Financial Accounting Newsletter for Reporting Standards Updates

This assignment encompasses a financial accounting newsletter and related financial statement analysis. The newsletter, prepared for staff at a large accounting firm, covers updates on financial reporting news from April 1, 2019, to July 31, 2019, including disclosures under SPFS, annual improvements to IFRS standards, CPA Australia's independent review board, pre-meeting summaries for the IASB June meeting, amendments to AASB 112, and amendments for IFRS 17 implementation. The assignment also includes a memorandum providing advice on income statement preparation, comparing expenses by nature and function, and analyzing the impact on net profit. The student also prepares a statement of financial position and references relevant accounting standards and literature.

Running hr
Financial Accounting
News Letter

1FINANCIAL ACCOUNTING
Financial accounting
Name of the student
Name of the university
Student ID
Authors note

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NEWS LETTER
Disclosures under SPFS (special purpose financial
statement)
4th July 2019
ED 293 proposed that not for profit organisations are
required to lodge their SPFS with the Australian Charities
and Not-for-profit commission whereas rest of the entities
are required to lodge their SPFS with the ASIC for the
purpose of disclosing the statement that can be analysed for
finding out whether the accounting policies they have
applied in SPFS are in confirmation with the recognition
and measurement criteria of AAS. Information is also
required regarding whether the entity has any investment in
joint venture or associates or has any substitute. It is also
required to notify the approach they are using to account
the interests. For further details please follow the link –
https://www.aasb.gov.au/admin/file/content105/c9/
ACCED293_07-19.pdf
Annual improvements to the IFRS standards 2018-2020
14th June 2019
It has been proposed by IASB requiring subsidiaries to
apply Para D16(a) of IFRS – 1st time adoption of IFRS to
measure the cumulative difference in translation by using
the amounts recorded by parent company based on the
IFRSs transition date. In addition to that joint venture
associated who will apply IFRSs they will also be required
to apply the amendments.
For further details please
follow the link –
https://
www.aasb.gov.au/admin/
file/content102/
c3/7.4_IASB_ED_annual
_improvements_2018-
2020_M171_NO.pdf
Summary of the updates regarding latest financial
reporting news
For the period between 1st April 2019 and 31st July 2019
Independent review board to be
formed by CPA Australia (13th
June 2019)
One board meeting held by the CPA
where it was decided that independent
panel is to be formed and the
procedure for the same has been
initiated. This panel will conduct
detailed review of all CPA Australia
related claims. The panel will further
recommend the way for improvement.
For further details please follow the
link –
https://
www.cpaaustralia.com.au/-/
media/corporate/allfiles/
document/media/media-release/
statement-from-president-16-june-
2017.pdf?
la=en&hash=5EBE1BE642C5981
EE999DDA3243BFDCB6C56C62
5

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Amendment to AASB 112
25th July 2019
It was proposed by IASB to amend the way in which the
entities recognise the deferred tax. As per the proposed
amendment the entities will have to recognise deferred tax
under initial recognition for some of the specific
transactions to the extent that generates DTA (deferred tax
assets) as well as DTL (deferred tax liabilities) for same
amounts. The amendment proposed for any transaction for
which the company recognise both assets and liability.
Though the amendment is applicable retrospectively by the
entities, transition relief will be allowed for recoverability
assessment required for the DTA. For further details please
follow the link –
https://www.aasb.gov.au/admin/file/content105/c9/
ACCED294_07-19.pdf
Amendment for IFRS 17 implementation
26th June 2019
Amendment to IFRS 17 has been proposed by IASB
regarding insurance contracts for public consultation.
Purpose of the amendment is providing continuous support
for implementation by cutting down the cost required for
implementation of the standards and making the procedure
easier for them. Main objective of this amendment is to
ease and simplify the concerns and challenges raised while
implementing the standards. For further details please
follow the link –
https://www.ifrs.org/-/media/project/amendments-to-ifrs-
17/ed-amendments-to-ifrs-17.pdf
Pre-meeting summaries for
IASB June meeting
14th June 2019
IASB met as per plan on 17th to
19th June 2019 in London for
discussing issues related to –
Impairment and goodwill,
Preliminary financial statements,
Amendments proposed to IAS
16, business combination in
common control, rate regulated
activities, financial statement
with equity characteristics and
comprehensive review of SMEs
and IFRSs standards. For each
topics IASB staff made the
agenda and made the same
available. They further
mentioned major issues for the
purpose of discussion and asked
for staff’s recommendation. For
further details please follow the
link –
https://www.iasplus.com/en/
news/2019/06/iasb-premeeting-
summaries

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Bibliography
Aasb.gov.au. (2019). News . Retrieved 6 August 2019, from
https://www.aasb.gov.au/News/Conceptual-Framework-for-Financial-Reporting?
newsID=325498
Aasb.gov.au. (2019). News . Retrieved 6 August, from
https://www.aasb.gov.au/News/Exposure-Draft--Amendments-to-Australian-
Accounting-Standards---Disclosure-in-Special-Purpose-Financial-Statements-of-
Compliance-with-Recognition-and-Measurement-Requirements?newsID=325506
Cpaaustralia.com.au (2019). CPA Program. Retrieved 6 August 2019, from
https://www.cpaaustralia.com.au/cpa-program
Iasplus.com. (2019). International Accounting Standards Board (IASB). Retrieved 6 August
2019, from https://www.iasplus.com/en/resources/ifrsf/iasb-ifrs-ic/iasb
Ifrs.org. (2019). IFRS . Retrieved 6 August 2019, from https://www.ifrs.org/news-and-
events/2019/06/iasb-consults-on-amendments-to-aid-implementation-of-ifrs-17/

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Question 2
Answer (i)
Memorandum
To: Board of Directors, Snow Gear Ltd
From: Andrew Richard, Account manager
Subject: advice for Income statement preparation
Purpose of this memo is to provide advice regarding ways in which the expenses can be
reported in the income statement. 2 ways are there in which the reporting entity can show the
expenses in the income statement – (i) by nature of the expenses and (ii) by function of the
expenses. Where the expenses are shown by nature, the expenses are directly categorized for
which they have been expensed like depreciation, rent expenses, COGS, salaries, wages and
advertising expenses. Under this approach the expenses are not sub-classified further.
Conversely, where the expenses are shown by function, the expenses are classified under
different functions like cost of goods sold, selling and distribution expenses and
administrative expenses. This approach shows the gross profit, operating profit, EBIT, EBT
and net profit.
Under both the approaches of showing the expenses profit reportable to the shareholders will
vary. It can be established through the income statement of Snow Gear Ltd for the period
ended 30th June 2019 that is prepared under both the approaches and under expenses by
function net profit amounting to $868,500 and under expenses by nature net profit is
amounting to $ 571,500. Hence, the income statement shall be prepared as per multi-step
format showing the expenses as per their function to comply with the requirement of AASB
101 to show higher amount of profit.
Sincerely,
Andrew Richard, Account manager

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Answer (ii)
Single-step format
Multi-step format

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Answer (iii)
Statement of financial position

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Bibliography
Aasb.gov.au. (2019). Retrieved 31 July 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income. Australian
Accounting Review, 24(2), 100-110.