Professional Documents
Culture Documents
vii
PART 1
THE AUSTRALIAN ACCOUNTING ENVIRONMENT. . . . . . . . . . . . . . . . . . . 1
PART 4
ACCOUNTING FOR LIABILITIES AND OWNERS’ EQUITY. . . . . . . . . . 373
xii
xiii
PART 5
ACCOUNTING FOR THE DISCLOSURE OF CASH FLOWS. . . . . . . . . 769
xiv
PART 6
INDUSTRY-SPECIFIC ACCOUNTING ISSUES. . . . . . . . . . . . . . . . . . . . . 813
PART 7
OTHER DISCLOSURE ISSUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853
CHAPTER 21 Events occurring after the end of the reporting period. . . . . . . 854
21.1 What is an ‘event after the reporting period’? 855 Learning objectives (LO) 854
21.2 Why disclose information about events that have occurred Opening questions 854
after the end of the reporting period? 856 Summary 863
Key terms 864
21.3 Types of events after the reporting period 857
Answers to Opening
21.4 Events that necessitate adjustments to the financial questions 864
statements (adjusting events after the reporting period) 858 Review questions 865
21.5 Events that necessitate disclosure but no adjustment Challenging questions 866
(non-adjusting events) 860
21.6 Disclosure requirements 862
PART 8
ACCOUNTING FOR EQUITY INTERESTS IN OTHER ENTITIES. . . . . 947
PART 9
FOREIGN CURRENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1205
PART 10
CORPORATE SOCIAL-RESPONSIBILITY REPORTING. . . . . . . . . . . . 1249
Appendix A Present value of $1 in n periods = 1/(1 + k)n, Appendix C Calculating present values����������������������� 1338
where k is the discount rate��������������������� 1334 Glossary ��������������������������������������������������������������������������������� 1341
Appendix B Present value of an annuity of $1 Index ��������������������������������������������������������������������������������������� 1353
per period for n periods ���������������������������� 1336
xviii
This is the ninth edition of a book that was originally readers to critically evaluate the various rules and
published in 1995. Since the first edition was guidelines. The aim is to develop accountants who
published we have seen extensive changes in are able to apply particular accounting requirements,
relation to the practice and regulation of general as well as being able to contribute to the ongoing
purpose financial reporting. These changes continue improvement of accounting requirements. The view
to occur and this book has always attempted to taken is that it is important for students not only to
carefully explain the nature of the changes as well understand the rules of financial accounting, but also
as the potential economic and social consequences to understand the limitations inherent in many of the
that might result from such changes. existing accounting requirements. For this reason,
In the period of time between when the eighth reference is made to research studies that consider the
edition of this book was published, and the writing of merit, implications, and costs and benefits of the various
this ninth edition was completed (in October 2019) accounting requirements. Furthermore, newspaper
there have been some rather significant changes articles discussing different aspects of the accounting
in regulation and guidance pertaining to external requirements are included for consideration and
reporting. These changes have been incorporated discussion. This all adds up to give this book a ‘real-
within this ninth edition. For example, there were some world’ perspective. The permission of copyright holders
significant changes to the Conceptual Framework for to reproduce this material is gratefully acknowledged.
Financial Reporting and a number of new accounting Social-responsibility reporting continues to be an
standards have come into effect (such as AASB important area of accounting, and one that is rapidly
15 Revenue from Contracts with Customers and developing. Its importance is further highlighted by the
AASB 16 Leases). There have also been a number growing evidence of climate change, species extinction
of significant developments in the area of social and and large-scale poverty, hunger and social inequities in
environmental (and sustainability) reporting, and these many countries. While this book predominantly considers
are addressed in Chapter 32. financial accounting and reporting, Chapter 32 focuses
Each chapter of this ninth edition contains clear on social-responsibility reporting and provides the most
learning objectives, as well as a number of opening up-to-date and comprehensive material available on this
questions, which students are encouraged to answer important topic, with additional material on the important
before reading the chapter. Solutions to each topic of climate change—from both an accounting and
opening question are provided at the end of the a scientific perspective—as well as commentaries on
chapter and students are asked to consider how their various alternative reporting frameworks.
