Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Corporate Accounting > Presentation of fin. Statements, Accounting Policies And Other Disclosures, Related Party Transactions (Lecture 2) > Flashcards

Presentation of fin. Statements, Accounting Policies And Other Disclosures, Related Party Transactions (Lecture 2) Flashcards

1
Q

What should an annual report created by a company include?

A
  1. An annual FINANCIAL REPORT
  2. An annual DIRECTOR’S REPORT
  3. An annual AUDITOR’S REPORT
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the components of an annual FINANCIAL report ?

A
  1. The FINANCIAL STATEMENTS for the year.
  2. The NOTES to the financial statements.
  3. The DIRECTOR’S DECLARATION about the statements and notes.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the elements of the FINANCIAL STATEMENTS?

A
  1. Statement of FINANCIAL POSITION as at the end of the year.
  2. Statement of COMPREHENSIVE INCOME for the year.
  3. Statement of CHANGES IN EQUITY for the year.
  4. Statement of CASH FLOWS for the year.
  5. CONSOLIDATED ACCOUNTS (if applicable).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What information must NOTES contain and why?

A

The NOTES must contain all information needed to ensure that the FINANCIAL REPORT provides a TRUE and FAIR VIEW of the financial position and performance of the company or consolidated entity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When are the FINANCIAL STATEMENTS authorised for issue?

A

On the day the DIRECTOR’S DECLARATION is signed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What must the DIRECTOR’S DECLARATION include about the statements and notes?

A
  1. A statement of whether the FINANCIAL STATEMENTS and NOTES are IN ACCORDANCE WITH THE CORPORATIONS ACT (AND THE ACCOUNTING STANDARDS)
  2. A statements of COMPLIANCE WITH IFRSs (if it has done so)
  3. A statement of whether in the DIRECTOR’S OPINION, there are reasonable grounds to believe that the COMPANY IS SOLVENT.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is ANNUAL FINANCIAL REPORT accompanied by?

A

DIRECTOR’S REPORT.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the TWO MAIN PARTS OF THE DIRECTOR’S REPORT?

A
  1. GENERAL INFORMATION
    • REVIEW OBE OPERATIONS and results thereof.
    • Details of SIGNIFICANT CHANGES during the year after reporting period.
    • LIKELY FUTURE DEVELOPMENTS.
    • Entity’s performance in ENVIRONMENTAL REGULATIONS.
  2. SPECIFIC INFORMATION
    • information about DIVIDENDS, DIRECTORS, OPTIONS AND INDEMNITIES, UNISSUED SHARES.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does AUDITOR’S REPORT form an OPINION about?

A

Whether:

  1. FINANCIAL REPORT is in accordance with CORPORATIONS ACT and AASB accounting standards.
  2. FINANCIAL REPORT gives a TRUE and FAIR VIEW.
  3. Auditor has been GIVEN all necessary INFORMATION and EXPLANATIONS.
  4. Company has KEPT FINANCIAL RECORDS to enable a financial report to be prepared and audited.
  5. Company has KEP REGISTERS and RECORDS requires by the CORPORATIONS ACT.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the elements of the CONCISE FINANCIAL REPORT?

A
  1. An ALTERNATIVE ANNUAL REPORT
  2. SUMMARY of the MAIN points of an ANNUAL REPORT.
  3. Content GOVERNED by AASB 1039 CONCISE FINANCIAL REPORTS.
  4. Statements mist be identical to the report but notes are effectively replaced with a “discussion and analysis” report.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the elements of HALF-YEAR FINANCIAL REPORT?

A
  1. In ADDITION to the ANNUAL REPORT.
  2. Only required by disclosing entities.
  3. Content GOVERNED by the AASB 134 INTERIM FINANCIAL REPORTS.
  4. Also INCLUDES DIRECTORS REPORT AND AUDITORS REPORT for half year.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What features should FINANCIAL STATEMENTS have?

A
  1. FAIR PRESENTATION and COMPLIANCE with AASB and IFRS.
  2. GOING CONCERN.
  3. Accrual basis of accounting.
  4. MATERIALITY and AGGREGATION.
  5. OFFSETTING.
  6. Frequency of reporting - at least annually.
  7. COMPARATIVE Information.
  8. CONSISTENCY of presentation.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does AASB 1054 AUSTRALIAN ADDITIONAL DISCLOSURES state with regards to the compliance with AASB and IFRS?

