Review the statement of financial position prepared by the

Question

Question 1: 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 2016 to 17 March 2017.

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 Australian Securities Exchange. 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. 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.
• The newsletter must be printed in minimum font set at 11 points (You may wish to use larger fonts etc 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.
• There is no specific 'word limit'. The newsletter must be no longer than 2 pages. In cases where the newsletter exceeds the 2 page limit, only the first 2 pages will be marked.
• Do not attach actual articles/printouts of web sources etc to your assessment. You are only required to include details of these in the bibliography (see section 4 below).

Don't be afraid to be creative. The effectiveness of a newsletter is impacted by how interesting the readers find it.

4. Bibliography and referencing

This assessment must include a bibliography 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.

Newsletters without a bibliography may not be accepted or marked.

Please be reminded that plagiarism is regarded as a serious issue within the University system with severe consequences for students who have been found to have deliberately plagiarised, the minimum penalty being zero for the assignment. All students should ensure that they are familiar with the plagiarism policy and referencing requirements before commencing assessment tasks.

Question 2: Financial statement presentation

You are the senior financial accountant at Kool Klothes Ltd. One of the new trainee accountants has prepared the following statement of financial position as at 30 June 2016, after its first year of operations:

Kool Klothes Ltd Statement of financial position as at 30 June 2016
	$000
Assets
Cash at bank	84
Receivables and inventory	190
Raw materials	12
Work in progress	24
Prepaid insurance	13
Shares in listed companies (at cost)	40
Advertising costs	16
Property, plant, equipment and intangible assets	328
Motor vehicles	185
Patents	40
Cash management account	60
Total assets	992
Liabilities
Accounts payable and provision for warranty	80
Allowance for doubtful debts	5
Accumulated depreciation - property, plant and equipment	48
Borrowings	120
Debentures	80
Current and deferred tax liabilities	36
Provision for annual leave	18
Retained earnings	90
Dividend payable	25
Total liabilities	502
Net assets	1 494
Equity
Share capital - ordinary shares	490
Total equity	1 004

Additional information:

Where AASB 101 requires entities to disclose further sub-classifications of the minimum line items either on the face of the statement or in the notes, the directors of Kool Klothes Ltd have advised you that they wish to disclose these sub-classifications in the notes and only report the minimum line items on the face of the statement.

Required: Review the statement of financial position prepared by the trainee accountant. Discuss what corrections / changes need to be made to the statement of financial position, to ensure that it complies 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 a revised statement of financial position.

Rationale

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. Accounting professionals need to ensure they are aware of current developments 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. 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.

This assignment will assess your ability to:

• prepare basic financial statements for reporting entities; and
• discuss critically and comprehensively changes and developments in the statutory and professional requirements upon which published financial statements are based.