answers changed as a result of reading the chapter. Writing a text like this is an extremely time-
Throughout the chapters there are also numerous consuming exercise and it has been very gratifying
boxes identifying why students need to know that the effort involved has been rewarded by so many
particular material. The book provides material that institutions across Australia (and also some outside
will enable the reader to gain a thorough grasp of the Australia) electing to prescribe previous editions of this
contents and of the practical application of the majority book as part of their accounting programs. Given the
of financial accounting requirements currently in place success of all previous editions, every effort has been
in Australia. In the discussion of these requirements, made to ensure that this
numerous worked examples, with detailed solutions, ninth edition is equally
are provided throughout the text. A glossary of key valuable to students and
terms is provided towards the back of the book. teachers, and that it has
As well as addressing how to apply the various been substantially and
accounting requirements, this text also encourages thoroughly revised.
xix
There are many people who must be thanked for Lee Moermon, University of Wollongong; Gary
their contribution to the ninth edition of this book. Monroe, Australian National University; Richard
First, thanks must go to the following reviewers of Morris, University of New South Wales; Anja
the current edition: Morton, Southern Cross University, Lismore
campus; Karen Ness, James Cook University;
Jahangir Ali, La Trobe University; Peter Baxter, Cameron Nichol, RMIT University; Gary Plugarth,
University of the Sunshine Coast; Collette University of New South Wales; Lisa Powell,
Chesters, University of Western Australia; Scott University of South Australia; Jim Psaros,
Copeland, University of South Australia; Omar University of Newcastle; Michaela Rankin,
Faroque, University of New England; Chelsea Liu, Monash University; Andrew Read, University of
University of Adelaide; Meiting Lu, Macquarie Canberra; Dan Scheiwe, Queensland University
University; Wei Lu, Monash University; Lara of Technology; Mark Silvester, University of
Meng, Curtin University; Balachandran Muniandy, Southern Queensland; Stella Sofocleous,
La Trobe University; YH Tham, Curtin University. Victoria University of Technology; Jenny Stewart,
Griffith University; Seng The, Australian National
This book has also been improved during the University; Len Therry, Edith Cowan University;
course of the first eight editions by the feedback Matthew Tilling, University of Western Australia;
received from many people and I would like to Irene Tutticci, University of Queensland; Mark
acknowledge the contribution that they have Vallely, University of Southern Queensland;
previously made. These people include: Trevor Wilmshurst, University of Tasmania;
Victoria Wise, University of Tasmania; Ann-Marie
Maria Balatbat, University of New South Wales; Wyatt, University of Technology Sydney.
Peter Baxter, University of the Sunshine Coast;
Poonam Bir, Monash University; Phil Cobbin, Thanks also go to many of my colleagues
University of Melbourne; Lome Cummings, at RMIT University for their friendship and
Macquarie University; Matt Dyki, Charles Sturt encouragement. The McGraw-Hill (Australia) team,
University, Wagga Wagga campus; Natalie including Simone Bella, Caroline Hunter, Claire
Gallery, Queensland University of Technology; Linsdell, Alison Moore, Paul Leslie, Bethany Ng,
John Goodwin, RMIT University; Deborah Janke, Genevieve MacDermott, Debbie Gallagher,
University of Southern Queensland; Maurice Gurdish Gill, Rosemary Gervasi and Katie Miller,
Jenner, University of Southern Queensland; also deserve a great deal of thanks for helping in
Graham Jones, Flinders University; Peter the preparation of this book.
Keet, RMIT University; Janet Lee, Australian And last, but certainly not least, thanks again go
National University; Steven Lesser, Charles Sturt to my 20-year-old daughter Cassandra for all the
University, Wagga Wagga campus; Stephen Lim, love and support she gives me in whatever I seem
University of Technology Sydney; Janice Loftus, to be doing and for continually helping me to put
University of Sydney; Wei Lu, Monash University; everything into perspective. As I have said before,
Diane Mayorga, University of New South Wales; she is indeed my finest work (and my most valuable
Kellie McCombie, University of Wollongong; ‘asset’) and represents that aspect of my life of which
Malcolm Miller, University of New South Wales; I am most proud. She is now ‘seven editions’ old.