A

That companies must explicitly stated their compliance with AASB and IFRS accounting standards in the note to the financial statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the features of MATERIALITY AND AGGREGATION?

A
  1. Each material class of similar items must be presented separately.
  2. Items of a dissimilar nature or function must be presented separately, unless they are immaterial (in which case they are aggregated).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the features of OFFSETTING?

A
  1. Assets/Liabilities and Income/Expenses are not to be offset, unless required or permitted by accounting standards.
  2. OFFSETTING is appropriate when netting any income with relayed expenses arising from the same transaction.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the TWO EXCEPTIONS OF CONSISTENCY of presentation?

A
  1. There has been a SIGNIFICANT CHANGE in the Entity’s operations.
  2. A change in presentation or classification will provide MORE RELEVANT INFORMATION or is required by an accounting standard.
17
Q

What are the TWO components of COMPREHENSIVE INCOME?

A
  1. Profit & Loss
  2. Other Comprehensive Income
    • Changes in Revaluation Surplus
    • Actuarial gains and losses on defined benefit plans
    • gains and losses arising from the translation of financial statements of foreign operations.
    • Gains and loss s on remeasuring AFS financial assets.
    • the effective portion of gains and losses on hedging instruments in a cash flow hedge.
18
Q

What is disclosee in the statement of CHANGES IN EQUITY?

A

For each COMPONENT of equity:

  1. Changes in a counting policy
  2. Corrections of errors required by AASB 108.
  3. A reconciliation between opening and closing balances showing changes resulting from:
    • Profit/Loss
    • OCI
    • Transactions with equity holders

Total COMPREHENSIVE INCOME for the period attributable to:

  1. Equity holders of parent; and
  2. Non controlling interests.
19
Q

What is the order of NOTES?

A
  1. SIMMARY of accounting policies and accounting estimates.
  2. SUPPORTING INFORMATION for items in statements.
  3. Other disclosures:
    • Dividend
    • Company details
    • Auditor remuneration
20
Q

What does AASB 108 ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS deal with?

A
  1. Setting accounting policies.
  2. Changing accounting policies.
  3. Disclosures concerning accounting policies.
21
Q

What are the FEATURES of ACCOUNTING POLICIES DISCLOSED in the notes to the financial statement?

A
  1. Accounting policies are disclosed in a note (Note 1) to the financial statements.
  2. The contents of the accounting policy note is outlines in AASB 101.
  3. Details may be prescribed by other accounting standards or be a matter for management judgement.
22
Q

What INFORMATION should be DISCLOSED about the ACCOUNTING POLICIES?

A
  1. A statement that the FINANCIAL STATEMENTS ARE GENERAL PURPOSE FINANCIAL STATEMENTS and identification of the financial reporting framework applied in their preparation.
    The notes must states whether the statements are prepared ina accordance with:
    • accounting standards
    • interpretations of accounting standards
  2. The MEASUREMENT BASIS or BASES used in preparing the financial statements.
  3. A DESCRIPTION of ACCOUNTING POLICIES:
    - AASB 101 states that the information provided should allow users to understand how transactions and other events are reflected in the reported financial performance and position.
    - in many cases other accounting standards prescribe the information to be disclosed about accounting policies.
    Ex: AASB 102 Inventories requires disclosure of the accounting policies adopted in measuring inventories including cost formula used.
  4. JUDGEMENTS, apart from those involving estimations, that management has made in the process of applying the Entity’s accounting policies that have the most significant effect in the amounts recognised in the financial statements.
    Ex: the classification of leases as finical or operating.
  5. Information about ASSUMPTIONS made concerning the FUTURE:
    • Sources of ESTIMATION UNCERTAINTY that have a significant risk if causing a MATERIAL ADJUSTMENT to the carrying amounts of assets and liabilities within the next financial year; such as
    • provisions subject to the future outcome of litigation in progress.
    • long-term employee benefits such as superannuation obligations
    • recoverable amount of specialised classes of PPE.
23
Q

What must DICLOSURES include if an entity CHANGES an ACCOUNTING POLICY and the effect of the change has a MATERIAL effect on the financial statements?

