). Simplifying income recognition for not-for-profit entities. Governance
Directions, 68(11), 666.
Joubert, M., Garvie, L., & Parle, G. (2017). Implications of the New Accounting Standard for
Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance
Sheet. Journal of New Business Ideas and Trends, 15(2), 1-11.
Mills, A., & Woodford, W. (2015). Company Accounting. Pearson Higher Education AU.
Newberry, S. (2015). Public sector accounting: shifting concepts of accountability. Public
Money & Management, 35(5), 371-376.