xx
The statements contained in Financial Accounting are provided only as a guide for the users
of this textbook. The AACSB leaves content coverage and assessment within the purview of
individual school, the mission of the school, and the faculty. While Financial Accounting and the
teaching package make no claim of any specific AACSB qualification or evaluation, within Financial
Accounting we have identified chapters as containing content and labelled selected activities
according to the six general knowledge and skills areas.
xxi
OPENING QUESTIONS
Below are a number of questions that we want you to consider before reading the material in this chapter. We
will ask the same questions again at the end of the chapter and provide respective solutions. The solutions will
appear just before the end of chapter review questions but please do not look at the answers until you have
read the chapter. Each chapter of this book will have ‘Opening questions’ so that you can assess, or consider,
Learning objectives AASB standards referred to in this chapter
41
whether your views have changed, and therefore, your knowledge has been advanced, as a result of reading
An overview
foundation for your examof accounting
revision by using them to test IAS equivalents, to give you a broader understanding of
5. What power does the IASB have to enforce the accounting standards that it develops, and which are in use
internationally? LO 1.7
yourself. The end-of-chapter assignments also link back to how Australian standards link to the international scene.
for
these
An overview
assets
learning objectives.
of the
Australian external reporting AASB STANDARDS REFERRED TO IN THIS CHAPTER AND IFRS/IAS EQUIVALENTS
environment
LEARNING OBJECTIVES (LO) AASB no. Title IFRS/IAS equivalent
101 Presentation of Financial Statements IAS 1
4.1 Understand and be able to apply the definition of an asset.
4.2 Understand and be able to apply asset recognition criteria. 108 Accounting Policies, Changes in Accounting Estimates and Errors IAS 8
4.3 Understand how assets are measured, and that different measurement bases can be applicable to 1048 Interpretation of Standards —
LEARNING OBJECTIVES (LO)
different classes of assets. 1049 Whole of Government and General Government Sector Financial Reporting —
4.4 Know the meaning of ‘fair value’ and the reason that a ‘fair-value hierarchy’ has been introduced into the
1.1 Understand the meaning of ‘financial accounting’ and its relationship to the broader areas of ‘accounting’ and 1053 Application of Tiers of Australian Accounting Standards —
accounting standards. Also, be aware of some concerns that are attributed to the use of fair values.
‘accountability’.
4.5 Know how to differentiate between current and non-current assets.
1.2 Be able to explain who is likely to be a user of general purpose financial statements.
4.6 Be aware of how a balance sheet shall be presented.
1.3 Understand the role of the Australian Securities and Investments Commission with respect to general purpose financial
4.7 Have knowledge about how to account for property, plant and equipment, including how to account for
reporting within Australia, and be aware of the requirements within the Corporations Act that require the preparation of
related safety and
a Directors’
individual items of
1.4 Understand the
environmental
Declaration,
property,
expenditures,
Directors’
plant
role of the
Report, and arepairs
and equipment.
Australian
and by
Declaration maintenance, and how
the Chief Executive to allocate
Officer and Chiefcosts to Officer.
Financial
Accounting Standards Board with respect to general purpose financial
Chapter introduction
1.1 Accounting, accountability and the role of financial accounting
4.8 Be aware of accounting issues that arise when property, plant and equipment is acquired with assets
other
reporting within Australia.
than cash. the role of the Financial Reporting Council with respect to general purpose financial reporting within Australia.
1.5 Understand Each
In this bookchapter begins
we focus on financial with
accounting, and an excellent
particularly overview
financial accounting undertaken byoflarger-sized
the LO 1.1
4.9 Understand how the
1.6 Understand to determine the cost of
role of the Australian an assetExchange
Securities when the payments
with for
respect to the asset
general are financial
purpose deferred.reporting within organisations (which we will generally refer to as ‘reporting entities’) that are required to apply accounting standards.
4.10 Know Australia.
how to account for interest costs associated with the acquisition, or construction, of an item of material to be
But before we launch covered
into doing some ‘financialthat places
accounting’, it toinbriefly
it is useful the broader
consider how financial accounting
1.7 Be able
property, plantto and
explain the general functions of the International Accounting Standards Board and its relevance to
equipment. relates to the broader area of ‘accounting’, and how accounting in turn relates to the notion of ‘accountability’.
