Accounting Newsletter Report: AASB Standards and Financial Reporting

This financial accounting report provides an overview of changes in accounting standards by the AASB (Australian Accounting Standards Board) from December 2017 to March 2018, including updates related to IFRS standards, non-IFRS information presentation, and the presentation of EBITDA. The report also addresses the depiction of unusual items, disclosure of accounting policies, and reduced disclosure requirements for second-tier companies. Furthermore, it analyzes the presentation and preparation of financial reports under AASB 101, offering guidelines for entities. The report identifies accounting errors in a case study of Blake Ltd, such as incorrect classification of assets and liabilities, and provides recommendations for accurate financial reporting, including proper recording of depreciation, dividends, and finance costs. References to relevant academic literature support the analysis.

Running Head: NEWSLETTER AND FINANCIAL ACCOUNTING
Newsletter and Financial Accounting
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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
Location of information
to company with IFRS
Standard (2-10-2017)
The AASB has received
feedback that financial
statements and annual
reports are becoming
more difficult to analyse
and understand because
of duplication and
fragmentation of
information
(Aasb.gov.au, 2018). The
board in its preliminary
view stated that the
general disclosure
standard must take into
the account the
necessary information in
agreement with the
IFRS Standard to
provide information in
an entity’s annual
report. The AASB in its
preliminary view stated
that an entity annual
report must describe
single reporting package
including the standards
of ISA (720).
Providing information
recognized as non-ifrs in
financial statements (2-
10-2017)
The AASB preliminary
view is that the general
standards for disclosure
must include principles
where an entity can
provide required
information to comply
with the IFRS standard
outside the financial
statement if the
information is provided in
the entity’s annual report
with the financial
statements remaining
understandable and the
information is presented
faithfully. The
preliminary view of board
also includes that general
disclosure standard must
not prohibit any
organization from
including information in
financial report as Non-
IFRS information
(Aasb.gov.au, 2018).
PRESENTATION OF
EBIT AND ebitda (2-10-
2017)
The preliminary view of
the AASB is that
presenting the EBITDA
as the subtotal in the
statement of financial
performance can help
providing a fair
representation of given
the companies present the
analysis of the
expenditure based on
their nature (Aasb.gov.au,
2018). The board views
that presenting the
EBITDA upon the
analysis of the expenses
based on their functions
would cause mixture in
the nature of expenses
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NEWSLETTER AND FINANCIAL ACCOUNTING
and functions of expense
which would result in
disruption in analysis of
expenses.
Depiction of unusual or
infrequent occurring
items in the statement of
financial performance
(2-10-2017)
The AASB has stated that
an entity is required to
separately present the
material event or
transaction that is
occurring infrequently or
unusually (Aasb.gov.au,
2018). An unusual or
infrequent transaction or
occurring event should be
presented separately in
the appropriate section.
The description of each of
event and transaction
should be disclosed in the
statement of
comprehensive income or
in the notes section of
financial report.
Disclosure of accounting
policies (2-10-2017)
The preliminary view of
the board is that an entity
is required to disclose the
accounting policies which
is important in
understanding of financial
statements in categories 1
and 2. If the company
decides to disclose
category 3 accounting
policies it can consider
separating those
disclosure from the
significant accounting
policies. This will help
users in identifying the
accounting policies by
disclosing the category 3
accounting policies
outside the financial
report and cross
referencing their location.
AASb reduced disclosure
requirements (21-12-
2017)
AASB has released the
reduced disclosure
requirements relating to
the second tier companies
that are reporting
accounting for lease
under AASB 16.
Compare to Tier-1 the
disclosure in Tier-2
would help in reducing
the increasing burden of
disclosure together with
the cost of preparing and
auditing General purpose
financial reporting for
numerous companies
notwithstanding whether
they are profit and non-
profit organizations.
Framework for financial
reporting for charaties
(14-2-2018)
A research paper has been
released by AASB
relating to current
reporting requirement of
charities. The objective is
to provide charities with
the framework for
improving the financial
reporting requirements.
