Recent Changes in Financial Reporting Environment

This document discusses the recent changes and developments in the financial reporting environment, including newly amended accounting standards and mandatory compliances. It provides information on the applicability of these changes and their impact on financial reporting. The document also includes corrections required in the reporting of inventory and other financial items.

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

1FINANCIAL ACCOUNTING AND REPORTING
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Correction required:...............................................................................................................5
Discussions and references from applicable paragraphs of AASB 101:................................7
References and bibliography:.....................................................................................................9

2FINANCIAL ACCOUNTING AND REPORTING
Answer to question 1:
RECENT CHANGES AND DEVELOPMENTS IN
FINANCIAL REPORTING ENVIRONMENT
NEWLY AMENDED ACCOUNTING
STANDARDS, AASB 2019-X (Dated:
24.01.2019)
The AASB have issued a proposed
standard 2019-X, which brings significant
changes in the conceptual framework of
reporting financial information
(aasb.gov.au, 2019). AASB seeks public
comments and suggestions from various
users of financial information to improve
the efficiency and effectiveness of the
standards. It will be made applicable for
the privet sector companies which are
having public interests and accountability.
Not for profit organisations can also adopt
it voluntarily (aasb.gov.au, 2019). It will
retain the Framework for preparation and
presentation of financial statement and the
concept of reporting entity as it was at its
initial stage. It will be applicable for
01.01.2019.
APPLICABILITY OF AASB
PRACTICE STATEMENT 2 (Dated:
13.12.2018)
AASB have issued a new AASB
practice statement 2, which seeks
additional disclosure requirements of
information for risks related to climate
changes. It sets a guideline for
professionals, directors, accountants, and
auditors who are preparing and certifying
the financial statement of a company.
(aasb.gov.au, 2019).
APPLICABILITY OF NEW
AUSTRALIAN ACCOUNTING
STANDARDS (Dated: 20.12.2018)
AASB have issued two amended
accounting standards which clarifies the

3FINANCIAL ACCOUNTING AND REPORTING
definition of business and ‘material’. The
newly amended AASB 2018-6 clarifies the
definition of business to identify whether a
transaction would be recorded as a
business combination or as an acquisition
of assets. Secondly, the new amended
AASB 2018-7 clarifies the term ‘material’
and clarifies its applications. It has brought
amendments in AASB 101; Preparation of
financial statements.
NEW ACCOUNTING STANDARD:
RIGHT-OF-USE ASSETS OF NOT-
FOR-PROFIT ENTITIES (Dated:
24.12.2018)
The AASB have issued newly
amended accounting standard AASB
2018-8, which gives clarification and
guidance on recognition of right to use of
assts into lease or a right to use for not for
profit entities. It gives clarifications on the
valuation of those leases or right to use of
assets. It has brought two key changes in
the reporting measures, one is provisional
option to apply the ROU assets on class by
class basis and the other is for the
Government and general Government
sector financial reporting to measure the
ROU assets at costs price.
MANDATORY COMPLIANCES FOR
CURRENT REPORTING PERIOD
(Dated: 30.01.2019)
AASB have made it mandatory for
companies to comply with the following
three accounting standards from the
reporting period starting from 01.01.2019.
AASB 1: First time adoption of Australian
Accounting Standards, AASB 15: Revenue
from contract with customers and the
AASB 1059: Service concession
arrangements.
PUBLIC SECTOR: COLLECTIVE
AND INDIVIDUAL SERVICES AND
EMERGENCY RELIEF (Dated:
12.02.2019)
AASB have issued an Exposure
Draft (ED) 67on collectives and individual
services and emergency relief applicable
for public sector entities having provisions
for emergency reliefs. It proposes to apply

4FINANCIAL ACCOUNTING AND REPORTING
the IPSAS 19 for recognising provisions. AASB is still seeking comments on it from
the public till 31st May, 2019.
Answer to question 2:

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Correction required:
Reporting of Inventory: Amount
Raw materials 110
Work in progress 128
Total value of inventory to be shown in Balance sheet 238

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Prepaid Insurance:
Prepaid insurance is a current asset, it should not be shown in the income statement, and
instead it should be shown in the balance sheet under the head current assets.
Repair Expenses:
It is an expense, and hence it should be shown in the income statement.
Plant, Property and equipment: Amount
Carrying value of plant, property and equipment 348
Less: Accumulated depreciation 3
Net value of plant property and equipment to be shown in the balance sheet 345
Amount of Cash and cash equivalent: Amount
Cash at bank 92
Cash management account 120
Total cash and cash equivalent to be shown in the balance sheet 212
Adjustments for Dividend:
It should be adjusted with the retained earnings.

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Accounts Receivable: Amount
Trade receivable 140
Allowances for doubtful debt 3
Accounts receivable net to be shown in the balance sheet 137
Provision for current liabilities: Amount
Provision for Warranty 6
Provision for annual leave 18
Total provision for current liabilities to be shown in the balance sheet 24
Discussions and references from applicable paragraphs of AASB 101:
AASB 101 guides for the presentation of financial statement. Some basic corrections
are needed in the income statement and balance sheet relating to recognition of expenses and
assets. Apart from those, some major corrections required as per AASB 101 can be cited
from the following paragraphs.
Classification of assets and liabilities into proper heads:
Assets and liabilities need to be classified as current and noncurrent in the financial
statement. Paragraph 66-67 of AASB 101 requires the financial statement to be prepared and
arranged as per their class and liquidity.
Reporting Shareholders’ Equity:
Paragraph 54 of AASB 101 requires using equity method for presentation of share
investment. Paragraph 109 of AASB 101; statement of changes in equity needs to be

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prepared in accordance with the accounting standard AASB 101 and the dividend should be
adjusted with the balance of retained earnings not with the share capital.

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References and bibliography:
Aasb.gov.au. (2019). Onerous Contracts – Cost of Fulfilling a Contract. Retrieved 7 April
2019, from https://www.aasb.gov.au/admin/file/content105/c9/ACCED287_01-19.pdf
Aasb.gov.au.(2019). Presentation of Financial Statements. Retrieved 9 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Henderson, S., Peirson, G., Herbohn, K., &Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
News . (2019). Aasb.gov.au. Retrieved 9 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 9 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 9 April 2019, from
https://www.aasb.gov.au/News/New-Australian-Accounting-Standards?
newsID=310717