ACC222 Financial Reporting Newsletter on Recent Changes and Updates

This report is a financial reporting newsletter prepared for staff in a large accounting firm specializing in preparing financial reports for companies listed on the Australian Securities Exchange (ASX). The newsletter focuses on recent changes and developments in the financial reporting environment, with a specific emphasis on the new accounting standard AASB-7, Financial Instrument Disclosure, which came into operation on January 14, 2019. The newsletter details the requirements of the new standard, including disclosure of financial information, amendments, and updates. It also covers the regulation and monitoring of financial reporting by ASIC, provides information sources for staff, and discusses potential developments in qualitative and quantitative disclosures. The newsletter aims to keep staff informed about changes that may impact their work, and provides directions to access further information. The document also references key resources such as ASIC and AASB websites and provides a bibliography of relevant sources. The newsletter is intended to aid staff in understanding the nature of the changes and their potential impact.

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NEWSLETTER
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CHANGES IN FINANCIAL REPORTING
Issue of new Accounting Standard: Financial
Instrument Disclosure
This new standard of accounting will come into
operation from 14th January, 2019. Under the
section 334 of the Corporations Act, 2001, this
accounting standard AASB-7 has to be followed
with a specific objective foe better financial
performance of the firm and the reporting of the
financial and operational risks faced by the firm
in the external business environment.
Requirements of new accounting standard
This new accounting standard adoption will be
required to disclose the financial information to
the stakeholder in a systematic arrangement with
collaboration of AASB 119 ‘Employee Benefit’,
AASB 4 ‘Insurance Contracts’ and AASB
9’Share –based payment’.
Amendments to AASB-7
1. Early reporting on the financial gains
and losses on assets and liabilities which
are designated at a fair value.
2. The amendment should be in the annual
reporting period beginning after 2016
financial year for AASB 2015-1
(Amendment to Accounting Standard in
respect of annual improvements)
3. AASB 2015-2 ( Amendments made in
the disclosure of information)
Updates on AASB-7
The classes of financial instruments for
disclosure will follow the distinguishing features
in financial instruments at the amortised cost.
There will be separate classes to treat this
differentiated category. As per the paragraph 6,
the entity is bound to not disclose any
information without any proper aggregation and
difference between individual risks and
transactions. As per paragraph 21, the
accounting policies of the firm should follow the
disclosure of the financial statement through
account of net gains and losses. There should be
quantitative disclosures about the risks faced by
the firm with the concentration of risk as per the
geographic region, the amount, market
concentration. As per paragraph 40a, the
sensitivity analysis will portray the effect on net
profit or loss as per the changes in the risk
variables like interest rates currently prevailing
in market. Paragraph 41 states that there should
be disclosure of the values of risks as per their

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interdependencies among the variables. This
value model should rely on the Monte Carlo
simulation technique. The entity is required to
disclose the previous analysis of observation
period, the current volatilities of risk with
correlation among the variables.
Regulation of Financial Reporting
For record –keeping obligations there will be
destruction of books, licensing, company
addresses with mails published. For the annual
report reporting, there will be disclosing of
entity of provisional reliefs, audit relief, parent
entity financial statements, report on the security
dealers. There should be also half-yearly
financial reports with the disclosure of the entity
provisions relief. There must be a concise
financial report for the top management
discussion. There should be a director’s report
for the new procedures and the financial
reporting overall of the business
Monitoring of Financial Reporting
For monitoring as per the ASIC reviews, under
RG 260- the innings of the financial report
should be communicated from audit files
preparation to the directors and the managers.
As per REP 533, the financial report
submissions on CP 265, the audit must be
communicated to the audit committees, senior
managers and the directors for final
implementation of decisions.
Information sources for staff
The staff are required to visit the sources for
more information:
https://asic.gov.au/regulatory-resources/
regulatory-index/financial-reporting/
https://www.aasb.gov.au/Pronouncements/
Current-standards.aspx
The above website links will guide the staff
towards the accounting standard and the ASIC
policies and reviews.
Potential developments
There will be two kinds of disclosures for
reporting risks by the entity:
Qualitative disclosures – The entity is required
to disclose the time of occurrence as well the
exposure limit of risk. The objectives along with
policies made to mitigate that risk and measure
it’s outcomes with changes in previous period.
Quantitative disclosures- The entity is required
to disclose the summarized data with numerical
analysis of risks rising at the end of annual
reporting period. As per AASB 124 Related
Party Disclosure, the risk information should be
presented internally to the shareholders and
directors of the entity. The information should
be representative with concentration of risk.
In order to meet the required objectives in
paragraph 35B, an entity should consider on
how much amount of details to disclose
along with much emphasis to put on various

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aspects of the disclosure primary
requirements, the amount of aggregation
with disaggregation needed. The
requirement for financial statement users in
order to evaluate the quantitative
information if needed, should be disclosed
too. The paragraph 40a and 40b require the
entity to make sensitivity analysis in order to
measure each form of market risk with
which the entity gets directly exposed to
right from the areas of hyper-inflation to low
inflation.

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Bibliography
ASIC annual reports | ASIC - Australian Securities and Investments Commission. (2020).
Retrieved from Asic.gov.au website: https://asic.gov.au/about-asic/corporate-
publications/asic-annual-reports/
Compiled AASB Standard AASB 7 Financial Instruments: Disclosures. (n.d.). Retrieved from
https://www.aasb.gov.au/admin/file/content105/c9/AASB7_08-15_COMPdec17_01-
19.pdf
Khlif, H., & Hussainey, K. (2016). The association between risk disclosure and firm
characteristics: a meta-analysis. Journal of Risk Research, 19(2), 181-211.
Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting
regulation: Evidence and suggestions for future research. Journal of accounting research,
54(2), 525-622.
Minnis, M., & Shroff, N. (2017). Why regulate private firm disclosure and auditing? Accounting
and Business Research, 47(5), 473-502.
Thai, K. H. P., & Birt, J. (2019). Do risk disclosures relating to the use of financial instruments
matter? Evidence from the Australian metals and mining sector. The International Journal
of Accounting, 1950017.

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