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).
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.
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):
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
International Accounting Standards Board
Websites of large accounting firms
(b) Professional publications:
In the Black (CPA)
3. Format and presentation
The following are to be observed for your newsletter preparation.
The top of the newsletter must include the title (you need to decide what to call your newsletter) and details of the period the newsletter is considering.
The newsletter should not read as one continuous 'essay'. It must include headings and sub-headings that assist in identifying the nature of news / changes / developments and help to guide the reader, and also enable the reader to distinguish between items of interest and the relative importance of changes.
You must refer the reader to specific sources (including website links where appropriate) so that they are able to obtain more detailed information of the news / change / development. If you include direct quotations in your newsletter, you need to include in-text citations using the APA referencing format.
The newsletter must be printed in minimum font set at 11 points (you may wish to use different formatting (such as larger fonts) for headings etc. Apart from minimum font size, there are no specific requirements in relation to line spacing, margins etc. However, you should note that simply reducing line spacings or margins to 'fit more in' may impact on the presentation and effectiveness of the newsletter.
Financial statement presentation
Cash at bank 18,200
Cash management account 150,000
Accounts receivable 123,900
Interest receivable 6,700
Raw materials 100,500
Prepaid rent 13,600
Investment property 614,000
Loan receivable 60,000
Land (at cost) 1,100,000
Plant and equipment (at cost) 652,200
Accumulated depreciation – plant and equipment 104,300
Accounts payable 75,800
Allowance for doubtful debts 14,600
Current tax liability 33,500
Accrued wages payable 8,200
Interest payable 8,300
Dividends payable 45,000
Provision for annual leave 36,000
Provision for long service leave 27,000
Provision for warranty 17,000
Debentures (due April 2020) 600,000
Bank loan 500,000
Share capital 500,000
General reserve 276,800
Retained earnings 873,300
All assets other than cash at bank, cash management account, accounts receivable, interest receivable, inventory, raw materials, and pre-paid rent are non-current.
All liabilities other than accounts payable, allowance for doubtful debts, current tax liability, accrued wages payable, interest payable, dividends payable and provisions listed below are non-current.
Provision for annual leave includes $19,000 payable within 1 year.
Provision for long service leave includes $8,000 payable within 1 year.
Provision for warranty includes $5,000 payable within 1 year.
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 Winter 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.
The purpose of this task is to help you further develop some of the skills and knowledge required and valued by the accountancy profession. The task that you will be required to undertake is similar to the tasks required of a professional accountant working within the financial reporting field.
Given that all reporting entities need to prepare general purpose financial reports, accounting professionals need to be experts in preparing key financial statement reports that comply with the presentation requirements contained in the accounting standards.
Accounting professionals also need to ensure that they are aware of current developments in the financial reporting environment and that their knowledge is up to date. They need to be able to identify changes that have occurred that may impact on their work and to know where they can obtain information about these changes.
In this assignment, you are asked to provide a summary of recent developments relating to financial reporting and prepare financial statement reports in accordance with accounting standard requirements. As such this assignment allows you to:
develop the ability to identify and source changes to accounting/reporting requirements so as to update professional knowledge required for practice;
acquire an awareness of current developments and changes (both locally and internationally) that may impact on current and future accounting and reporting rules and regulations;
develop the ability to provide written material appropriate to the accountancy profession;
appreciate the limitations of the currency of knowledge in a technical financial reporting area; and
research current financial reporting obligations relating to the preparation and presentation of general purpose financial statement reports and apply this knowledge to a range of practical situations.
This assignment will assess your ability to:
discuss critically and comprehensively changes and developments in the statutory and professional requirements upon which published financial statements are based;
prepare basic financial statements for reporting entities, in accordance with accounting standard requirements; and
be able to interpret and apply generally accepted accounting principles and specific financial accounting standards relating to concepts of recognition, measurement, and disclosure of key financial statement elements when preparing general purpose financial reports.