Advanced Financial Accounting

This document provides answers to questions on various topics in advanced financial accounting, including IFRS 16, Disclosure Initiative of IFRS, Changes in Financing Liabilities, IASB Updates, Importance of Special Purpose Financial Statements, New Accounting Standards, and more.

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

1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................4
References..................................................................................................................................7

2ADVANCED FINANCIAL ACCOUNTING
Answer to Question 1
ACCOUNTING NEWSLETTER
International News from 1st December 2018 to 31st March 2019
IFRS 16, New Lease Standard’s
Effectiveness (Date: 08.01.2019)
Major changes in lease accounting can be
seen under IFRS 16 Leases since the
companies are no longer required to
distinguish between the operating and
finance leases. The new lease standard
demands the companies to capitalize most
of the leases as Right-Of-Use Assets and
Lease Liabilities in their balance sheet
(ifrs.org, 2019).
Changes in Financing Liabilities (Date:
21.02.2019)
The International Accounting Standard Board
(IASB) has issued certain changes in IAS
Statement of Cash Flows that became
effective in the year 2017. As per the new
changes in this standard, the companies are
needed to make the necessary disclosures in
the changes in liabilities due to the results of
different financing liabilities. The main aim
of this amendment is to make the users of the
financial statements able in evaluating the
changes in liabilities (ifrs.org, 2019).
Disclosure Initiative of IFRS – Summary
of the Principles of Disclosure Project
(Date: 21.03.2019)
The foundation of IFRS has published a
document and this document summarizes
the works done by the IASB on the field of
Disclosure Initiative – Principles of
Disclosures research projects. This
document considers summarizing two
aspects; they are research performed and
feedback received on Disclosure Initiative
and decision of the Board related to
Targeted Standards-Level Review of
Disclosure (ifrs.org, 2019).
IASB Updates for January 2018
(Date: 25.01.2019)
The IASB has made the publication of
certain updates in their accounting
standards. As per this disclosure, certain
topics are considered for discussion
purpose; they are changes in IFRS 17,
Extractive Activities, Rate-regulated
Activities and Proposed Changes in IAS
12 (ifrs.org, 2019).

3ADVANCED FINANCIAL ACCOUNTING
National News from 1st December 2018 to 31st March 2019
Importance of the Special Purpose
Financial Statements for the Profit Users
(Date: 13.12.2018)
The Australian Accounting Standard Board
(AASB) has conducted a survey on
ascertaining the importance of SPFS and
78% of the primary users have stated that
SPFS lack consistent application in the
Australian Accounting Standard’s
requirements for recognition and
measurement and this issue needs to be
addresses (aasb.gov.au, 2019).
New Complications for Reporting Period
of AASB (Date: 30.01.2019)
The AASB has published the new
complications for the financial reporting
period on or after 01.01.2019 and these
complications can be seen in three specific
standards; they are AASB 1 First Time
Adoption of Australian Accounting
Standards, AASB 15 Revenue and AASB
1059 Service Concession Arrangements:
Grantors (aasb.gov.au, 2019).
New Accounting Standards for Right-of-
use Assets of Not-for-Profit Entities
(Date: 24.12.2018)
The AASB has brought certain changes in
Australian Accounting Standards – Right-
of-use Assets of Not-for-profit Entities
through the issue of AASB 2018-8. This
will provide a temporary option for not-for-
profit lessees for electing to measure a class
of right-of-use assets that arises from the
contemporary leases (aasb.gov.au, 2019).
New Australian Accounting Standards
(Date: 20.12.2018)
The AASB has introduced two new
standards for providing the definition of
business; they are AASB 2018-6 and
AASB 2018-7. The former one provides
clarification on the business definition in
AASB 3 Business Combination and the
latter one provides the clarification on the
definition of material through the
amendments in AASB 101 Presentation of
Financial Statements (aasb.gov.au, 2019).
Fatal Flaw Review Draft: Proposed Standard of AASB 2019-X by AASB (Date: 24.01.2019)
The AASB has introduced the Conceptual Framework for Financial Reporting for the
consequential amendments through proposing the standard of AASB 2019-X. The AASB has
invited comments from the related parties within 22.03.2019 (aasb.gov.au, 2019).

