This newsletter provides updates on the latest news and developments in financial accounting. It covers topics such as new accounting standards, definitions, updates from IASB, onerous contracts, and proposed amendments to the conceptual framework.
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Financial Accounting News Letter
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NEWS LETTER New Accounting standard AASB 2018-8: Right-of-Use assets for the Not-for-profit organisations AASB issued AASB 2018-8 amendments with regard to AAS–Right-of-useAssets(ROUA)ofNot-for-profit organisations to provide the temporary option for the not- for-profit leases in context for selection of the measure. This measurement is with regard to the classes or class of the ROUA those are generated from the ‘concessionary lease’ at initial recognition. This recognition is made either at cost as per Para 23-25 of AASB 16 for leases or as per Para Aus25.1 of AASB 16.Concessionary lease here is consideredastheleasethatissignificantlybelowas compared to market terms. Major change made by the standard is allowing for temporary option applicable for ROUA based on class by class and amended AASB 1049 to allow the government for measuring ROUA at cost rather than at fair values. New AAS (Australian Accounting Standard) for the definition Definitionfortheterms materialandbusiness havebeenclarifiedby AASBthroughnew amendedsectionas follows – 1.AASB2018-7stated that any information will be regarded as material its misstatement, omission or obscuringinfluencesthe decision of GPFS primary users that is being taken onthebasisofthe financialstatementthat include such information. 2.AASB 2018 – 6 stated the term business as the integratedsetofthe activitiesandanyasset that can be conducted and Financial reporting related news and development Period covered: 1stDecember 2018 to 31stMarch 2019
managed for providing goods or services to the customers to generate income. Proposed amendments for standard AASB 2019-X in contextofconceptual framework As per the proposed AASB 2019-X,theconceptual frameworkwillbe applicable only to for-profit privateentitiesthoseare publicly accountable and are requiredtocomplywith AAS by the legislation and the for-profit entities those voluntarilychoosethe applicationofconceptual framework.Proposed amendments are in context ofAAS,different pronouncementand interpretation of the AASB toallowotherentitiesto continuewiththeexisting framework while they will preparethepresenttheir financialstatements. Further,theproposed standardswillrevisethe referenceandquotation regarding which version of AASB 137 – Onerous contract In accordance with AASB 137 the term onerous contractisthecontractforwhichtheexpected economic benefit to be received is lower than the unavoidablecostoffulfillingthecontractual obligation.Here, the unavoidable cost is the cost of fulfilling the obligation or compensation or penalty payablefor not fulfilling the contractual obligation, whicheverislower.Inaccordancewiththe amendment costs directly attributable to fulfilment of contractual obligation. Update from IASB UpdatesfromIASBfocussedonthepreliminary decisions.Itdiscussedthetopicsassociatedwith IFRS in context of SMEs standards – update, review, management commentary, primary financial reports, and amendment to IFRS 17 on insurance contracts. All14memberspresentedinthemeetingwere agreed to the decision. The meeting also decided regarding the topics to be discussed in next meeting.
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conceptualframeworkshallbeused,ifitrequiresusingconceptual framework. Answer 2 Financial statements are the written records that represent the business activities and thefinancialperformanceofanyorganisation.Itincludesthebalancesheet,income statements, changes in the equity statement and cash flow statement. AASB 101 requires the ASX listed entities to present the financial statement in faithful manner through reporting and disclosingtheimpactofeachtransactiontakenplaceduringtheconcernedperiod (Aasb.gov.au, 2019). Financial statements shall be prepared as per the requirement of AASB 101 and it must provide information regarding accounting in such manner that it shall be relevant, reliable, understandable and comparable. Main purpose of financial statement is providing information with regard to the company’s financial performance and position that will influence the decision of a user of financial statement while making any economic decisions (Aasb.gov.au, 2019). Financial statement prepared by trainee accountant of Whirl Limited involves various mistakes those were not in compliance with AASB 101 as follows – ErrorCorrectionReference In statement of profit or losscostofsaleshas beenreportedafter reporting advertising and annual leave expenses Costofsalesshallbereportedunder revenue and deducted from revenues to get the gross profit amount (Hodgson & Russell, 2014). AASB 101, Para 103 Alltheexpensesare reported randomly Operating and selling and administrative expenses shall be reported below the line of gross profit and shall be deducted from grossprofittogetoperatingprofit. AASB101,Para99 and Para 103
Financecostshallbereportedbelow operatingprofitanddeductedtoget earnings before tax. Tax expenses shall be deducted from earning from tax to get earning after tax or net income for the period (Clarke & Wilson, 2018). Prepaidinsurance reportedunderthe statementofprofitand loss Prepaid insurance shall be reported as under current assets in the balance sheet AASB 101, Para 78(b) Assets are not classifiedAs per AASB 101, the assets shall be classifiedascurrentassetsandnon- current assets AASB101,Para55, requirementof headings sub-totals and AASB 101, Para 62 Liabilitiesarenot classified As per AASB 101, the liabilities shall be classified as current liabilities and non- current liabilities (Aasb.gov.au, 2019). AASB101,Para55, requirementof headings sub-totals and AASB 101, Para 62 Inventoriesandtrade receivablesreported together Trade receivables and inventories shall be reportedseparatelywithindividual amount AASB101,Para55, requirementof headings sub-totals Trade payables deducted from trade receivables Trade payables shall be reported under theheadofcurrentliabilities (Aasb.gov.au, 2019). AASB 101, Para 55 Accumulated depreciationrecorded Accumulateddepreciationshallbe deducted from the property, plant and AASB 101, Para 78(a)
under the head liabilitiesequipment reported under asset. Deferredtaxliabilities and current tax reported together Deferred tax liabilities and current tax shallbereportedseparatelywith individual amount AASB 101, Para 56 Changesforownership interestsforthe subsidiariesarenot reported in the statement of changes in equity Changes for ownership interests for the subsidiariesthatwillleadtolossof control shall be reported under statement ofchangesinequity(Aasb.gov.au, 2019). AASB101,Para 106(d)(iii)
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Reference Aasb.gov.au. (2019).Australian Accounting Standards Board (AASB) - Home. Retrieved 12 April 2019, from https://www.aasb.gov.au/ Iasplus.com. (2019).International Accounting Standards Board (IASB). Retrieved 12 April 2019, fromhttps://www.iasplus.com/en/resources/ifrsf/iasb-ifrs-ic/iasb Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income.Australian Accounting Review,24(2), 100-110. Mission, A. C. P. N. S. (2014). Defining and Accounting for Fundraising Income and Expenses Executive Summary. Coulton, J., Ribeiro, A., Shan, Y., & Taylor, S. (2016). The rise and rise of non-GAAP disclosure. Handley, K., Wright, S., & Evans, E. (2018). SME Reporting in Australia: Where to Now for Decision‐usefulness?. Australian Accounting Review, 28(2), 251-265. Wee, M., Tarca, A., & Chang, M. (2014). Disclosure incentives, mandatory standards and firm communication in the IFRS adoption setting. Australian Journal of Management, 39(2), 265-291. Clarke, E. A., & Wilson, M. (2018). Accounting: An Introduction to Principles and Practice 9ed. Cengage AU. Aasb.gov.au.(2019).Retrieved12April2019,from https://www.aasb.gov.au/admin/file/content105/c9/Framework_07- 04_COMPjun14_07-14.pdf