Disclosure & Reporting of Company Financial Statements:

1. Disclosure & Reporting of Company Financial Statements: Statements of Financial Position & Performance Text : Leo & Hoggett Chap 5 & 6

2. Objectives • Be able to prepare company financial statements in accordance with required accounting standards (AASBs) • Week 1- Statement of Financial Performance - Statement of Financial Position • Week 2 - Additional notes to financial statements

3. AASB1025 Application of Reporting Entity • This standard is a means of differential reporting SAC1 reporting entities that reasonable to expect the existence of users dependent on general purpose reports General Purpose Reports where users cannot demand special purpose reports these must be prepared in accordance with AASB’s • We assume all companies reporting entities

4. Legislative Requirements • Company Financial Statements • as per Corporations law coy must prepare Profit & Loss Statement & Balance Sheet • AASB 1018 Statement of Financial Performance (interpreted as P & L) • AASB 1040 Statement of Financial Position (interpreted as Balance Sheet) • Cash Flow Statements - not covered in this unit • Plus • Notes to Financial Reports • Directors Statement/Report • Auditors Report

5. Financial Statements Must be prepared in accordance with the AASB s provided a REPORTING ENTITY- AASB 1025 In the 2 weeks we will look at the major standards covering the requirements for preparation of Financial Reports Financial Statements

6. Overriding Accounting Standards • AASB 1001 Accounting Policies • AASB 1031 Materiality

7. AASB 1001 Accounting Policies • Setting policy • Basic rules adopted when preparing reports • Consider whether relevant and reliable • Changing policies • Entity required to report the changes made to policy from previous years ie so comparable over the years • Disclosures of policies • Standard requires the entity to set down the rules used in a NOTE to the accounts (refer text for example) • Measurement adopted • Specific policies • Uncertainty re going concern

8. AASB1031 Materiality • The concept of “TRUE & FAIR” does not mean absolutely complete and accurate rather implies reasonably correct • ie some errors & omissions may occur • All accounting information is assessed against the concept of materiality • An item is material when its omission , mis-statement or non-disclosure in a financial report could jeopardise the quality of decision making and evaluations based on the report.

9. AASB1031 Materiality • Para 4.1.6 Guidelines • if 10% or more of the base material • if 5% or less of the base immaterial • between 5% and 10% - own judgement • Base (select largest % impact) • balance sheet either total equity or the relevant balance sheet class • profit and loss- the operating profit or appropriate revenue/expense

10. The Trilogy • 3 main standards of presentation AASB 1018 Statement of Financial Performance AASB 1034 Financial Report Presentation & Disclosure AASB 1040 Statement of Financial Position

11. AASB 1034 Financial Report Presentation & Disclosure Sets out the General Requirements para 4 • Must be in English • Must be in Australian Currency • Must provide comparative figures • Must display _ • Name of reporting entity • reporting date or period covered

12. Statement of Financial Performance • No format specified however appendix 1 to the standard gives an example • Starting Point- Profit and Loss Statement use this to prepare the Statement of Financial Performance AASB1018

13. Bulldog Ltd Profit & Loss Statement for the year ended 30 June 2003 Revenues Sales 1 540 000 Other 280 000 1 820 000 Expenses Selling Expenses 1 265 300 cost of Sales etc Administration Expenses 280 000 details Financial Expenses details 35 9001 581 200 Net Profit 238 800 Tax Expense 71 640 Net Profit after tax $167 160

14. Bulldog Ltd Statement of Financial Performance for the financial year ended 30 June 2003 Revenue from ordinary activities 1 820 000 Expenses from ordinary activities (1 579 700) Borrowing Costs (1 500) Profit from Ordinary act before tax 238 800 Income tax expenses from ord act. (71 640) Profit from ord act after tax 167 160 Profit or Loss on extraordinary items - after tax - Net Profit or Loss 167 160 Increase in asset revaluation reserve 60 000 Total changes in equity other than those resulting from transactions with owners $227 160

15. AASB1018 Statement of Financial Performance • Extraordinary Items • Must be disclosed • Must meet 2 tests to be considered extraordinary:- Outside normal operations & non-recurring in nature extremely rare e.g. Earthquake or other natural disaster - however if region subject to such disasters then not extraordinary

16. Statement of Financial Position • Starting point the Balance Sheet • No prescribed format however para 4.1 & 4.2 asstes & liabilities must be classified as either • Current /Non-current or • Liquidity if more appropriate • Basic Formats refer appendix to standard • Use Current/Non-current classification for this unit AASB1040

17. Bulldog Ltd Balance Sheet as at 30 June 2003 Current Assets Current Liabilities Cash 64 000 Accounts Payable 60 000 Accounts Rec . 218 000 Interest Payable 9 300 Allow. for D Debts 10 900 207 100 Tax Payable 79 640 Inventory 250 000 Provision for Dividend 120 000 Prepaid Insurance 6 000 Non-Current AssetsNon-Current Liabilities Land - at cost 100 000 Loan Payable 12 000 Motor Vehicles 300 000 Acc Depn (180 000) 120 000 Equity Store Equip 585 000 Capital 887 000 Acc Depn (65 000) 520 000 Reserves Goodwill 140 000 ARR 160 000 Amortisation (7 000) 133 000 General Reserve 75 000 Research & Dev 100 000 Retained profits 87 160 Amortisation (10 000) 90 000 $1 490 100$ 1490 100

18. Bulldog Ltd Statement of Financial Position as at 30 June 2003 Current Assets 527 100 Cash assets 64 000 Receivables 207 100 Inventories 250 000 Other 6 000 Non-Current assets 963 000 Property, plant & equipment 740 000 Intangible assets 133 000 Other 90 000 Total Assets $1 490 100 Current Liabilities 268 940 Payables 69 300 Current tax liabilities 79 640 Provisions 120 000 Non- current liabilities 12 000 Interest-bearing liabilities 12 000 Total Liabilities $280 940 Equity Contributed 887 000 Reserves 235 000 Retained Profits 87 160 $1 209 160

19. Other Requirements- AASB 1018 • Revision of accounting Estimates • eg doubtful debts / depreciation • effect to be recognised in reporting period • Errors correct in period discovered or can amend & re-issue accounts • Fundamental errors (so signiicant material effect on accounts) re-issue accounts however if too costly then alternative • disclosure this year (refer appendix 4 AASB1018) • nature of error • separate line item & tax effect • note to accounts @*# JOHNSON

20. Tutorial Questions Question 1 - Exercise 6.1 Amend the Selling & Administration Exps to $60 000) Question 2 - Exercise 6.4 Question 3 - Exercise 6.5 @/*# JOHNSON