4ADVANCED FINANCIAL ACCOUNTING
Answer to Question 2
Particulars
Amount
($000)
Amount
($000)
ASSET
Current Assets
Cash and Cash Equivalent 212
Trade Receivable 137
Inventory 238
Prepaid Insurance 3
Total Current Assets 590
Non-Current Assets
Property, Plant and Equipment and Intangible Assets
(net) 318
Patents 20
Total Non-Current Assets 338
Total Assets 928
LIABILITIES
Current Liabilities
Current and Deferred Tax Liabilities 190
Trade payables 26
Provision 24
Total Current Liabilities 240
Non-Current Liabilities
Loans 100
Total Non-Current Liabilities 100
Total Liabilities 340
EQUITY
Share Capital 200
Retained Earnings 388
Total Equity 588
Total Liabilities and Equity 928
Correction or Changes Required
Correction 1 – Under the cash and cash equivalent in the balance sheet, both the cash at bank
and cash management needs to be considered. Thus, the total balance is:
Cash at Bank
Add: Cash Management Account
Total
$92,000
$120,000
$212,000

5ADVANCED FINANCIAL ACCOUNTING
Correction 2 – It can be seen from the provided information that the accountant of Whirl
Limited has shown trade receivable and inventory together when the requirement of AASB
101 is to show them separately. It is needed to subtract the value of allowance for doubtful
debts from trade receivable. It is shown in below:
Trade Receivable
Less: Allowance for Doubtful Debts
Total
$140,000
$3000
$137,000
Correction 3 – The accountant has shown the value of trade payable in asset side when
AASB 101 states that it needs to be stated under the current liabilities. Thus, $26,000 of trade
payable is shown in the balance sheet as current liabilities.
Correction 4 – The accountant of Whirl Limited has shown raw materials and work-in-
progress separately in the balance sheet whey they should be shown together as inventory as
the current assets. The correction is as below:
Raw Materials
Add: Work-in-Progress
Total
$110,000
$128,000
$238,000
Correction 5 – The accountant has shown prepaid insurance as an expense in the profit or
loss statement. However, in actual, it is a current asset and $3000 is shown under the current
assets in the balance sheet.
Correction 6 – In case of property, plant and equipment, repairs worth $3000 needs to be
shown in the profit and loss statement. Accumulated depreciation needs to be subtracted from
the value of property, plant and equipment.
Property, plant and equipment and intangible assets
Less: Accumulated depreciation
Total
$348,000
$30,000
$318,000

6ADVANCED FINANCIAL ACCOUNTING
Correction 7 – The accountant has shown both the provisions separately in the balance sheet,
but these provisions need to be shown together as the provisions for current liabilities.
Provision for Warranty
Add: Provision for Annual Leave
Total
$6000
$18,000
$24,000
Correction 8 – The accountant of Whirl Limited has shown the term loans from Westpac and
Commonwealth Bank separately as the liabilities in the balance sheet. However, in the
correct form, these two loans are needed to be shown as loans under the non-current
liabilities.
Loan from Westpac
Add: Loan from Commonwealth Bank
Total
$80,000
$20,000
$100,000
Correction 9 – It can also be seen that the accountant of Whirl Limited has not segregated
the assets and liabilities correctly as he has only reported the assets and liabilities as a whole.
As per AASB 101, Paragraph 66-76, items in the balance sheet are segregated between
current assets and non-current assets and current liabilities and non-current liabilities
(aasb.gov.au, 2019).

7ADVANCED FINANCIAL ACCOUNTING
References
Aasb.gov.au. (2019). Presentation of Financial Statements. Retrieved 7 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/01/ifrs-16-is-now-effective/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/02/feature-changes-in-financing-
liabilities/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/03/disclosure-initiative-principles-of-
disclosure-project-summary-now-available/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/01/january-iasb-update-published/
News . (2019). Aasb.gov.au. Retrieved 7 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
News . (2019). Aasb.gov.au. Retrieved 7 April 2019, from
https://www.aasb.gov.au/News/New-compilations-for-reporting-periods-beginning-
on-or-after-1-1-19?newsID=310722
News . (2019). Aasb.gov.au. Retrieved 7 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 7 April 2019, from
https://www.aasb.gov.au/News/New-Australian-Accounting-Standards?
newsID=310717
News . (2019). Aasb.gov.au. Retrieved 7 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