FINANCILA ACCOUNTING QUESTIONS -
Question 1 - Newsletter
The regulatory environment and financial reporting
You are employed in a large accounting firm which specialises in preparing general purpose financial reports for large companies that are listed on the Australian Securities Exchange (ASX). As the training manager, one of your key tasks is to prepare a regular newsletter for staff involved in the preparation of the above financial reports. The purpose of the newsletter is to keep staff updated on the latest financial reporting news, alerting staff of changes and developments that may impact their work, and provide enough information to staff to satisfy the following:
For staff to understand the nature of the news / change / development and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work);?Provide directions to staff of where they can access further information on the news / change / development if they wish to (including website links where appropriate).
Required: Prepare a 2 page newsletter that identifies and summarises changes / developments and news in the financial reporting environment for the period from 1 December 2017 to 31 March 2018.
Detailed guidelines for completing this task:
1. Identification of changes and developments
This will involve extensive research on a number of sources over the required period. You will need to identify and consider a range of developments/changes such as:
Technical issues: for example, the issue of new accounting standards, amendments to accounting standards, updates on AASB or IASB projects in progress, outcomes of AASB or IASB meetings, amendments to ASX listing rules.?Regulation and monitoring of financial reporting: for example, ASIC reviews on financial reporting.?Political influences or other potential developments. 'Political' does not only mean action from politicians - it would also include lobbying/actions by other groups to promote their own interests - for example there may be articles about companies, or particular interest groups such as Group of 100, saying that if certain accounting standards are introduced this will disadvantage or have a negative impact.
You will need to consider both local (Australian) and international sources and developments.
The restriction of a 2 page newsletter means that you need to use your own judgment as to whether to include information about specific news items and changes / developments, and how much information to include. It is not intended that you provide complete details of changes / developments (although you may consider in particular cases that more detail is needed).
Given the target audience, it would be assumed that they have a working knowledge of common terms and abbreviations (such as AASB, IASB), so abbreviations may be used.
What not to consider?
You need to take care that the news / changes / developments included in the newsletter are relevant to the objective, in particular that they relate directly to the preparation of general purpose financial reports for large companies listed on the ASX. The newsletter should not consider areas only indirectly related to the preparation of financial reports such as (this is not an exhaustive list):
Fraud?Auditing?Taxation?Other disclosures by listed companies such as: industry disclosures required by peak organisations, and voluntary disclosures in the area of corporate social responsibility.
2. Potential sources
Given the scope of the potential influences on financial reporting, you will need to research a range of sources. Below is a list of sources that may be of interest. Note that this list is not exhaustive, students should search for sources outside of these. Students should not rely on any one type of source, but a range of sources from each category, i.e. do not just look at websites, also check journals, newspapers etc. Examples of possible information sources include:
(a) Websites such as those of:
Australian Accounting Standards Board?Financial Reporting Council?Australian Securities and Investment Commission
Australian Securities Exchange?International Federation of Accountants?Chartered Accountants Australia and New Zealand CPA Australia?International Accounting Standards Board Websites of large accounting firms
(b) Professional publications:
In the Black (CPA) Acuity (CAANZ)
(c) Newspapers/journals
3. Bibliography and referencing
This assessment must include a bibliography using the APA referencing style, rather than a reference list (this should not be part of your newsletter and is to be given on a separate page). A bibliography includes all materials used/read in the preparation of your assignment, not just those referenced or cited within the paper. The reason a bibliography is required (rather than a reference list) is that this will provide an insight into the range of your research activities which is part of the criteria for assessment. It is expected that the bibliography will be quite long. The bibliography needs to include specific articles or readings that you have actually accessed - not just a general link to a website or newspaper etc. Therefore if you use a source such as the AASB website, please reference every article that you have read separately. You should only include sources that are related to the area. For example, if you look at a particular publication but most of the content relates to taxation or auditing issues, it would not be appropriate to include these articles in your bibliography as these are not directly related to the area of interest.
Question 2 - Financial statement presentation
You are the senior financial accountant at Blake Ltd. One of the new trainee accountants has prepared the following statement of profit or loss and other comprehensive income and statement financial position from the trial balance, after its first year of operations:
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Blake Ltd Statement of profit or loss and other Comprehensive income for the year ended 30 Jun 2017
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$'000
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Revenue
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1,869
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Administrative expenses
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(155)
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Annual leave expense
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(20)
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Cost of sales
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(720)
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Distribution and delivery expenses
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(29)
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Dividends paid
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(25)
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Depreciation expense
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(48)
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Insurance expense
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(36)
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Other expenses
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(65)
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Sales and marketing expenses
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(180)
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Profit before tax
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591
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Finance costs
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(10)
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Income tax expense
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(174)
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Profit for the year
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407
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Other comprehensive income:
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-
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Total comprehensive income for the year
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407
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Additional information:
Blake Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by function on the statement.
In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Blake Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.
Required: Review the financial statements prepared by the trainee accountant. Discuss what corrections / changes need to be made to the financial statements, to ensure that they comply with the requirements of AASB 101. Provide references to relevant paragraphs in the accounting standards where appropriate to support your answers.
Note: You are not required to discuss any note disclosures that are needed, or prepare revised financial statements.