Disclosure

1

• Disclosure Reporting of
• Company Financial Statements
• Statements of Financial Position Performance

Text Leo Hoggett Chap 5 6
2
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

3
Application of
Reporting Entity
AASB1025

• 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
  AASBs
• We assume all companies reporting entities

4
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

5
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

6
Overriding Accounting Standards

• AASB 1001 Accounting Policies
• AASB 1031 Materiality

7
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

8
Materiality
AASB1031

• The 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.

9
Materiality
AASB1031

• 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

10
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

11
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 entity
• reporting date or period covered

12
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

AASB1018
13

• 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
  

14

• 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

15
Statement of
Financial Performance
AASB1018

• 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

16
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

AASB1040
17

• 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

18

• 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

19
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

_at_ JOHNSON
20
Tutorial Questions

• Question 1 - Exercise 6.1
• Amend the Selling Administration Exps to 60
  000)
• Question 2 - Exercise 6.4
• Question 3 - Exercise 6.5

_at_/ JOHNSON