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FinReporting08ReportsUpdated.pptxChapter 8
Report Presentation
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Overview
AASB 101 sets the basic requirements for the presentation of general-purpose financial reports.
Financial reports comprise:
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Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes
Notes to the Financial Statements
Notes to the Financial Statements would usually be arranged in the following order:
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Summary of significant accounting policies
Supporting notes for items in the financial statement. Each item should be cross-referenced.
Other disclosures not appearing in the financial statement such as:
Contingent liabilities
Contractual commitments
Other AASB Standards Requiring Specific Disclosures
Other standards also require specific disclosures to be made in the financial reports including:
AASB 108
AASB 110
AASB 118
AASB 114
AASB 124
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8.1
Accounting Policies
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Accounting Policies
Accounting policies are the specific principles, bases, conventions, rules and practices applied by a company in preparing and presenting financial reports.
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Accounting Policies Continued
If accounting standards are not specifically applicable, or a choice is available, management can use their own judgment to adopt accounting policies.
Guidelines for exercising this judgement are contained in AASB 108.
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AASB 108 Guidelines
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Factors to be considered
Meeting user needs
Reliability of resulting financial statements
Applicability of the International Equivalent AASB Standards Framework
Applicability of Australian Accounting Standards
Accepted industry practice
Accounting literature
Other standard setting institutions’ framework
8.2
Comparative Information
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Comparative Information
AASB 101 requires comparative amounts for the previous period be given in the financial reports including:
the balance sheet,
income statement,
statement of changes in equity,
statement of cash flows and
the notes thereto.
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Comparative Information Continued
Specific instances where comparatives might be changed include:
Change to accounting policies (AASB 101 & 108)
Changes to accounting estimates affecting assets, liabilities or equity in prior periods (AASB 108 & 110).
Corrections of errors in prior periods (AASB 108 & 110)
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8.3
Statement of Comprehensive Income
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Statement of Comprehensive Income
An entity is required to prepare either one complete Statement of Comprehensive Income or two separate statements:
‘traditional’ Income Statement and a short-form Statement of Comprehensive Income.
The Statement of Comprehensive Income includes income and expense items in equity.
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Statement of Comprehensive Income
Additional line items, headings and subtotals may be added if it would assist in understanding the financial performance of the company.
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Suggested Comprehensive Income Statement Format
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Suggested Statement of Comprehensive Income Format Continued
Disclosure Requirements Summary
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Disclosure Requirements Summary
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Description of Requirements: Revenues AASB118
The amount of each significant category of revenue recognised during the period.
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Disclosures required include:
Sale of goods
Rendering of services
Interest
Royalties
Dividends
Description of Requirements: Expense Analysis AASB101
Under AASB 101 presentation of expenses may be:
By their nature (such as occupancy costs and employee benefits
By their function depending on what is more reliable and relevant.
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Example of Expense Analysis Disclosure by Function
Description of Requirements: Material Items AASB101
Requires separate disclosure of the nature and amount of material income and expense items.
“Material” is defined as items that could individually or collectively influence the economic decisions of users of the financial report.
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Examples of Material Items
Material write-downs of inventory or property, plant and equipment.
Material disposals of property, plant and equipment or investments.
Legal settlements.
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Description of Requirements: Income Taxes AASB112
Requires disclosure of how the taxation calculation was affected by permanent differences.
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8.4
Statement
of
Changes in Equity
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AASB 101 Statement of Changes in Equity.
This statement shows all changes in equity arising from transactions with owners in their capacity as owners.
Must show:
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Statement of changes in equity must show:
Total comprehensive income
The effect of revised accounting standards for components of equity
Amounts of transactions with owners
Reconciliation between the opening and closing balances of components of equity
Suggested Format
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8.5
Statement of Financial Position
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Statement of Financial Position
AASB 101 contains specific requirements:
Assets and Liabilities are to be classified as
current or
non-current
- except when a presentation based on liquidity is more reliable and relevant.