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NEWSLETTER AND FINANCIAL ACCOUNTING
Answer to question 2:
A guideline has been set down for the entities regarding the presentation and
preparation of the financial report under the “AASB 101”. The guidelines set down by the
AASB 101 aims to make sure that the general purpose financial statements are comparable
with the present and past year for an entity (Vanza et al., 2018). According to the “Australian
Accounting Standard Board 101” the presentation and preparation of financial reporting is
effectively laid down under the standard together with the necessary rules that governs the
structure and presentation of financial content in the report (Peach & West, 2017).
As evident from gauging into the financial reporting of Blake Ltd it is understood that
the accountant has followed the format for single line reporting for the preparation and
presentation of the financial records (Perera & Chand, 2015). The accountant of Blake Ltd did
not classified the transactions under the heads of current and non-current assets. On the other
hand, the classification of the liabilities is requires to be segregated into current and non-
current liabilities.
The accountant of Blake Ltd has even failed to recognize the cash and cash equivalent
at the end of the year in respect of appropriate standards defined under AASB 101
(Schaltegger & Burritt, 2017). There are accounting transactions such as raw materials, work in
process raw materials, work in process under the inventory into the current assets sections.
The reason behind this is that the transactions are regarded as the part of input goods that is
required in production process (Macve, 2015). There are other transactions such as the
accounts payable and provision for warranty, allowance for doubtful debts and provision for
annual leave should be categorized under the heads of liabilities. Classifying these business
transactions under the heads of liabilities will help Blake Ltd in gaining a better
understanding. As these business transactions are regarded as liabilities for Blake Ltd but
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NEWSLETTER AND FINANCIAL ACCOUNTING
they carry the principles of matching concepts which is completely ignored by the accountant
(Cañibano, 2017).
There is an incorrect recording of the accumulated depreciation relating to property
plant and equipment under the heads of liabilities. The accountant of Blake Ltd rather than
recording the accumulated depreciation under the liabilities the same should be recorded in
balance sheet in asset side (Cheng et al., 2014). The accountant of Blake Ltd should understand
that the accumulated depreciation is regarded as constant credit balance and the same has the
effect of contra asset account. The accountant has wrongly credit the depreciation in profit
and loss account, therefore in the balance sheet it should be deducted from the property plant
and equipment following the end of accounting period to reflect a true and fair view of the
fixed assets (Hodder et al., 2014).
There is an incorrect recording of dividend paid in the income statement. It should be
noted that divided is not a business income and the same is required to be incorporated in
statement of stakeholders equity (McNeil et al., 2015). The finance cost represents expense and
the accountant is required to consider before deriving the “profit before tax”. It is necessary
for the accountant to follow the guidelines set under paragraph 85 of AASB 101 for better
disclosure of financial statement.
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REFERENCES:
Cañibano, L. (2017). Accounting and intangibles.
Cheng, M., Green, W., Conradie, P., Konishi, N., & Romi, A. (2014). The international integrated
reporting framework: key issues and future research opportunities. Journal of International
Financial Management & Accounting, 25(1), 90-119.
Hodder, L., Hopkins, P., & Schipper, K. (2014). Fair value measurement in financial
reporting. Foundations and Trends® in Accounting, 8(3-4), 143-270.
Macve, R. (2015). A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool,
Or Threat?. Routledge.
McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: Concepts, techniques
and tools. Princeton university press.
News. (2017). Aasb.gov.au. Retrieved 30 March 2018, from http://www.aasb.gov.au/News.aspx
Peach, K., & West, C. S. (2017). Invitation to comment on ED 277 Disclosure Requirements for Tier
2 Entities.
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.
Vanza, S., Wells, P., & Wright, A. (2018). Do asset impairments and the associated disclosures
resolve uncertainty about future returns and reduce information asymmetry?. Journal of
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Contemporary Accounting & Economics, 14(1), 22-40.
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