ACC222 Study Guide - Final Guide: Interest Expense, Accounts Receivable, Underwriting
Topic 1 – Accounting regulation and the conceptual framework
AASB 1053 Application of Tiers of Australian Accounting Standards establishes a differential
reporting framework consisting of two tiers of reporting requirements for preparing general
purpose financial statements: (a) Tier 1: Australian Accounting Standards; and (b) Tier 2:
Australian Accounting Standards – Reduced Disclosure Requirements. Private sector for-
profit entities complying with Tier 1 requirements will simultaneously comply with IFRSs.
Many other entities complying with Tier 1 will also simultaneously comply with IFRSs.
>Identify the key sources of financial reporting regulation in Australia and explain the
roles played by the various regulatory bodies;
>The Corporations Act;(disclosures by disclosing entites, public and large proprietry
companies, registered schemes)
• Australian Accounting Standards; AASB 101 Presentation of Financial Statements; • AASB
107 Statement of Cash Flows; • AASB 108 Accounting Policies; • AASB 1048 Interpretation &
Application of Standards.
• The Conceptual Framework; scope and objectives of financial reporting, • qualitative
characteristics that financial information should possess, • elements of financial reporting.
• ASX Listing Rules. The Listing Rules include requirements for continuous disclosure and
periodic reporting.
>Explain the key components of the Conceptual Framework;
Conceptual frameworks prescribe the nature, function and limits of financial accounting and
reporting. ▸ Central goal in establishing a conceptual framework is general consensus on: •
scope and objectives of financial reporting, • qualitative characteristics that financial
information should possess, • elements of financial reporting.
> increased comparability of financial statements(internationally)
>should result in the boards being more responsible
The Australian conceptual framework comprises:
• The Framework for the Preparation & Presentation of Financial Statements
• SAC 1 Definition of the Reporting Entity
>Explain the qualitative characteristics of useful financial information, and key elements
of financial statements; and
>Fundamental qualitative characteristics: • Relevance; • Faithful representation.
>Enhancing qualitative characteristics: • Comparability; • Verifiability; • Timeliness; •
Understandability.
>Interpret and apply the principles for recognising and measuring the elements of
financial statements.
Asset
Liability
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Equity
Income(Revenue)
Expense
>Asset recognition: Probability of future economic benefits and reliable measurement
required. A company my fail the probability aspect. You can talk about intanglible assets if it
does not specifically mention to talk about asset recognition.
▸ Liability recognition: Probability of an outflow and reliable measurement required.
▸ Income recognition: Probability of increase in future economic benefits and reliable
measurement required.
▸ Expense recognition: Probability of decrease in future economic benefits and reliable
measurement required.
A number of measurement bases may be used: • Historical cost. • Current cost. •
Realisable or settlement value. • Present value.
General recognition creteria. Inflow or outflow? Reliability of the measurement of the item
Topic 2 - AASB 101 – Presentation of financial statements
Topic 3 Accounting policies and other financial statement disclosures
Explain the disclosures required by AASB 101 and AASB 1054 in the notes to
financial statements;
AASB101 =
AASB1054 =
- An entity shall disclose in the notes: (a) the statutory basis or other reporting
framework, if any, under which the financial statements are prepared; and (b) whether,
for the purposes of preparing the financial statements, it is a for-profit or not-for-profit
entity.
- An entity shall disclose in the notes whether the financial statements are general
purpose financial statements or special purpose financial statements.
-An entity shall disclose the amount of imputation credits available for use in subsequent
reporting periods.
-An entity shall disclose fees to each auditor or reviewer, including any network firm,
separately for: (a) the audit or review of the financial statements; and (b) all other
services performed during the reporting period.
Interpret and apply the requirements of AASB 108 regarding the selection of
accounting policies, changes in accounting estimates and errors; and
S101.117 – an entity shall disclose in the summary of significant accounting policies a)
the measurement basis(or bases) used in preparing the financial statements, b) the
other accounting policies used that are relevant to an understanding of the financial
statements
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Interpret and apply the requirements of AASB 110 regarding events after the
reporting period
Events that occur between the end of the reporting period and and the date when the
financial statements are authorised for issue. Two types of events: adjusting(conditions
that existed at the end of the reporting period) and non-adjusting(conditions that arose
after the reporting period).
If non-adjusting events after the reporting period are material, non-disclosure could
influence the economic decisions that users make on the basis of the financial
statements. Accordingly, an entity Federal Register of Legislative Instruments disclose
the following for each material category of non-adjusting event after the reporting
period: (a) the nature of the event; and (b) an estimate of its financial effect, or a
statement that such an estimate cannot be made.
AASB116 – PPE – topic 5(revaluation)
A revaluation of an asset can be made upwards(increase) or downwards(decrease).
Asset must be measured at its cost(purchase price, costs attributable to its relocation, costs
of dismantling, taxes, import duties, delivery installation, professional fees).
Cost Model item carried at its cost less accumulated depreciation and any accumulated
impairment loss
Revaluation Model fair value (at date of revaluation) less acc depreciation and acc
impairment loss
Separated into classes of assets.
Increases/decreases
>If an assets carrying amount is increased as a result of revaluation the increase shall be
recognised in OCI and accumulated in equity under revaluation surplus.
Dr accc dep
Cr asset
Dr asset
Cr gain on revaluation
HOWEVER, if there was a previous revaluation decrease , the increase must be recognised in
profit and loss (regarding the same asset)
Dr acc dep
Cr asset
Dr asset
Cr gain on revaluation (P&L)
> is the carrying amount decreases, the decrease shall be recognised in P&L,
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Document Summary
Topic 1 accounting regulation and the conceptual framework. Aasb 1053 application of tiers of australian accounting standards establishes a differential reporting framework consisting of two tiers of reporting requirements for preparing general purpose financial statements: (a) tier 1: australian accounting standards; and (b) tier 2: Private sector for- profit entities complying with tier 1 requirements will simultaneously comply with ifrss. Many other entities complying with tier 1 will also simultaneously comply with ifrss. >identify the key sources of financial reporting regulation in australia and explain the roles played by the various regulatory bodies; >the corporations act;(disclosures by disclosing entites, public and large proprietry companies, registered schemes: australian accounting standards; aasb 101 presentation of financial statements; aasb. 107 statement of cash flows; aasb 108 accounting policies; aasb 1048 interpretation & Application of standards: the conceptual framework; scope and objectives of financial reporting, qualitative characteristics that financial information should possess, elements of financial reporting, asx listing rules.