Australian
4.11 Be able to accountgeneral purpose
for an assetfinancial
that hasreporting.
been acquired at no direct cost. context of how
Financial accounting topics
represents in ofvarious
only a part the broader area chapters
of ‘accounting’. Sointerrelate.
what is ‘accounting’? Simply
1.8 Understand that accounting standards change across time, meaning that profits calculated in past years may not be
stated, accounting can be defined as the provisionCHAPTER of information about aspects of the performance of an entity to a
2: The Conceptual Framework for Financial Reporting 77
directly comparable with current profit calculations.
1.9 Be able to explain the idea of ‘differential reporting’.
particular group of people with an interest, or stake, in the organisation—we can call these parties stakeholders. But
what ‘aspects of performance’ should ‘accounting’ address and what ‘accounts’ are stakeholders entitled to? This
Videos Before 1.10 Understand
reading
for your1.11
the watch
this chapter, role of the
the auditor, and the video
accompanying auditor’s report,Deegan
of Craig with respect to general
explaining whypurpose financial
this topic
NEW!
reporting.
is important
Be aware of some of the perceived benefits pertaining to the international standardisation of financial reporting as
studies.
Worked examples
really depends upon judgements we make about the organisation’s responsibilities and accountabilities. For example,
Assets acquired at no cost
espoused by the International Accounting Standards Board. if we were to accept that an entity has a responsibility (and an accountability) for its social and environmental impacts,
Opening questions
dee67382_ch04_159-200.indd 160 10/17/19 08:09 AM
CHAPTER 2: The Conceptual Framework for Financial Reporting
A reporting entity has been involved with the following transactions and events:
75
ANSWERS
108 TO OPENING
Accounting QUESTIONS
Policies, Changes in Accounting Estimates and Errors IAS 8
is what we have just discussed. However, as the above The paragraph indicates, further criteria (other thanof meeting
balance sheet
which provides information about
financial the
accounting
definition of an element of financial accounting)
Liabilities are required to be satisfied before an item shall be recognised for
the financial position of an organisation
138 Intangible Assets IAS 38 financial accounting purposes. at a point in time
At the beginning of the chapter we asked the following seven questions. As a result of reading this chapter we should now
1053 Application
be able to provide of Tiers of
informed answers to Australian Accounting Standards
these questions. — When the Conceptual
Equity Framework was revised and re-released in 2018, it specifically required that accountants
must consider the fundamental qualitative characteristics of relevance and faithful representation (which were
1. What is the difference in role between a conceptual framework for financial reporting and accounting standards?
LO 2.1, 2.2
discussed earlier) when deciding if an item should be recognised within the financial statements. This was a change
2.1A An introduction
conceptual to the
framework provides IASB
a general Conceptual
framework Framework
for general purpose financial reporting and does not deal from the previous recognition criteria, which focused on assessing the probability of future economic benefits, as well
LO 2.1 with individual, or specific types of, transactions or events. Accounting standards, by contrast, deal with specific as whether the item could
Incomebe measured reliably. Specifically,
The income thestatement
Conceptual Framework now requires that an asset
which provides information about
types of As noted
assets in Chapter
or liabilities 1, in 2005,
or transactions Australia
or events. startedstandards
Accounting using the
takeaccounting
precedencestandards issued by the
over the conceptual the financial performance of an organisation
International
framework. When there is Accounting Standards
no specifically Board (IASB).
relevant accounting Asreference
standard, such, there was
should be also
madeatorelated requirement
the conceptual Expenses for a period of time
Conceptual Framework that we use the Conceptual Framework developed by the IASB. That is, because International
framework.
A framework that
Financial
2. What benefits
describes the objective Reporting
are generated as aStandards (IFRSs)
result of having have been
a conceptual developed
framework in accordance
for financial with
reporting? LO 2.2 the IASB
Conceptual
of, and the concepts for,Section 2.2 Framework
of this chapter identified for Financial Reporting, and as Australia adopted IFRSs, then Australia
the benefits.
general purpose financial
must also adopt the IASB Conceptual Framework. This meant we had to move away
3. What qualitative characteristics will useful financial accounting information be expected to possess? LO 2.8
from using the dee67382_ch02_059-098.indd 77 10/18/19 07:05 AM
reporting.
