Changes and Developments in Financial Reporting

This article discusses the changes and developments in financial reporting from 1st December 2018 to 31st March 2019. It covers amendments in the Australian accounting standards, introduction of new accounting standards, and new accounting standards on right-of-use assets of not-for-profit entities. It also highlights the corrections required in the financial statements and provides discussions in support of these corrections based on AASB 101.

FINANCIAL ACCOUTNING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ACCOUNTING
Table of Contents
Answer to question 1:......................................................................................................................1
Answer to question 2:......................................................................................................................3
Corrections Required:..................................................................................................................5
Discussions in support of above corrections based on AASB 101:.............................................6
Bibliography:...................................................................................................................................7

2FINANCIAL ACCOUNTING
Answer to question 1:
AMENDMENTS IN THE AUSTRALIAN
ACCOUNTING STANDARDS, AASB
2019-X (Dated: 24.01.2019)
The proposed standards of AASB
2019-X brings significant changes in the
conceptual framework of financial reporting
(aasb.gov.au, 2019) and they have asked for
comments from various information users
on that proposed standards to improve its
efficiency and effectiveness. The new
accounting standard will be applicable for
the privet sector companies having public
accountability and it is voluntary for the not
for profit organisations (aasb.gov.au, 2019).
AASB PRACTICE STATEMENT 2
(Dated: 13.12.2018)
AASB have issued a bulletin on the
AASB practice statement 2. It requires
additional disclosure of information for the
Companies who have been affected by any
issues of the climate change. It issues a
guideline for the directors, accountants,
auditors and the financial statement
certifying authorities to disclose any climate
change related risks in the financial
statement (aasb.gov.au, 2019).
INTRODUCTION OF NEW
AUSTRALIAN ACCOUNTING
STANDARDS (Dated: 20.12.2018)
AASB have introduced two amended
accounting standards and clarified the
definition of business and ‘material’. The
newly amended AASB 2018-6 gives
clarification of business to specify whether a
transaction should be recorded as
combination of business of acquisition of
assets. The newly amended AASB 2018-7
CHANGES AND DEVELOPMENTS IN FINANCIAL REPORTING
FROM 1ST DECEMBER 2018 TO 31ST MARCH 2019

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clarifies the definition of ‘material’ and
specifies its applications. It brings
amendments in AASB 101 Preparation of
financial statement.
NEW ACCOUNTING STANDARD ON
“RIGHT-OF-USE ASSETS OF NOT-
FOR-PROFIT ENTITIES”. (Dated:
24.12.2018)
The newly issued amended
accounting standard AASB 2018-8, gives
clarification and guidance recognition of
right to use of assts into lease or a right to
use. It also clarifies on the valuation aspect
of those leases or right to use. It brings two
key changes, temporary option to apply the
ROU assets on class by class basis and
government and general government sector
financial reporting to measure the ROU
assets at costs.
NEW COMPLIANCE FOR
REPORTING PERIOD (Dated:
30.01.2019)
AASB have made mandatory to
comply with the three accounting standards.
AASB 1 First time adoption of Australian
Accounting Standards. AASB 15 Revenue
from contract with customers and the AASB
1059 Service concession arrangements,
these three new accounting standards have
been made applicable for the reporting
period starting from 01.01.2019.
COLLECTIVE AND INDIVIDUAL
SERVICES AND EMERGENCY
RELIEF FOR PUBLIC SECTOR (Dated:
12.02.2019)
AASB have issued an Exposure
Draft (ED) 67 collective and individual
services and emergency relief, which aims at
accounting for collective and individual
services and also the emergency reliefs. It
proposes an amendments to the IPSAS 19. It
clarifies the definition of collective services
and emergency reliefs. The IPASB have

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asked for comments and views on it by 31st
May 2019.

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Answer to question 2:
WHIRL LIMITED
Income Statement for the year ended 30 June 2018
Amount
($000) Amount ($000)
Revenue 1793
Less: Cost of Sales 720
Gross Profit 1073
Expenses:
Advertising 11
Annual Leave Expenses 20
Depreciaiton Expense 30
Insurance Expense 26
Other Expense 67
Rent Expense 43
Salaries and Wages 190
Telephone expense 13
Utilities Expense 21
Warrenty Expense 8
Bad debt Expense 3
Repair 3
Total Expensees 435
Profit Before Interest and
Tax 638
Interest Expense 10
Profit Before tax 628
Less: Tax Expenses 190
Net Operating Income 438

6FINANCIAL ACCOUNTING
WHIRL LIMITED
Balance sheett for the year ended 30 June 2018
Amount
($000)
Amount
($000)
ASSET
Cash and Cash Equivalent 212
Accounts Receivables 137
Prepaid Insurance 3
Inventory 238
Total Current Assets 590
Property, Plnat and Equipment and Intangible Assets
(net) 318
Patents 20
Total Non-Current Assets 338
Total Assets 928
LIABILITIES
Current and Deferred Tax Liabilities 190
Trade payables 26
Provision for Current liabilitites: 24
Total Current Liabilities 240
Loan Westpack 80
Loan Commonwealth Bank 20
Total Non-Current Liabilities 100
Total Liabilities 340
Share Capital 200
Retained Earnings 388
Total Equity 588
Total of Liabilities and Equity 928

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Corrections Required:
Inventories:
Raw materials 110
Work in progress 128
Total Inventory 238
Plant, Property and equipment:
Carrying value 348
Less: accumulated depreciation 3
Net value of plant property and
equipment 345
Cash and cash equivalent:
Cash at bank 92
Cash management account 120
Total cash and cash equivalent 212
Prepaid Insurance:
It is to be shown as current assets in the balance sheet. It should not be recognized as an
expense in the income statement.
Repairs:
It is to be recognized as an expense in the income statement. It should not be shown as asset in
the balance sheet.
Dividend:
It needs to adjusted with the retained
earnings

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Accounts Receivable:
Trade receivable 140
Allowances for doubtful debt 3
Accounts receivable net 137
Provision for current liabilities:
Provision for Warranty 6
Provision for annual leave 18
Total provision for current liabilities 24
Discussions in support of above corrections based on AASB 101:
AASB 101 gives the guidelines for the presentation of financial statement for reporting
entities. There are some basic corrections needed about recognition of expenses and assets,
which needs to be corrected. Apart from those, some major mistake, which goes against the
AASB 101, can be cited as below with reference to the respective paragraphs or AASB 101.
Classifying assets and liabilities in the current and noncurrent in the balance sheet:
Assets and liabilities are to be segregated as current and noncurrent in the balance sheet.
It is based on the requirement of paragraph 66-67 of AASB 101. It requires the financial
statement to arrange the assets and liabilities according to their liquidity in two broad heads,
current and non-current. It also requires the amount of inventories to be recorded separately.
Shareholders’ Equity:
As per paragraph 54 of AASB 101, equity method is to be used for share investment. As
per paragraph 109 of AASB 101, shareholders equity changes statements should be prepared in
accordance with the respective accounting standard and the dividend should not be adjusted with
the share capital, rather it should be adjusted with the balance of retained earnings.

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Bibliography:
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
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
Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income. Australian
Accounting Review, 24(2), 100-110.
Henderson, S., Peirson, G., Herbohn, K., &Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.
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
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/How-
special-are-special-purpose-financial-statements---For-profit-User-and-Preparer-Survey-
Results?newsID=310714