1 disclosure & reporting of company financial statements: statements of financial position &...
TRANSCRIPT
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Disclosure & Reporting of
Company Financial Statements:
Statements of Financial Position & Performance
Text : Leo & Hoggett Chap 5 & 6
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Objectives
Be able to prepare company financial statements in accordance with required accounting standards (AASBs)
Week 1- Statement of Financial Performance
- Statement of Financial Position Week 2 - Additional notes to financial
statements
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Application of Reporting Entity
This standard is a means of differential reporting
SAC1 reporting entities that reasonable to expect the existence of users dependent on general purpose reports
General Purpose Reports
where users cannot demand special purpose reports these must be prepared in accordance with AASB’s
We assume all companies reporting entities
AASB1025AASB1025
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Legislative Requirements Company Financial Statements
– as per Corporations law coy must prepare Profit & Loss Statement & Balance Sheet
AASB 1018 Statement of Financial Performance (interpreted as P & L)
AASB 1040 Statement of Financial Position (interpreted as Balance Sheet)
Cash Flow Statements - not covered in this unit
Plus– Notes to Financial Reports
– Directors Statement/Report
– Auditors Report
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Financial Statements
Financial Statements
Must be prepared in accordance with the AASB s provided a REPORTING ENTITY- AASB 1025
In the 2 weeks we will look at the major standards covering the requirements for preparation of Financial Reports
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Overriding Accounting Standards
AASB 1001 Accounting Policies AASB 1031 Materiality
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AASB 1001 Accounting Policies
Setting policy– Basic rules adopted when preparing reports
– Consider whether relevant and reliable
Changing policies– Entity required to report the changes made to policy from
previous years ie so comparable over the years
Disclosures of policies– Standard requires the entity to set down the rules used in
a NOTE to the accounts (refer text for example) Measurement adopted Specific policies Uncertainty re going concern
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MaterialityMaterialityThe concept of “TRUE & FAIR” does not
mean absolutely complete and accurate rather implies reasonably correct– ie some errors & omissions may occur
All accounting information is assessed against the concept of materiality
An item is material when its omission , mis-statement or non-disclosure in a financial report could jeopardise the quality of decision making and evaluations based on the report.
AASB1031AASB1031
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MaterialityMateriality
Para 4.1.6 Guidelines– if 10% or more of the base material
– if 5% or less of the base immaterial
– between 5% and 10% - own judgement
Base (select largest % impact)– balance sheet either total equity or the relevant
balance sheet class
– profit and loss- the operating profit or appropriate revenue/expense
AASB1031AASB1031
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The Trilogy
3 main standards of presentation
AASB 1018 Statement of Financial Performance
AASB 1034 Financial Report Presentation & Disclosure
AASB 1040 Statement of Financial Position
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AASB 1034 Financial Report Presentation & Disclosure
Sets out the General Requirements para 4
–Must be in English
–Must be in Australian Currency
–Must provide comparative figures
–Must display _Name of reporting entityreporting date or period covered
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Statement of Financial Performance
No format specified however appendix 1 to the standard gives an example
Starting Point- Profit and Loss Statement use this to prepare the Statement of Financial Performance
AASB1018AASB1018
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Bulldog Ltd
Profit & Loss Statement
for the year ended 30 June 2003
Revenues
Sales 1 540 000
Other 280 000 1 820 000
Expenses
Selling Expenses 1 265 300
cost of Sales etc
Administration Expenses 280 000
details
Financial Expenses
details 35 900 1 581 200
Net Profit 238 800
Tax Expense 71 640
Net Profit after tax $167 160
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Bulldog Ltd
Statement of Financial Performance
for the financial year ended 30 June 2003
Revenue from ordinary activities 1 820 000
Expenses from ordinary activities (1 579 700)
Borrowing Costs (1 500)
Profit from Ordinary act before tax 238 800
Income tax expenses from ord act. (71 640)
Profit from ord act after tax 167 160
Profit or Loss on extraordinary items - after tax -
Net Profit or Loss 167 160
Increase in asset revaluation reserve 60 000
Total changes in equity other than those resulting
from transactions with owners $227 160
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Statement of Financial Performance
Extraordinary Items– Must be disclosed
Must meet 2 tests to be considered extraordinary:-
Outside normal operations
& non-recurring in nature
extremely rare
e.g. Earthquake or other natural disaster - however if region subject to such disasters then not extraordinary
AASB1018AASB1018
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Statement of Financial Position
Starting point the Balance Sheet No prescribed format however para 4.1 & 4.2
asstes & liabilities must be classified as either – Current /Non-current or
– Liquidity if more appropriate
Basic Formats refer appendix to standard Use Current/Non-current classification for
this unit
AASB1040AASB1040
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Bulldog Ltd
Balance Sheet as at 30 June 2003
Current Assets Current Liabilities Cash 64 000 Accounts Payable 60 000
Accounts Rec . 218 000 Interest Payable 9 300
Allow. for D Debts 10 900 207 100 Tax Payable 79 640
Inventory 250 000 Provision for Dividend 120 000
Prepaid Insurance 6 000
Non-Current Assets Non-Current Liabilities Land - at cost 100 000 Loan Payable 12 000
Motor Vehicles 300 000
Acc Depn (180 000) 120 000 Equity Store Equip 585 000 Capital 887 000
Acc Depn (65 000) 520 000 Reserves
Goodwill 140 000 ARR 160 000
Amortisation (7 000) 133 000 General Reserve 75 000
Research & Dev 100 000 Retained profits 87 160
Amortisation (10 000) 90 000
$1 490 100 $ 1490 100
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Bulldog Ltd
Statement of Financial Position
as at 30 June 2003
Current Assets 527 100
Cash assets 64 000
Receivables 207 100
Inventories 250 000
Other 6 000
Non-Current assets 963 000
Property, plant & equipment 740 000
Intangible assets 133 000
Other 90 000
Total Assets $1 490 100
Current Liabilities 268 940
Payables 69 300
Current tax liabilities 79 640
Provisions 120 000
Non- current liabilities 12 000
Interest-bearing liabilities 12 000
Total Liabilities $280 940
Equity
Contributed 887 000
Reserves 235 000
Retained Profits 87 160 $1 209 160
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Other Requirements- AASB 1018
Revision of accounting Estimates– eg doubtful debts / depreciation
– effect to be recognised in reporting period
Errors correct in period discovered or can amend & re-issue
accounts
Fundamental errors(so signiicant material effect on accounts)
re-issue accounts however if too costly then alternative
– disclosure this year (refer appendix 4 AASB1018) nature of error separate line item & tax effect note to accounts
@*# JOHNSON
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Tutorial Questions
Question 1 - Exercise 6.1Amend the Selling & Administration Exps to $60 000)
Question 2 - Exercise 6.4
Question 3 - Exercise 6.5@/*# JOHNSON