Financial Statements And Requirements Of AASB 101 †Free Samples

Question: 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? Answer: Location of relevant assumptions and judgements for disclosure: The AASB requires an organization to disclose the information relating to the significant judgements and assumptions. In the preliminary view of AASB it has stated that to make the accounting policy of an entity more useful by providing the users of the financial statements to make relevant judgement and assumptions while applying accounting policy (Aasb.gov.au, 2018). The board requires an organization to implement the accounting policy adjacent to the disclosure unless the organization decides to disclose the accounting policy close on another location which would be helpful in improving in better understanding of uses. An organization is required to disclose the accounting policy by clearly highlighting the significant judgements or assumptions. The preliminary view of AASB states that an entity is required to make the disclosure of the accounting policy either in the general disclosure or under the non-mandatory guidance. Reduced disclosure requirements by AASB: The AASB has released a statement in its preliminary that dealt with the reduced disclosure requirements for the companies under the Tier-2 that are reported for the accounting of lease under AASB 16 (Aasb.gov.au, 2018). In contrast to Tier-1 disclosure an entity that is disclosing the relevant information under the Tier-2 will be able to lower down the load of revelation with cost associated with the preparation and presentation of the general purpose monetary statement notwithstanding of the situation whether they are profit making organization or non-profit making organization. Location of information with respect to IFRS Standard: In the feedback received by AASB, there are circumstances where the financial statements and annual reports have turn out to be hard to determine and comprehend due to duplication and disintegration of information. In the initial opinion of AASB it is stated that a general disclosure standard is necessarily required to be in consistent with the IFRS standard for making disclosure of information relating to an entity profit making report. The location of information with respect to IFRS standard is that profit making are required to address the single reporting package by referring to International Accounting Standard of ISA 720. Presenting EBIT and EBITDA in Financial Report: Conferring to the initial opinion of the AASB, EBIT and EBITDA ought to be presented in the yearly monetary report as it would helpful in reflecting the financial performance with fair depiction of an entitys present expenditure based on their nature. As opinion by AASB stating the EBIT and EBITDA based on their nature would help in presenting the combination of expenditure and expenditure functions that causes disturbance in analysis of expenses. According to the AASB 101 there is a guideline that has been stated related to the preparation of the fiscal report. The guidelines provided by AASB 101 assures that general purpose financial statements should be comparable for an organization for both the previous and current year (Hodgson Russell, 2014). The situation of Blake Ltd evidently provides that the accountant follows the single line format for reporting and presenting the financial statements. As evident the accountant has not classified the current and non-current assets. The accountant has also not classified the liabilities that requires segregation among the current and non-current liabilities. A recognition for cash and cash equivalent is required under AASB 107 for the Blake Ltd. Certain accounting transactions namely the raw materials, WIP in raw materials and WIP in the inventory under the current assets sections. The primary reason for classifying the transaction under the non-current asset is that these transactions are input goods used in manufacturing procedure (Warren Jones, 2018). The accountant of Blake Ltd requires classification of current liabilities for transactions such as accounts payable and warranty provision, allowance for doubtful debts and annual leave. These transactions are the portion of Blake Ltd normal operating cycle and needs classification despite the dues are to be matured for more than twelve months subsequent to the financial year. The similar accounting cycle is applicable to Blake Ltd for the classification of the organizations assets and liabilities. The accountant has erroneously recorded the accumulated depreciation for PPE under the liabilities segment. In its place these transactions must be recorded under the asset side of the balance sheet (Warren Jones, 2018). The accumulated depreciation is viewed as the consistent credit balance having contra effect on the asset account. The bookkeeper of Blake Ltd is under obligation to deduct the accumulated depreciation from the property, plant and equipment at the end of the financial year or accounting period to provide the fair value of the asset. Dividend paid by the company has been incorrectly recorded by the Accountant under the income statement. An important assertion can be bought forward that dividends does not constitute business income and it is obligatory for the accountant to record the dividend paid into the stakeholders equity statement (Hodgson Russell, 2014). Additionally, thefinance cost constitutes business expenditure and the accountant is obligatory required to take account of the same before obtaining the profit before tax. On a conclusive note, the accountant is required to follow the guidelines defined under paragraph 85 of the AASB 101 as this will help in healthier understanding of monetary statements. References Hodgson, A., Russell, M. (2014). Comprehending comprehensive income.Australian Accounting Review,24(2), 100-110. Warren, C. S., Jones, J. (2018). Corporate financial accounting. Cengage Learning. Media releases. (2018).Aasb.gov.au. Retrieved 5 April 2018, from https://www.aasb.gov.au/News/Media-releases.aspx News. (2018).Aasb.gov.au. Retrieved 7 April 2018, from https://www.aasb.gov.au/News.aspx