Newsletter and Financial Accounting Standards

The assignment provides an overview of recent updates by the Australian Accounting Standard Board (AASB) on various financial reporting standards. The AASB has issued preliminary views on changes in accounting policies, presentation of EBITDA, disclosure of infrequent items, and reduced disclosure requirements for second-tier companies. The assignment also discusses the implications of these changes on financial reporting, including the need to distinguish between current and non-current assets and liabilities, and the importance of accurate classification of property, plant, and equipment. Additionally, the assignment touches on the requirement to disclose dividends paid in the statement of changes in equity.

Running Head: NEWSLETTER AND FINANCIAL ACCOUNTING
Newsletter and Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:
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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
LOCATION OF
INFORMATION TO
COMPLY WITH
STANDARD OF
IFRS (2-10-2017)
As per the feedback
received by AASB the
annual reports and
financial statements are
turning out difficult to
understand due to
disintegration and
duplicate information.
The preliminary view
stated by AASB defines
that general disclosure
standard should
consider the required
information in
compliance with IFRS
standard to provide
understanding of an
organizations financial
report (AASB.GOV.AU,
2018). The preliminary
view of AASB is that an
organization financial
report must explain the
single reporting package
together with the
standards of ISA (720).
STATING
INFORMATION
IDENTIFIED IN
NON-IFRS
FINANCIAL
REPROTS (2-10-
2017)
As the per the preliminary
view of the AASB the
required standard for
disclosure should
consider including
principles where an
organization can offer
necessary information to
adhere with IFRS
standard beyond the
financial statement if the
information is stated in
the annual statement of
the organization and the
financial report being
understandable with
faithful presentation of
information. The AASB
has also stated that the
general standard for
disclosure should not
impede any entity from
considering information
in annual report as the
NON-IFRS information.
PRESENTATION OF
EBIT AND EBITDA
(2-10-2017)
According to the
preliminary view of the
AASB the EBITDA
should be presented in the
statement of financial
performance in subtotal
form (Aasb.gov.au, 2018).
This would help in
offering in true and fair
depiction if the
companies report
expenses based on their
nature. According to the
board presenting the
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NEWSLETTER AND FINANCIAL ACCOUNTING
EBITDA based on the
analysis of expenses
would result a mix in the
nature of expenditure and
functions of expenditure
leading to disruption in
analysis of expenses.
DISCLOSURE OF
INFREQUENT
ITEMS IN
FINANCIAL
STATEMENT (2-10-
2017)
According to the
preliminary view of the
AASB an organization is
required to present the
material transaction that
takes place frequently or
unusually (Aasb.gov.au,
2018). The AASB
requires an organization
to present the transactions
that are occurring
infrequently under the
appropriate section. The
items should be described
and disclosed in the
comprehensive income
statement or under the
notes section of the
financial report.
DISCLOSING
ACCOUNTING
POLICIES (2-10-
2017)
The AASB in its
preliminary view has
stated that the accounting
policies should be
disclosed in the financial
statement under the
categories 1 and
categories 2 (Aasb.gov.au,
2018). If an organization
choses to disclose the
accounting policies under
category 3 then it take
into the consideration of
separating the disclosure
from the significant
accounting policies. It
would assist the users in
recognizing the
accounting policies by
stating the category three
accounting policies
outside the financial
statement and cross
referencing the location
of such disclosure.
AASB REDUCED
DISCLOSURE
REQUIREMENTS
(21-12-2017)
A statement has been
released by the AASB
regarding the reduced
disclosure requirements
for the second tier
companies that are
reporting for the lease
accounting in respect of
AASB 16. In comparison
to Tier -1 disclosure the
Tier -2 disclosure would
assist in reducing the
burden of disclosure and
cost involved in the
preparation and audit of
general purpose financial
report for several
companies regardless of
whether they are profit
and non-profit entities
(Aasb.gov.au, 2018).
FRAMEWORK FOR
FINANCIAL
REPORTING FOR
CHARATIES (14-2-
2018)
AASB in its research
paper provided current
requirements for
reporting of charities. The
purpose of report was to
improve the reporting
requirements of charities.
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NEWSLETTER AND FINANCIAL ACCOUNTING
Answer to question 2:
The Australian Accounting Standard Board has laid down guiding principle for the
entities relating to the preparation and presentation of financial statement under the AASB
101. The guiding principles of AASB 101 purposes is to assure that the the general purpose
financial statements can be compared with the reports of the present as well as the previous
year for an organization (Hodgson & Russell, 2014). As laid under the “Australian Accounting
Standard Board 101” the necessary rules has is incorporated in the standard relation to the
preparation and presentation of the financial report along with the required content to be
stated in the report.
Circumstances obtained from gauging into the financial report of Blake Ltd states that
the accountant has followed one single line process of preparing the financial statement. As
understood Blake Ltd accountant has overlooked the distinction of assets under the heads
such as current and non-current assets in compliance with paragraphs 66-76 under AASB
(Hodgson & Russell, 2014). Unlike assets a distinction among the current and non-current
assets is required by the Blake Ltd accountant.
The AASB 101 requires the accountant of Blake Ltd to classify the cash and cash equivalent
under AASB 107 at the end of the account year (Hodgson & Russell, 2014). Other accounting
transactions of Blake Ltd includes such as raw materials, work in process raw materials, work
in process under inventories which are to be classified as current assets since it is sold or
consumed as the portion of normal operating cycle.
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NEWSLETTER AND FINANCIAL ACCOUNTING
The accountant of the Blake Ltd has not created distinction among the current
liabilities and non-current liabilities. Items such as accounts payable and provision for
warranty, allowance for doubtful debts and provision for annual leave forms the part of
current liabilities and are part of working capital that is used in the normal operating cycle of
business. The accountant of Blake Ltd should classify this items as current liabilities even
though the due is to be settled more than twelve months following the reporting period.
The property plant and equipment should be disaggregated by the accountant of Blake
Ltd in compliance with the “AASB 116”. The accumulated depreciation has been incorrectly
recorded under the liabilities heads (Hodgson & Russell, 2014). Instead of wrongly crediting
the accumulated depreciation in the profit and loss account the same should be subtracted
from the property, plant and equipment in the balance sheet. This reason behind this is that
the accumulated depreciation carries a continuous credit balance and has contra effect on the
asset.
The accountant has wrongly recorded the dividend in the statement of profit and loss
account. According to AASB 101 Blake Ltd should disclose the dividend paid either in the
statement of financial position or in the statement of changes in equity. Finance is regarded as
expenditure and should be accounted before getting the “profit before tax”. Additionally the
accountant of Blake Ltd should prepare and present the line of items in the profit and loss
statement by reconciling with the subtotals stated under paragraph 85 of the AASB 101.
Classification of assets and liabilities of Blake Ltd differ in frequency and distinction among
those items would help in better understanding of financial statements.
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NEWSLETTER AND FINANCIAL ACCOUNTING
REFERENCES:
Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income. Australian Accounting
Review, 24(2), 100-110.
News. (2017). Aasb.gov.au. Retrieved 31 March 2018, from http://www.aasb.gov.au/News.aspx
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