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Current / Non-Current Presentation
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Liquidity Presentation
If the liquidity method is used, these classifications would be shown:
Assets and liabilities are to be classified within these classifications in the order of liquidity.
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Definitions
Current asset. The definition is based on intention to use.
Expected to be consumed during an operating cycle, or
Held primarily to be traded, or
Expected to be realised within twelve months from the reporting date, or
Cash or cash equivalent
Non-current asset. All non-current assets, including deferred tax assets.
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Definitions
Current liabilities
Expected to be settled during an operating cycle, or
Held primarily to be traded, or
Expected to be settled within twelve months from the reporting date, or
There is no unconditional right to defer settlement beyond twelve months.
Non-current liabilities
All liabilities not current liabilities, including deferred tax liabilities (always non-current).
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Operating Cycle assuming credit sales and credit purchases
Operating cycle is the time between the acquisition of inventory and its realisation in cash or cash equivalents (sales receipts).
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Inventory
Sales
Accounts Receivable
Cash
Accounts Payable
Operating Cycle Continued
If a company’s operating cycle is longer than twelve months, assets expected to realise after twelve months from the reporting date can be classified as current.
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Liquidity or Current / Non-Current Choice
Separate classification of current and non-current assets is required in all cases where companies work within an operating cycle.
The liquidity option is more relevant to those companies without a definable operating cycle.
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Reporting and Disclosure of Assets
Cash and cash equivalents
Trade and other receivables
Investments in associates
Available-for-sale investments
Other financial assets
Inventories
Property plant and equipment
Investment property
Goodwill
Other intangible assets
Biological assets
Deferred tax assets
Items required to be listed as assets are:
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Reporting and Disclosure of Liabilities
Items required for liabilities are:
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Reporting and Disclosure of Equity
Line items required for equity are:
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8.6
Other Disclosure Requirements
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Operating Segments: AASB 8
Report separate information for each operating segment:
Segment revenue
Segment expenses
Segment proit or loss
Segment assets
Segment liabilities
A reconciliation of segment profit, assets and liabilities to corresponding whole-entity amounts
A reportable segment is a component of business whose results are independently reviewed by the entity’s management.
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Related Party Disclosures: AASB 124
Disclosures required include:
The parent of the company and, if applicable, the ultimate parent.
Key management personnel compensation in benefits and shares
The names of:
• Key management personnel during the reporting period.
• Directors required to prepare the financial report (specified directors).
Details of transactions with existing and former related parties
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Suggested Related Party Compensation Note
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Suggested Related Party Compensation Note
Commitments
The disclosure must include details of amounts payable:
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Within 12 months
Between 12 months and 5 years
Later than 5 years
Contingent Liabilities
Contingencies are potential assets or liabilities not recognised in the balance sheet. Such as:
A loan guarantee that will only result in a liability if a default occurs.
A law suit is pending resolution and the settlement cannot be estimated.
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Contingent Liabilities
Disclosure requires a description of its nature and where possible, an estimate of the financial effect and its timing. Such as:
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Non-Current Assets Held For Sale and Discontinued Operations : AASB 5
AASB 5 requires that discontinued operations and other assets held for sale be presented separately. Disposal group liabilities must also be presented separately.
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In Addition
The following must be disclosed for discontinued operations:
A single amount on the face of the Income Statement comprising the post tax profit or loss of the discontinued operation
The post tax gain or loss on restatement to fair value of the discontinued operation less costs to sell
An analysis of the single amount in ( 1 ) and (2 ) above into:
Revenue, expenses and pre tax profit
Related income tax expense
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Definitions
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Held for Sale
If the carrying value of a non-current asset will be recovered through a sale transaction rather than through its continued use it is classified as a “held for sale” asset.
Discontinued Operations
A separate component of a company’s business that has either been sold or is classified as held for sale.