A
  1. The nature of the change of the accounting policy
  2. To the extent practicable, the amount of the adjustment for the current and previous periods to each financial statement line affected
  3. The amount of any adjustment to periods prior to those presented to the extent practicable.
24
Q

What details should NOTES include on ACCOUNTING ESTIMATES?

A
  1. Their nature
  2. Their Carrying Amount as at the reporting date.

Examples include future interest rates and useful lives of non-current assets.
Accounting estimates are regularly changed as news information arises.
Changes in accounting estimates require prospective application.

25
Q

How does an entity CORRECT an ERROR?

A

An entity shall correct material prior period errors retrospectively in the first set of financial statements authorised for issue after their discovery by:

  • Restating the COMPARATIVE AMOUNTS for the prior period(s) presented in which the error occurred; OR
  • if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
26
Q

Why it is the case that IMMATERIAL ERRORS may NOT be corrected and IMMATERIAL FACTS may NOT be reported?

A

As the immaterial errors and omissions don’t render the reports misleading.

27
Q

What is the meaning of MATERIAL in paragraph 5 of AASB 108?

A

Information is material if it’s omission or misstatement could affect users’ economic decision.

Some items are material regardless of their amount due to their nature - ex. Related Party Transactions.

28
Q

What is the OBJECTIVE of AASB 124 RELATED PARTY TRANSACTIONS?

A

To ensure an Entity’s financial statements contain the disclosures necessary to an understanding of the POTENTIAL EFFECT of TRANSACTIONS and outstanding BALANCES and COMMITMENTS with related parties.

29
Q

What are the major issues to be considered re RELATED PARTY DISCLOSURES?

A
  1. Identifying related Party RELATIONSHIPS and TRANSACTIONS
  2. identifying outstanding BALANCES, including COMMITMENTS, between an entity and it’s related parties
  3. Identifying the CIRCUMSTANCES in which disclosure of the items in (1) and (2) is required
  4. Determining THE DISCLOSURES to be made about those items.
30
Q

According to AASB 124, a PERSON or a close member of the person’s family is related to a reporting entity if that person:

A
  1. Has control or joint control of the reporting entity
  2. Has significant influence over the reporting entity
  3. Is a member of a key management personnel of the reporting entity or of a parent of the reporting entity.
31
Q

According to AASB 124, an ENTITY is RELATED to a reporting entity if any of the following conditions apply:

A
  1. The entity and the reporting entity are MEMBERS of the SAME GROUP.
  2. One entity is an associate or joint venture of the entity (or an associate or joint venture of a member of a group of which the other entity is a member)
  3. BOTH entities are JV of the same third party
  4. One entity is a JV of a third entity and the other entity is an associate of the third entity.
  5. The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
  6. The entity is controlled or jointly controlled by a person identified in part (1).
  7. A person who has control or joint control of the reporting entity has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
32
Q

What are the relationships that are not regarded as RELATED PARTY?

A
  1. Two entities simply because they have a director in common.
  2. Two entities simply because they have a member of key management personnel in common
  3. Two entities simply because they have a member of key management of one entity has significant influence over the other entity
  4. Two ventures simply because they share joint control over a joint venture
  5. The following entities which simply have normal dealings with an entity
    • providers of finance
    • trade unions
    • public utilities
    • departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity
  6. Simply as a result of economic dependence with a party with whom an entity transacts a significant volume of business:
    • a customer
    • a supplier
    • a franchiser
    • a distributor or general agent
33
Q

What is the major focus of the disclosure requirements of AASB 124 ?

A

The major focus directed towards revealingg the remuneration arrangements made for KMP.

34
Q

What are some of the examples of RELATED PARTY TRANSACTIONS that must be disclosed?

A
  1. The purchases or sales of goods or services
  2. The acquisition or disposal of assets
  3. Leases
  4. Transfers
  5. Finance arrangements
  6. Provision of guarantees or collateral

Corporate Accounting (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions