Accounting Concepts and AASB 16: Incitec Pivot Limited

CORPORATE
ACCOUNTING
Module Number

Table of Contents
Introduction............................................................................................................... 1
1. From the annual report of Incitec Pivot Limited and in addition, to providing examples identify and
describe the accounting concepts used............................................................................... 1
2. What changes have been incorporated in the new accounting standard for lease AASB 16? Using
Incitec Pivot Limited and discuss the issue with examples......................................................3
3. Summarise the key disclosures the company has made on its accounting for leases including on the
transitional provision and effect of the transition to AASB 16 from AASB 117............................4
References................................................................................................................ 6

Introduction
With the changes in economic, various accounting frameworks have been developed to set up
harmonisation in the domestic and international reporting framework. International
Accounting Standards Board has been working since long to rationalise the accounting
pattern followed by different nations to raise financial homogeneousness and comparability.
A milestone achieved by IASB in this line is introduction of IFRSs. IFRS for leases has also
been introduced. In this report, implication of the lease accounting standards with the
implication of the Incitec Pivot Limited has been taken into consideration. Based on the
requirements mentioned in this IFRS, the AASB of Australia has replaced its “AASB 117,
Leases”. In place, a new standard AASB 16 is announced. The changes in the accounting and
disclosure list brought by this new standard are discussed in the current assignment. Incitec
Pivot Limited, listed on ASX is chosen for AASB 16’s analysis purpose. In addition, the
basic accounting concepts applied by Incitec Pivot Limited are also studied.
1. From the annual report of Incitec Pivot Limited and in addition, to providing
examples identify and describe the accounting concepts used.
The basic accounting concepts applied while preparing the financial statements by Incitec
pivot limited are as follows:
 Money measurement concept: this accounting concept lays the basic requirement for
transactions to be accounted in organisation’s financial statements. Only those business
activities which can be translated in monetary activities are recorded while preparing
financials. All those business activities which does not involve money or money in kind
inflow or outflow are ignored (Carey, Knowles, and Towers-Clark, 2017).
E.g. Incitec Pivot Limited has account employee benefit expenses which involved cash or
kind outflow from organisation. But for all the activities where employees were just rewarded
with “words of appreciation” are not recorded in financial statements of business.
 Accounting period concept: even when the business is supposed to be running for an
indefinite term, yet the financial results are required to be gathered for a specific duration.
This duration has to be similar always. This time frame is termed as accounting period. Every
business is supposed to compute and disclose financial results for an accounting period. This
enhances performance comparison and helps in understanding performance patterns.