First, theconceptual framework
information should that and
be relevant we faithfully
had developed
representwithin Australia.
the underlying Other or
transaction countries
event thatthat have adopted
it purports to
Definition and recognition of assets asset
xxii represent.IFRSs have similarly
To enhance adopted
the relevance the IASB Conceptual
and representational Framework
faithfulness, and should
the information abandoned
also betheir domestically
comparable, According to the Conceptual Framework, an asset is defined as: Defined in the Conceptual
Framework as ‘a present
developed frameworks. The
verifiable, timely andpurpose of the Conceptual Framework can be summarised as follows:
understandable. economic resource
a present economic resource controlled by the entity as a result of past events.
(a) assist
4. the
What IASB to develop
are the accounting
five different standards
‘elements’ thataccounting?
of financial are based on LO consistent
2.9 concepts controlled by the entity as
a result of past events’.
(b) assist They
preparers of financial
are assets, statements
liabilities, income, to develop
expenses consistent accounting policies when no accounting
and equity. The above definition of an asset refers to an economic resource. An ‘economic resource’ is
standard applies to a particular transaction or other event, or when an accounting standard allows a choice of defined in the Conceptual Framework as:
5. What are the three main components of the definition of assets? LO 2.9
accounting policy entity controls the resource; the control exists as a result of a past transaction or event; and the
The reporting a right that has the potential to produce economic benefits.
(c) assist all partieshas
resource tothe
understand
potential toand interpret
produce accounting
economic benefitsstandards.
for the reporting entity.
It is6.generally accepted
Are all assets that ittoisbeunwise,
required measured andusing
perhaps illogical,
the same basisto
of develop accounting
measurement? LO 2.10 standards unless there is first
some agreement on key,
No, assets canfundamental
be measured issues, such as:measurement
using different the objectives of general
bases. purpose financial
The measurement reporting;
basis used the
should be qualitative
chosen
characteristics that useful
according financial
to whether it bestinformation shalland
enables relevant possess (for example,
representationally relevance
faithful financialand representational
information faithfulness);
to be presented to
dee67382_fm_i-xxvi.indd
how and when transactions
the users xxii
should
of the financial be recognised; what constitutes an element of financial reporting; and who is the
statements. 10/24/19 04:13 PM
audience7. ofWhat
general purpose
role does financialhave
‘materiality’ statements. Unless
with respect the accounting
to deciding profession
whether particular and accounting
financial informationstandard-setters
should be dee67382_ch02_059-098.indd 75 10/18/19 07:05 AM
NEW!
the capacity of an entity
before an asset can be shown within the body of an entity’s balance sheet (statement of financial
Why do I need to know . . .?
∙ a single measurement basis for all assets and liabilities may not provide the most relevant information for users of
The residual interest
financial is a claim or right to the net assets of the reporting entity held by the owners of an organisation.
statements Key terms
towith accounting
benefit from an assetstandards.
the pursuit of the entity’s
in
position). Frequently, controlled assets are owned, but this is not always the case. For example, many
As a residual
∙ theinterest,
numberequity ranksmeasurements
of different after liabilities inshould
used terms be
of the
a claim against
smallest the necessary
number assets of atoreporting entity.information.
provide relevant Consistent objectives and to deny organisations include leased assets (and the associated lease liabilities) in their balance sheets.
These boxes enhance real-world relevance; they help
or regulate the access of
with the definitions
and liabilities.
