Financial Accounting Newsletter: Financial Reporting Updates for ASX

This financial accounting newsletter provides a comprehensive overview of recent developments in financial reporting from April 1, 2019, to July 31, 2019. It covers amendments to Australian Accounting Standards (AAS) regarding disclosures for special purpose financial statements, changes to AASB 112 on deferred tax, and the definition of not-for-profit companies. The newsletter also addresses amendments to IFRS 17 implementation, the conceptual framework for financial reporting, and includes a memorandum offering advice on preparing an income statement. The document also includes a comparison of expense reporting by function versus nature, along with relevant bibliography and links to further information. The newsletter format is designed to keep staff informed of changes that may impact their work and provides directions to staff on where they can access further information.

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Financial Accounting
News Letter

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Financial accounting
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NEWS LETTER
Amendment to the AAS – disclosures
for special purpose financial statement
to comply with requirement related to
recognition and measurement (4th July
2019)
ED 293 proposed that the entities are
required to lodge the SPFS with the ASIC
whereas the not-for-profit entities are
required to lodge the same with Australian
Charities and non-for-profits commission.
It is required for verifying whether the
accounting policies used in the SPFS are
conformed with AAS recognition and
measurement criteria. The entities shall
also furnish the information regarding
whether the companies have any
investments in joint venture or any
subsidiary and the approaches used for
accounting for the interests.
Amendments to AASB 112 – Deferred
tax assets and liabilities arising from
single transactions (25th July 2019)
As per the proposed amendments by IASB
companies shall recognise deferred tax on
initial recognition for any transaction to
the extent of the transaction to which it
generates equal amounts of deferred tax
assets as well as liabilities. The said
amendments will be also be applicable for
the transaction for which assets and
liabilities both are recognized such as lease
obligation and decommissioning.
Definition of non-for-profit companies
and related guidance (11th June 2019)
It has been proposed to change the existing
definition for not-for-profit organisation
with the substantive definition. Newly
proposed definition has 2 independent
parts – (i) main aim is delivering goods
and services for social benefit or for
community (ii) provision of equity is to
support the aim and not just providing
return to equity shareholders.
Updates summary regarding latest financial reporting
news
Period covered: 1st April 2019 to 31st July 2019:

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Amendments for IFRS 17
implementation by IASB (26th June
2019)
IASB proposed amendments to the IFRS
17 regarding standards on insurance
contracts for public consultation. Main
objective of this proposed amendment is to
provide continuous support in
implementation by reducing the cost of
implementing the standards and making
the implementation process easier. Further,
it is expected that the proposed
amendments will ease the concerns as well
as challenges raised from the
implementation of standards.
Conceptual framework for financial
reporting
For the for-profit organisations under
private sector those are accountable
publicly, as per the requirement of
legislation shall comply with the AAS. As
per the new conceptual framework
meaning of IASB to reporting
organisations those differ in terms of
reporting entity’s concept as per
Australia’s current pronouncements. It
further replaced the definition along with
the recognition criteria for the assets and
liabilities in addition to a new chapter on
measurement. It is important that the new
conceptual framework shall be in place so
that the companies those follow and
prepare financial statement in accordance
with IFRS may keep on doing so.

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Bibliography
Aasb.gov.au. (2019). News . Retrieved 31 July 2019, from
https://www.aasb.gov.au/News/Conceptual-Framework-for-Financial-Reporting?
newsID=325498
Aasb.gov.au. (2019). News . Retrieved 31 July 2019, 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
Asic.gov.au. (2019). ASIC Home | ASIC - Australian Securities and Investments
Commission . Retrieved 9 August 2019, from https://asic.gov.au/
Iasplus.com. (2019). International Accounting Standards Board (IASB). Retrieved 31 July
2019, from https://www.iasplus.com/en/resources/ifrsf/iasb-ifrs-ic/iasb
Ifrs.org. (2019). IFRS . Retrieved 31 July 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: Emily Johnson, Account manager
Subject: Advise for preparing income statement
Date: 8th August 2019
It can be stated that in accordance with AASB 101, the expenses reported under the statement
of profit and loss can be reported in 2 ways – (i) expenses can be reported by their function
(ii) expenses can be reported by their nature. Where the expenses are reported as per the
function they are segregates as operating expenses, selling expenses and administrative
expenses. On the other hand, whereas the expenses are reported as per their nature the
expenses are directly reported for which they are spent like salary expenses, rent,
transportation cost, depreciation and material costs. However, it can be stated that where the
expenses are reported by its nature generated profit that is to be reported to the shareholders
will be lower as compared to where expenses are reported by function. For example,
reportable profit to the shareholders of Snow Gear Ltd for the period ended 30th June 2019
under expenses reported by function is will be $868,500 and under expenses reported by
nature is will be $ 571,500. Hence, the expenses shall be presented by its function as it shows
higher income. Further this is required to comply with the requirement of AASB 101 that
requires presenting the income statement in multi-step format and presenting the expenses by
their function.
In case of any query please do not hesitate to contact us through our official e-mail address.
Sincerely,
Emily Johnson, Account manager

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Answer (ii)
Single step format
Normal view
Formula view
As per AASB 101
Normal view

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Formula view
Answer (iii)

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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.