Financial Accounting Newsletter: Reporting and Standard Updates

This financial accounting newsletter covers the period from December 1, 2018, to March 31, 2019, and addresses key developments in financial reporting. It highlights the new accounting standard AASB 2018-8 regarding Right-of-Use assets for not-for-profit organizations, clarifying definitions and providing temporary options for measurement. The newsletter also discusses AASB 137 on onerous contracts and updates from the IASB, including decisions on IFRS for SMEs and amendments to IFRS 17 on insurance contracts. Additionally, it covers proposed amendments for standard AASB 2019-X concerning the conceptual framework. The second part of the document analyzes financial statements prepared by a trainee accountant, identifying errors and non-compliance with AASB 101, providing detailed error corrections and references to the relevant accounting standards. It also includes a list of references used for the newsletter.

Financial Accounting
News Letter

Name of the student
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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-use Assets (ROUA) of Not-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
considered as the lease that is significantly below as
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
Definition for the terms
material and business
have been clarified by
AASB through new
amended section as
follows –
1. AASB 2018-7 stated
that any information will
be regarded as material its
misstatement, omission or
obscuring influences the
decision of GPFS primary
users that is being taken
on the basis of the
financial statement that
include such information.
2. AASB 2018 – 6 stated
the term business as the
integrated set of the
activities and any asset
that can be conducted and
Financial reporting related news and development
Period covered: 1st December 2018 to 31st March 2019

managed for providing goods or services to the customers
to generate income.
Proposed amendments for
standard AASB 2019-X in
context of conceptual
framework
As per the proposed AASB
2019-X, the conceptual
framework will be
applicable only to for-profit
private entities those are
publicly accountable and are
required to comply with
AAS by the legislation and
the for-profit entities those
voluntarily choose the
application of conceptual
framework. Proposed
amendments are in context
of AAS, different
pronouncement and
interpretation of the AASB
to allow other entities to
continue with the existing
framework while they will
prepare the present their
financial statements.
Further, the proposed
standards will revise the
reference and quotation
regarding which version of
AASB 137 – Onerous contract
In accordance with AASB 137 the term onerous
contract is the contract for which the expected
economic benefit to be received is lower than the
unavoidable cost of fulfilling the contractual
obligation. Here, the unavoidable cost is the cost of
fulfilling the obligation or compensation or penalty
payable for not fulfilling the contractual obligation,
whichever is lower. In accordance with the
amendment costs directly attributable to fulfilment of
contractual obligation.
Update from IASB
Updates from IASB focussed on the preliminary
decisions. It discussed the topics associated with
IFRS in context of SMEs standards – update, review,
management commentary, primary financial reports,
and amendment to IFRS 17 on insurance contracts.
All 14 members presented in the meeting were
agreed to the decision. The meeting also decided
regarding the topics to be discussed in next meeting.

conceptual framework shall be used, if it requires using conceptual framework.
Answer 2
Financial statements are the written records that represent the business activities and
the financial performance of any organisation. It includes the balance sheet, 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
disclosing the impact of each transaction taken place during the concerned period
(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 –
Error Correction Reference
In statement of profit or
loss cost of sales has
been reported after
reporting advertising and
annual leave expenses
Cost of sales shall be reported under
revenue and deducted from revenues to
get the gross profit amount (Hodgson &
Russell, 2014).
AASB 101, Para 103
All the expenses are
reported randomly
Operating and selling and administrative
expenses shall be reported below the line
of gross profit and shall be deducted from
gross profit to get operating profit.
AASB 101, Para 99
and Para 103

Finance cost shall be reported below
operating profit and deducted to get
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).
Prepaid insurance
reported under the
statement of profit and
loss
Prepaid insurance shall be reported as
under current assets in the balance sheet
AASB 101, Para 78(b)
Assets are not classified As per AASB 101, the assets shall be
classified as current assets and non-
current assets
AASB 101, Para 55,
requirement of
headings sub-totals and
AASB 101, Para 62
Liabilities are not
classified
As per AASB 101, the liabilities shall be
classified as current liabilities and non-
current liabilities (Aasb.gov.au, 2019).
AASB 101, Para 55,
requirement of
headings sub-totals and
AASB 101, Para 62
Inventories and trade
receivables reported
together
Trade receivables and inventories shall be
reported separately with individual
amount
AASB 101, Para 55,
requirement of
headings sub-totals
Trade payables deducted
from trade receivables
Trade payables shall be reported under
the head of current liabilities
(Aasb.gov.au, 2019).
AASB 101, Para 55
Accumulated
depreciation recorded
Accumulated depreciation shall be
deducted from the property, plant and
AASB 101, Para 78(a)

under the head liabilities equipment reported under asset.
Deferred tax liabilities
and current tax reported
together
Deferred tax liabilities and current tax
shall be reported separately with
individual amount
AASB 101, Para 56
Changes for ownership
interests for the
subsidiaries are not
reported in the statement
of changes in equity
Changes for ownership interests for the
subsidiaries that will lead to loss of
control shall be reported under statement
of changes in equity (Aasb.gov.au,
2019).
AASB 101, Para
106(d)(iii)

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, from https://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). Retrieved 12 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-
04_COMPjun14_07-14.pdf

Aasb.gov.au. (2019). Retrieved 12 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Appendix
Restated financial statements