The regulatory environment for financial reporting

  • Question 1 [35 marks]
    The regulatory environment for financial reporting

  • You are a member of a large accounting firm which is responsible for preparing financial reports, including statements and notes to the accounts; and for advising staff in client firms who are responsible for preparing financial reports. The firm only deals with large Australian companies listed on the Australian Stock Exchange. One of your key tasks is to monitor the changes and developments in the financial reporting environment and summarise them in a regularly published newsletter.

  • Required:

  • Prepare a 2 page newsletter that identifies and summarises developments and changes in the financial reporting environment for the period 1 January 2015 to 31 March 2015, inclusive.
    Detailed guidelines for completing this question:

  • 1. Monitoring of changes and developments
    This will involve regular monitoring of a number of sources over the required period. The sources should be varied in range, as you will need to identify and consider developments/changes relating to:
    • Technical issues such as issue of new accounting standards, exposure drafts or other pronouncements or interpretations.
    • Regulation and monitoring of financial reporting.
    • Political influences or other potential developments (such as identification of any reporting failures) that could impact or may be of interest to staff (such as Enron or Parmalat failure). '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. A section on 'international' items/developments must be included in the newsletter.

  • 2. Potential sources
    Given the scope of the potential influences on financial reporting you will need to monitor 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:

  • (i) Websites such as those of:
    - Australian Accounting Standards Board
    - Financial Reporting Council
    - Australian Securities and Investment Commission
    - Australian Securities Exchange
    - International Federation of Accountants
    - Institute of Chartered Accountants in Australia
    - CPA Australia
    - International Accounting Standards Board
    - Financial Accounting Standards Board
    - Websites of large accounting firms.

  • (ii) Professional publications:
    - In the Black (CPA)
    - Charter (ICAA)

  • (iii) Newspapers/journals
    3. Contents
    The restriction of a 2 page newsletter means that you need to use your own judgement as to whether to include information about specific changes and 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). The purpose of the newsletter is to alert staff to changes and developments that may impact on their work and provide enough information about these changes/developments to satisfy the following:

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    • For staff (the intended audience) to understand the nature of the development/change and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work),
    • Provide sufficient information for staff to be able to obtain further information on the development/change if they wish to,
    • The newsletter should where possible be in your own words with sources adequately referenced using the appropriate referencing system.
    Some examples of significant items to be considered include:
    • Revised or reissued accounting standards or interpretation (both national and international),
    • ASIC reviews on financial reporting,
    • New ASX disclosures for listed companies.
    Given the target audience, it would be assumed that they have a working knowledge of common terms and abbreviations (such as AASB, FASB) so abbreviations may be used. Don't be afraid to be creative. The effectiveness of a newsletter is impacted by how interesting the readers find it.
    What not to consider?
    Students need to take care that the developments and the changes considered and included in the newsletter are relevant to the objective, in particular the issues/developments that directly relate to the preparation of financial reports for large companies listed on the Australian Stock Exchange. The newsletter SHOULD NOT consider areas only INDIRECTLY related to the preparation of financial reports such as (and this is not an exhaustive list):
    • Fraud,
    • Auditing,
    • Taxation,
    • Other disclosures by listed companies such as:
    - Industry disclosures required by peak organisations,
    - Voluntary disclosures in the area of corporate social responsibility,
    - Voluntary Environmental disclosures.

  • 4. Format
    The newsletter should be in the following format:
    • The top of the newsletter must include the title (you need to decide on 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 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 so that they are able to obtain more detailed information of the development/change.
    • The newsletter must be printed in minimum font size of 11 points (You may wish to use larger fonts etc for headings etc). You may wish to set your newsletter out using columns but this is optional. 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, 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.
    5. Bibliography and referencing
    This assessment must include a bibliography rather than a reference list (this should not be part of your newsletter and to be given on a separate page). A bibliography includes all materials used in the preparation of your assignment, not just those referenced within the paper. The reason a bibliography is required (rather than a reference list) is that this will provide an insight into the range and regularity of your monitoring activities (not just those specifically referenced within your 'paper') which is part of the criteria for assessment. It is expected that the bibliography will be quite long. The bibliography needs to include specifics of what you have actually accessed and read that is related to the area - 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 read separately. Assessments without a bibliography will not be accepted or marked.

  • When citing electronic sources, please include the date accessed. If you are unsure how to cite electronic sources check the referencing guides that are available from the library or online at the student services site. APA referencing style should be used for all citing format.

  • 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.

  • Rationale
    The purpose of this assignment 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 aims to:
    • Develop the student's ability to identify and source changes to financial 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 financial reporting rules and regulations;
    • Develop the student's ability to provide written material appropriate to the accountancy profession;
    • Help students appreciate the limitations of the currency of knowledge in a technical financial reporting area;
    • Allow students to understand the relationships between technical issues and community attitude to financial reporting.

  • Assessment criteria
    The newsletter will be assessed in relation to the criteria specified in the following marking guide.

