Newsletter and Financial Accounting Standards

The assignment provides a scenario where an accountant has incorrectly applied AASB 101 and IFRS standards in a company's financial statements. Students are required to identify the mistakes, explain the corrections, and provide accurate financial statements. The case study focuses on current and non-current assets and liabilities, accumulated depreciation, finance costs, and dividend payments.

Running Head: NEWSLETTER AND FINANCIAL ACCOUNTING
Newsletter and Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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NEWSLETTER AND FINANCIAL ACCOUNTING
ANSWER TO QUESTION 1
CHANGES DEPICTING IN THE ACCOUNTING STANDAD BY AASB
DURING 1ST DECEMBER 2017 TO 31ST MARCH 2018
AUSTRALIAN
New Australian
Accountign Standard
(22-12-17)
There are three
amendments that has
been stated by the
Australian Accounting
Standard Board along
with new one principle
standard. The effective
date relating to the
amendments that is
made by AASB 2014-10
is deferred to annual
year commencing from
1s t January 2022
containing numerous
editorial corrections
(Aasb.gov.au, 2018). The
AASB 2017-6 provides
a scope of modifications
to AASB 9 financial
instrument that gives
consent to companies in
measuring the amortised
cost relating to financial
assets. The revision
includes long term
interest in joint ventures
and associates are to be
recorded by using the
AASB 9 financial
instrument before
allocating any loss and
impairment
(Aasb.gov.au, 2018).
Making materiality
judgement (22-12-2017)
A statement released by
Australian Accounting
Standard Board required
making materiality
judgements (Sutherland,
2017). The directors,
trustees and other
responsible individuals
were considered
accountable for preparing
and presenting the
financial statement by
making continuous
judgement regarding
materiality (aasb.gov.au,
2018). A practice
statement was released by
AASB that provided
guidance to auditors and
regulators regarding
materiality judgements.
Tax transparancy code
25th january 2018
A voluntary tax
transparency code was
released by the Australian
Accounting Standard
Board which intended to
encourage comparability
and transportability
relating to important
information concerning
organization taxation
(aasb.gov.au, 2018). On the
request of board of
taxation, AASB has
issued in its statement a
draft guidance to assist
companies in assessing
the performance of
recommended tax
reconciliation with
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NEWSLETTER AND FINANCIAL ACCOUNTING
effective tax calculation
rate.
Financial reporting
framework for charities
(14-02-2018)
The AASB has released a
research paper that is
based on the current
financial reporting
requirements relating to
charities (aasb.gov.au,
2018). The objective of
releasing the reporting
framework was to provide
charity sector to improve
the financial reporting
requirements.
Annual improvements to
2015-17 cycle (23-02-
2018)
The purpose of releasing
the standard is to revise
the interest which was
previously held in the
joint operation, income
tax consequences of
income payments of
financial instrument
which is classified as
equity together with cost
of borrowing that
qualified for
compensation.
AASb reduced disclosure
requirements (21-12-
2017)
AASB released reduced
disclosure requirements
for the second tier entities
associated with AASB 16
accounting for leases
(aasb.gov.au, 2018). In
contrast to Tier-1, the
disclosure in the tier 2
assisted in lowering the
burden of disclosure with
the cost of preparing and
auditing general purpose
financial statement for
several companies
regardless of whether
they are profit and non-
profit organizations.
Australian
implementation
guidance for NFP public
sector licensors: ED (21-
12-17)
The AASB has
developed standards that
is aimed at lower the
diversity that are
associated with
accounting for revenue
derived from license
issued by public sector
entities . The enforcement
direct 283 lay down the
revision to help the
licensors of public sector
in differentiating the
licenses from taxes and
ascertaining the nature of
licenses that are issued.
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NEWSLETTER AND FINANCIAL ACCOUNTING
Answer to Question 2:
According to the Accounting Standard AASB 101 guidelines has been laid down
relating to the preparation and presentation of the general purpose financial statements in
order to assure that the comparability is present relating to the financial statement of the
organization of the previous period together with the financial statement of the other entities
(Jin et al., 2015). As laid down under the “Australian Accounting Standard Board 101”
there are all the relevant requirements for the preparation and presentation of the financial
report along with the necessary rules governing the structure and minimum presentation for
the financial content.
Taking into the consideration the situation of Blake Ltd it is found that a single
financial reporting format for the preparation of profit and loss account along with other
comprehensive income is adopted by the accountant. Evidences obtained from the financial
statement defines that the accountant of Blake ltd has failed to appropriately classify the
assets under the current and non-current assets. Likewise, the liabilities section also lacks
appropriate classification of liabilities as current and non-current liabilities (Chand et al.,
2015). The accountant of Blake Ltd is required to make the financial statement more
presentable and understandable by classifying the assets and liabilities under their respective
heads.
The accountant of Blake Ltd is required to comply with the rules of the AASB 101
paragraphs 66-76 by preparing and presenting the financial statements with current and non-
current assets together with current and non-current liabilities (Scott, 2015). The accountant
has failed to identify the cash and cash equivalent in agreement with the standards set under
with AASB 101.
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NEWSLETTER AND FINANCIAL ACCOUNTING
The accountant of Blake Ltd should consider transactions during the course of
business such as raw materials, work in process raw materials, work in process under the
inventory section as current assets. This is because these transactions forms the part of input
goods which is used in the process of manufacturing (Schaltegger & Burritt, 2017). Other
business transactions namely accounts payable and provision for warranty, allowance for
doubtful debts and provision for annual leave is required to be classified under the heads of
liabilities. These accounting transactions constitute liability for Blake Ltd and arises at the
time when the company makes sales or absolute replacement of goods. These transactions are
based on the principles of matching concept which is overlooked by the accountant of Blake
Ltd.
Accounting transactions namely the accumulated depreciation for property plant and
equipment is classified wrongly under the section of liabilities. Instead the depreciation
should be recorded under the asset side of the balance sheet (Warren & Jones, 2018). It is
necessary for the accountant of Blake Ltd to understand that the accumulated depreciation
would be carrying incessant increasing credit balance which is considered as the contra asset
account. Instead of crediting the accumulated depreciation in the profit and loss account the
same should be subtracted from the property plant and equipment account in the balance
sheet at the end of the accounting (Henderson et al., 2015). As this will help in better
understanding the cost of property plant and equipment and the accumulated depreciation.
The dividend has been wrongly recorded by the accountant in income statement
instead they does not represent business income. The dividends paid must be recorded in the
changes in stakeholders equity (Hoyle et al., 2015). The finance cost should be considered as
expenditure and should be considered before obtaining the profit prior to tax. The accountant
of Blake Ltd is required to follow the AASB 101 paragraph 85. This would help in
disclosing the aspects of financial performance for better understanding of users.
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REFERENCES:
Chand, P., Patel, A., & White, M. (2015). Adopting international financial reporting
standards for small and medium‐sized enterprises. Australian Accounting
Review, 25(2), 139-154.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.
Jin, K., Shan, Y., & Taylor, S. (2015). Matching between revenues and expenses and the
adoption of International Financial Reporting Standards. Pacific-Basin Finance
Journal, 35, 90-107.
News. (2017). Aasb.gov.au. Retrieved 30 March 2018, from
http://www.aasb.gov.au/News.aspx
Perera, D., & Chand, P. (2015). Issues in the adoption of international financial reporting
standards (IFRS) for small and medium-sized enterprises (SMES). Advances in
Accounting, 31(1), 165-178.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Sutherland, D. W. (2017). Independent audit report. Newsmonth, 37(3), 19.
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Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
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