ADVANCED FINANCIAL ACCOUNTING.

ASX COMPANY THAT I HAVE SELECTED IS, BREVILLE GROUP LIMITED.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
Name of the Student
Name of the University
Student ID
Author Note

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ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Structure.....................................................................................................................................3
Introduction................................................................................................................................4
1. Accounting Concepts used by Breville Group Limited......................................................4
2. Changes incorporated in AASB 16 that is the new accounting standard for lease.............6
3. Key disclosures made by the entity including the transitional provision...........................8
Conclusion................................................................................................................................10
Reference:................................................................................................................................11

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Structure
The report will start with the introduction of selected company that is Breville Group Limited
and will get completed with the conclusion covering the key findings of discussion. In
between the discussion point will cover the details regarding accounting concepts and the
accounting concepts used by the entity that can be found out from its latest annual report. In
the next part of discussion it will highlight the hanged made in new accounting standard for
lease that is AASB 16 as compared to AASB 117. Finally the last part will discuss regarding
the key disclosures made by the entity regrading lease including the transitional provision.

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Introduction
Breville Group Limited is renowned for producing home wares in Australia. Initially
the company was named as Housewares International Limited and engaged in import of
household items in the year 1957. During the phase of success, Breville Group started to
expand its business and captured the markets in USA. In the year 1999, the company listed
their shares in Australian stock exchange. The founder of the company Mr. John O’Brien
changed the scenario of the market of household items with his innovative ideas. Presently
the company is selling their products more than 50 countries all over the world. The report
will describe the accounting concepts, accounting standard followed by the company and its
implications (Brevillegroup.com 2017).
1. Accounting Concepts used by Breville Group Limited
Accounting concepts refers to certain assumptions that are used to prepare financial
statements of the organisation. Main objective of accounting concept is to enhance the
preparation of financial report of an organisation to avoid ambiguity and confusion.
Therefore, accounting concept refers to a conceptual outline on financial reporting. There are
various accounting concepts including accrual concept, conservatism concept, concept of
consistency, concept of dual aspect, concept of money measurement, concept of matching,
concept of economic entity, going concern concept, cost concept and materiality concept
(Israel, Onyeka and Barisua 2018). There are three primary accounting concepts such as
going concern, consistency and accrual concept those are followed by Breville Group.
According to the financial report of the entity its audit is carried out by Pricewaterhouse
Coopers (PWC) for the financial year ended 2018 (Brevillegroup.com 2017). As per
knowledge of the independent auditor, the company has satisfied the rules and regulations of

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Australian Accounting Standard Board and followed the important regulations stated in
Corporations Regulations Act 2001. The financial statement and report prepared by Breville
Group depicts true and fare position of the firm’s financial position. The primary
responsibility of the directors is to prepare the financial report on basis of the accounting
concepts (Brevillegroup.com 2017).
According to concept of going concern, the company will operate for infinite period
and the assets are valued based on historical cost. This concept affirms that the assets are held
to get the benefit in future (Fagerström and Hartwig 2016). The financial report of Breville
Group explains that net carrying amount of non-current asset for the year ended 2018 is
$11,379,000 which indicates an increase in asset as compared to the financial year 2017. The
assets are valued at cost reduced by accumulated amount of depreciation and accumulated
amount of impairment loss. As per the report the assets are held for 10 years to get the
economic benefit and at the end of the useful life the economic benefit of the asset is
negative. A company needs to compare the financial statements, policies of one period with
other period. When a company change its method of accounting in any financial year then it
has to compare the accounting to analyse the amount of profit (Annualreports.com 2019).
A company changes its policies and methods of accounting to comply with the rules
and regulations of accounting standards, provisions of law and to represent true and fair
picture in financial statement accounting. Therefore, a company needs to follow particular
method of accounting in order to maintain consistency. Consistency concept states that
methods of accounting once adopted by the entity shall be applied on consistent basis for
future period. Further, the same method as well as technique shall be used for the similar
situations (Peterson, Schmardebeck and Wilks 2015). It determines that the entity shall be
refrained from changing the accounting policies unless reasonable ground is there to do so. In
case the there is an alteration in accounting policy for any suitable reason the entity is

