Preparing General Purpose Financial Reports for ASX Listed Companies
Changes Stated in the Accounting Standards for accounting and reporting of Australian Companies
Period 1st December to 31st March 2018:
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New Accounting Standard
The AASB bought forward three new changes in the standard of accounting with an improved one principle standard (Aasb.gov.au 2018). AASB 2017-5: The operative date for the changes made by AASB 2014-10 is submitted to year on year period which is commencing from 1st January 2022 with numerous editorial amendments. AASB 2017-6: A well scope for changes to the AASB 9 fiscal instrument offers authorization to profit making corporations in assessing the charge of amortization of fair worth through comprehensive financial assets. AASB 2017-7: The amendments made in accounting standard states that a profit making entity having a long run attention in associates and joint venture needs an organization to account for the interest in the joint venture and in associates by employing the AASB 9 monetary tool before assigning any loss and impairment requirements.
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Making Materiality Judgement:
The Australian Accounting Standard Board has issued a statement that is concerned with making judgements relating to materiality. The executives and directors are accountable for preparing the financial statements to make continuous decisions relating to materiality (Aasb.gov.au 2018). A statements has been published by AASB to make materiality judgements which offers guidance to the auditors and regulators.
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The AASB has stated that even though the fundamental characteristics are referred conceptual framework, the principles of communication can be regarded as the extension of fundamental characteristics of the faithful presentation and relevance. In line with the IFRS general disclosure standard profit making entities are required to include the principles of effective communication in the general disclosure standard.
The AASB has received feedback relating to situations where financial statements and annual reports have become difficult to assess and understand due to the duplication and disintegration of information. The AASB has stated in its preliminary view that general disclosure standard is required to be considered with the standard of IFRS to disclose necessary information in an organizations profit making report (Aasb.gov.au 2018). The preliminary view of AASB is that the profit making entities yearly financial publications should address single reporting package which should include reference to International Accounting Standards of ISA 720.
The AASB in its preliminary view stated that EBITDA must be presented in the financial statements as this will help in depicting the financial performance with fair reflection of an organizations current analysis on expenses in terms of their nature. The AASB opinion that presenting the earnings before interest, tax depreciation and amortization in respect of their function would result in the blend in the nature of expenses and functions of expenses causing disturbance in expenditure analysis.
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Description of Unusual or infrequent occurring of items in statements of financial position:
The AASB in its preliminary view has stated that a profit making entity is separately required to present the materiality event or transaction that takes place either uncommonly or unusually (Aasb.gov.au 2018). According to AASB an unusual or infrequent transaction or the happening of event must be presented separately in the comprehensive income statement or in the notes section of the annual financial report.
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Disclosure of Accounting Policies:
The AASB preliminary view states that Board a profit making entity is required to make the disclosure of the accounting policies that is vital in gaining an understanding of the financial statements under categories 1 and categories 2. If a profit making chooses to disclose the accounting policies in category 3 then the entity may consider separating the disclosure from the significant accounting policies. The users of the financial information would be able to identify the accounting policies outside the financial reports and cross reference their location.
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AASB in its preliminary view has released a statement relating to reduced disclosure requirements for the Tier-2 companies that are reporting accounting for lease under the AASB 16. In comparison to Tier 1 an entity making disclosure under the Tier-2 may be able to reduce their weight of disclosure together with cost involved in preparation and reviewing of GPFS irrespective of the situation whether they are profit making entities or non-profit making firms.
AASB requires an organization to make disclosure of information regarding the significant judgements and assumptions. AASB in its preliminary view has stated that to make an organization accounting policy more useful for the users of financial reports the board states that disclosure relating to significant judgements and assumptions used in implementing the accounting policy must be made adjacent to the disclosure of that accounting policy unless an entity judges that another location would help in improving the understanding ability of the financial reports (Aasb.gov.au 2018). The disclosure of the accounting policies for which an organization is required to make significant judgements or significant assumptions must be clearly highlighted. The board in its preliminary view stated has stated that accounting policy disclosure must be included either as the general disclosure standard or under the non-mandatory guidance.
In a preliminary view stated by the board it should develop a single centralized set of standards for disclosure of objectives that take into the account the objectives of financial statements. The centralized disclosure objectives could be used by the AASB as the basis for developing the disclosure objectives and requirements in the accounting standards which is highly unified and acts as the better link in the overall objectives of the financial statements. An alternative of having single set of standards for disclosure would be helpful in making disclosure objectives and requirements into numerous standards for making disclosure (Aasb.gov.au 2018). The AASB has stated that a single standard for disclosure would help the stakeholders in thinking regarding the objectives of disclosure and requirements as the package in a more unified manner. This means that the relationships among the different disclosure requirements would help in more readily identifying and making sure that the disclosure requirements are created with the consistency that may result in more effective disclosure of the accounting policies.
References:
News. (2017). Aasb.gov.au. Retrieved 30 March 2018, from https://www.aasb.gov.au/News.aspx
Media releases. (2018). Aasb.gov.au. Retrieved 5 April 2018, from https://www.aasb.gov.au/News/Media-releases.aspx