  • Element Criteria Exceeds expectation (HD/D) Meets expectation (CR/PS) Fails to meet expectation (FL)
    Technical content Local reporting news [25%] [19-25%]
    Correctly identify and report most of the news relating to changes in local financial reporting environment. [13-18%]
    Correctly identify and report some of the news relating to changes in local financial reporting environment. [0-12%]
    Identify some of the news relating to changes in local financial reporting environment, some news were incorrectly reported.
    International reporting news [25%] [19-25%]
    Correctly identify and report most of the news relating to changes in international financial reporting environment. [13-18%]
    Correctly identify and report some of the news relating to changes in international financial reporting environment. [0-12%]
    Identify some of the news relating to changes in international financial reporting environment, some news items were incorrectly reported.
    Effectiveness Detail of discussion [10%] [8-10%]
    -provides appropriate level of detail for all news;
    -provides effective summaries and directions to staff to access further information where appropriate for all news;
    -discriminates between significant and minor news. [5-7%]
    -provides appropriate level of detail for most of the news;
    -provides effective summaries and directions to staff to access further information where appropriate for most of the news;
    -sufficiently discriminates between significant and minor news. [0-4%]
    -level of detail provided for most of the news is inappropriate;
    -summaries provided are not effective for most news and directions to staff to access further information are not provided;
    -does not discriminates between significant and minor news.
    Creativity [10%] [8-10%]
    -titles/headings provided attract attention;
    -design of newsletter is exemplary. [5-7%]
    -titles/headings provided sometimes attract attention;
    -design of newsletter is original. [0-4%]
    -titles/headings provided do not attract attention;
    -design of newsletter is sub-standard.
    Presentation Grammar and spelling [10%] [8-10%]
    -writing is flawless in terms of spelling and grammar. [5-7%]
    -While there may be minor errors, the writing follows normal conventions of spelling and grammar throughout and has been carefully proofread. [0-4%]
    -Writing contains frequent spelling and grammar errors which interfere with comprehension.
    Language used and clarity [10%] [8-10%]
    -cohesive discussion and message conveyed is clear all the time;
    -appropriate use of language consistently throughout. [5-7%]
    -cohesive discussion and message conveyed is clear most of the time;
    -appropriate use of language most of the time. [0-4%]
    -ideas presented are scattered and message conveyed is unclear;
    -inappropriate use of language most of the time.
    Referencing system [5%] [4-5%]
    -presented a bibliography in accordance with APA referencing system without flaw. [3%]
    -presented a bibliography in accordance with APA referencing system but contain some errors. [0-2%]
    -no bibliography presented or majority of the bibliography presented is not in accordance with APA referencing system.
    Evidence of reading Width of coverage [5%] [4-5%]
    Impressive/very good range of coverage. [3%]
    Adequate range of coverage. [0-2%]
    Inadequate range of coverage.

  • Question 2 [15 marks]
    Financial statement presentation

  • Blackout Ltd, has prepared the following statement of financial position as at 30 June 2014:

  • Blackout Ltd
    Statement of financial position as at 30 June 2014
    $000
    Assets
    Cash and cash equivalents -12
    Trade and other receivables 80
    Inventories 20
    Deferred tax assets 14
    Other assets 9
    Investment property 57
    Less: Investment property loan -17
    Property, plant and equipment and intangible assets 397
    Total assets 548

  • Liabilities
    Trade and other payables 55
    Allowance for inventory obsolescence 2
    Accumulated depreciation – property, plant and equipment 30
    Financial liabilities 300
    Retained profits 10
    Provisions 24
    Ordinary share capital 100
    Total liabilities 536
    Net assets 1,084

  • Shareholders’ equity
    Dividend payable 5
    Reserves 7
    Total shareholders’ equity 1,096

  • Additional information:
    • ‘Cash and cash equivalents’ consists of $2,000 cash on hand, and a bank overdraft of -$14,000.
    • ‘Trade and other receivables’ consists of trade receivables and prepayments.
    • ‘Trade and other payables’ consists of trade payables, interest payable, and the company’s current tax liability.
    Required:

  • List and explain the errors need to be corrected in the above statement of financial position, to ensure that it complies with the requirements of AASB 101.
    Marking Guide - Question 2 Max. marks awarded
    List and explain corrections to be made 12
    References 3
    Total 15

  • Assessment criteria

  • The assessment rubric for this question is provided below. The detailed allocation of marks has been provided above for your information.

  • Criteria Exceeds expectation (HD/D)
    Meets expectation (CR/PS) Fails to meet expectation (FL)
    Question 2:
    Financial statement presentation.•
    - determine errors to be corrected without flaw/with minor flaws;
    - explanations shown are exemplary and clear;
    - references to AASB 101 are provided. - determine errors to be corrected with some errors;
    - explanations shown are adequate;
    - references to AASB 101 are provided. - fails to accurately determine most of the errors to be corrected;
    - explanations shown are inadequate;
    - references to AASB 101 are not provided.

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