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required to disclose nature of the alteration, reason that led to the alteration and its effect on
the financial statement. It is observed from the annual report of Breville Group that the
adopted accounting policies of the entity are consistent with the previous financial period.
Further, it discloses that it has valued its inventories at lower among cost and net realisable
value. For instance, plant and equipment of the entity are reported at cost reduced by
accumulated impairment, if any and depreciation and the depreciation is charged consistently
on straight line approach over the asset’s useful life (Annualreports.com 2019).
As per accrual concept, the effect of transaction depends on its occurrence. Thus,
accrual basis of accounting suggests that the revenues as well as the expenses shall be
reported in the same period to which it is related instead of while the cash is received or paid.
In other words, the accrued income shall be recorded in the period of accounting in which it
generates instead of when received (Kimmel et al. 2016). For instance, as per the financial
report of Breville Group the company has earned revenue amounting to $652,348 and some
are made on credit basis that is sales are generated but cash not received. However, the same
is reported in the period when the sales are made rather than the period in which the cash is
received. Therefore, it can be said that the company has followed accrual basis of accounting
(Annualreports.com 2019).
2. Changes incorporated in AASB 16 that is the updated accounting standard for
lease
New accounting standard on leases that is AASB 16 is expected to have noteworthy
impact on financial statement of large number of businesses after it becomes applicable.
AASB made significant changes in context of lease accounting with introduction of AASB
16 with the major changes being removal of difference among finance lease and operating
lease and with this most of the leases will now be covered under the balance sheet (Wong and

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Joshi 2015). Further, as per the present accounting standard that is AASB 117 obligation for
making future payments towards arrangement of operating lease is not considered under
balance sheet even while the entity is committed towards future expenditures (aasb.gov.au
2018). Concern of large number of stakeholders is that this does not provide accurate
reflection regarding true financial position of the entity.
AASB16 refers to accounting for single lessee model where it assists the lessee to
identify the liabilities and assets against all leases in terms of 12 months or more, otherwise
the value underlying assets get reduced. According to the standard, liabilities and assets are
assessed on present value method (aasb.gov.au 2018). The standard requires disclosure of
lessees, adequate information that will help to rectify the particular risk of residual value of
lesser. The revised accounting standard of AASB 16 defines the importance and necessity of
the activity of leasing in business organisations. Major aim of this standard is to get the right
to use the assets for attaining financial benefits and decrease the risk connected with the
ownership of the asset (Maglio, Rapone and Rey 2018). Before the alteration of the provision
of lease, lessees and lessors required to the lease as financial lease and operating lease. The
previous model has several drawbacks such as it could not recognise the necessity of the
users of the financial statement and it does not depict the true and fair picture of transactions
related to lease (aasb.gov.au 2018). Thus, the International Accounting Standard Board along
with US based Financial Accounting Standard Board has taken the responsibility to introduce
a revised approach of lease. According the annual report of Breville Group Limited, lease is
an important activity in the course of business (Brevillegroup.com 2017). The new standard
of lease came in to action since 1st January 2019 and the same is applicable to the new as well
as pre-existing agreements of lease. Key changes are as below –
 The expense of interest will be presented by the lessees as the liability associated with
lease liability. Whereas, the depreciation charged on right-of-use asset will be

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presented on income statement. It also states that company has to mention about the
lease interest as cash outflow on operating activity.
 Leases will be reported as lease liability that will reflect future payments for lease and
right-of-use asset for almost all the lease contracts (Brevillegroup.com 2017).
 Lease payments those represent interests on lease liability shall be reported as the
operating cash flow and cash payments towards principle part of lease liability shall
be classified under financing activities. Payments for the short-term leases as well as
leases associated with assets of low value shall be presented under operating leases
(aasb.gov.au 2018).
As an example, it can be identified from the annual report of the entity that operating
leases are generally entered for acquiring access to the commercial property. Payments for
the same are fixed however the same is disclosed in notes as commitments and contingencies.
As per AASB 16 the same shall be reported under balance sheet as lease liability (Singer et
al. 2017).
3. Key disclosures made by the entity including the transitional provision
According to the AASB 117, the scope of this standard is applicable on all leases
except lease taken on exploration of use of natural resources such as oil, different kinds of
minerals, natural gas and other non- renewable resources and agreements on leasing for
copyright, patent, video recordings, manuscript and films of motion pictures (Comiran and
Graham 2016). However, this standard also excludes the following items such as investment
property that is held by the lessees, lessor’s provided investment property based on operating
lease, lessees held as biological assets under lease based on finance and lessor’s retained
biological assets under operating lease (Sliwoski 2017). In contrast the scope of ASSB 16
defines the applicability of the standard on all leased property including right-of-use asset

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under sublease excluding lease on exploration, biological or organic assets, intellectual
property and concession on service agreement (Brevillegroup.com 2017).
The entity disclosed that it recognise the payments for operating lease as expenses
under income statement on the straight line approach over the term of lease. Any incentives
from lease are reported under income statement as integral part of entire lease expenses.
Determining whether any arrangement contains is lease depends on substance of
arrangements. Further, it requires assessment of whether fulfilment of arrangements is
dependent upon the usage of particular assets and arrangements expresses right of using the
asset (Brevillegroup.com 2017)
This standard aims to disclose the transparent picture of financial leverage and capital
employed considering all the assets and liabilities regarding lease in the balance sheet of an
organisation. According the revised leased provision that is AASB 16 Breville Group will
show all its leases under balance sheet at the close of the year and the income statement will
be changed since interest charged on leased assets recorded in the income statement
(Brevillegroup.com 2017). After the introduction of AASB 16, the entity will be able to claim
exemption on the circumstances including leases taken on 12 months or less than 12 months
and lease taken on low valued assets such as telephone, office furniture and fixture and
computers. AASB 117 segregates lease as operating lease and financial lease whereas AASB
16 eliminates the off-balance sheet aspect as per AASB 117. The revised standard of lease
also states that when a company makes the payment for future leasing, it has to recognise the
financial liability, which is made during the time of alteration as payment of lease
representing the obligations (aasb.gov.au, 2018).

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However, as per the disclosure made in the annual report of the entity for 2018,
Breville Group is under the procedures of accessing impact of the AASB 16 and is not
intended to adopt the same on early basis (Brevillegroup.com 2017)
Conclusion
It can be establishe from above discussion that since Breville Group Limited is a
listed entity under ASX, it has to maintain the financial records properly after complying all
the rules as well as regulations relevant to Australian Accounting Standard Board. Based on
the annual report of the Breville Group Limited it highlights the accounting concepts and the
accounting standard. At present the entity reports payments towards operating leases under
the income statement. However, after adoption of AASB 16 the revised leased provision the
entity Breville will show all the leases in the balance sheet at the end of the year and it will
impact the income statement as the interest charged on leased assets will be recorded in the
income statement.

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Reference:
aasb.gov.au 2018. [ebook] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB117_07-04_COMPapr07_07-07.pdf
[Accessed 21 Sep. 2019].
Aasb.gov.au. 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 21 Sep.
2019].
Annualreports.com. 2019. [online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BRG_2018.pdf
[Accessed 21 Sep. 2019].
Brevillegroup.com. 2017. History. [online] Available at: https://brevillegroup.com/about/
[Accessed 21 Sep. 2019].
Comiran, F. and Graham, C.M., 2016. Comment letter activity: A response to proposed
changes in lease accounting. Research in Accounting Regulation, 28(2), pp.109-117.
Fagerström, A. and Hartwig, F., 2016. Accounting for a Sustainable Use of Resources and
Capital Maintenance: A Value-added Approach. The International Journal of Sustainability
in Economic, Social and Cultural Context, 12(4), pp.35-43.
Israel, E.G., Onyeka, N.C. and Barisua, A., 2018. Current value accounting controversy and
the delimma of accounting conventions. Learning.
Kimmel, P.D., Weygandt, J.J., Kieso, D.E. and Trenholm, B., 2016. Financial Accounting.
Wiley Custom Learning Solutions.

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Maglio, R., Rapone, V. and Rey, A., 2018. Capitalisation of operating lease and its impact on
firm’s financial ratios: evidence from Italian listed companies. Corporate Ownership &
Control, pp.152-162.
Peterson, K., Schmardebeck, R. and Wilks, T.J., 2015. The earnings quality and information
processing effects of accounting consistency. The accounting review, 90(6), pp.2483-2514.
Singer, R., Pfaff, A., Winiarski, H. and Winiarski, M., 2017. Accounting for Leases under the
New Standard, Part 2: Lessor Accounting, Changes in Lease Terms, Practical Expedients,
and Preparation Tips. The CPA Journal, 87(9), pp.48-53.
Sliwoski, L.J., 2017. Understanding the New Lease Accounting Guidance. Journal of
Corporate Accounting & Finance, 28(4), pp.48-52.
Wong, K. and Joshi, M., 2015. The impact of lease capitalisation on financial statements and
key ratios: Evidence from Australia. Australasian Accounting, Business and Finance
Journal, 9(3), pp.27-44.