∙ the Given
of income
Unnecessary
benefitsthat
and expenses,
measurement
equityofrepresents
to users
the definition
changes should
a residual
financial reports
be avoidedof and
of a interest
equity is directly
necessary
inmeasurement
particular
a function
measurement
the assets of approach
an entity,need
of theshould
changes
the amount
definitions of assets
be explained
disclosed
to be sufficient as equity
to justify the
Key terms areto thebolded
others to that benefit.
in the text the first time they are
There are many resources that generate benefits for an entity but which are not recognised due
absence of control. For example, the use of the road system generates economic benefits for an
make the content relevant to your working life after
will correspond with the difference
cost associated between
with compiling the the amounts assigned to assets and liabilities. As such, the criteria for the
information. used,entity.
defined in the margin atbutthat point,
that such and
entities dolisted atwaterways,
the
However, because the entity does not control the roads, they do not constitute assets of the entity. Similarly, particular
waterways might provide economic benefits to entities, to the extent not control the
recognition Research
of assets has
andindicated
liabilities,
thatinmanagers’
turn, directly govern
support the recognition
for particular of equity.
measurement rulesTherefore, there isby
will be influenced nothe
need for a
industry
university.
separatetorecognition
which they criterion for example,
belong. For equity. Houghton and Tan (1995) undertook a survey of the chief financial officers of end they
of are not assets of those entities despite the fact that the organisation has a right to use them.
each
dee67382_ch02_059-098.indd
chapter.
93
They also appear in the glossary at
10/18/19 07:05 AM
the Group of 100, an association of senior accounting and finance executives representing major companies and Past events
government-owned enterprises in Australia. They found that 80 per cent of the respondents were satisfied with the end
In relationofto the
‘control’,book.
it therefore follows from the requirement that the relevant transaction must already have
historical cost. The respondents’ views were that historical cost is objective and verifiable; easily understood and occurred that future economic benefits which are not currently controlled are not to be recognised by a reporting entity.
widely known; and allows for consistency and comparability. Of the 20 per cent of respondents who did not favour
WHY DO I NEED TO KNOW ABOUT THE DEFINITIONS AND RECOGNITION CRITERIA
historical cost, at least half thought that historical cost was either meaningless or misleading and lacked relevance.
Potential to produce economic benefits
FOR THE ELEMENTS
Perhaps OF FINANCIAL
the above findings are not surprising.ACCOUNTING?
If a firm adopts some form of fair-value-based accounting, this will The expected future economic benefits can be distinguished from the source of the benefit—a
typically introduce some degree of volatility into the financial statements, given that market values tend to fluctuate.
future economic particular object or right. The definition refers to the economic benefit and not the source. Thus,
If we This
do not understand the bedefinitions benefits whether an object or right is disclosed as an asset will be dependent upon the potential it has to
volatility might not favoured and recognition particularly
by management, criteria, then we will
if they havenot really understand
accounting-based debt what the in
contracts The scarce capacity to
reported financial performance and financial position
place or are themselves rewarded in terms of accounting of profits.
an organisation
For example,actually
generalrepresents. For example, is,
insurers in Australia—that provide benefits to the generate economic benefits for the entity. In the absence of potential to generate economic benefits,
as a result of knowing
organisations theindefinitions
involved of the elements
providing insurance for lossesofassociated
financialwith
accounting,
events suchweasknow
theft, that
storm,certain
vehicleaspects
accidents, 54 PART
entities 1: The
that use them— Australiantheaccounting
object or right should not be considered to be an asset. Rather, any related expenditure would
environment
fire and flood—are
of organisational required towill
performance value
nottheir
be investments
reflected withinon the reported
basis of theprofits—for
assets’ fair values,
instance, withcertain
any changes
impacts in fair
common to all assets constitute an expense.
irrespective of their
on thevalues being treated
environment will as
notpart
beofreflected
a financial period’s
within profit
profits, or loss. because
perhaps Many managers of general
the negative insurance
impacts causedcompanies
by physical or other form. Therefore, cash is an asset owing to the economic benefits that can flow as a result of the
were particularly
the organisation opposed
related to the requirement
to resources that wereto use
notfair‘controlled’
value when byit was
theintroduced some and
organisation, yearswhich
ago. Intherefore
their view, it 3. Does the AASB have purchasing
legal power power it generates.
to enforce A machine
accounting is an asset
standards withinto Australia?
the extent LO that1.4
economic benefits are
introduces unwanted and unnecessary volatility anticipated to flow from
anyusing it. That is,powers.
the assetWithin
is effectively the itfuture economic benefits that
had not ever been recognised as assets of theinto the accounts,We
organisation. given that market
would values
therefore of investments
know can is
that ‘profits’ change
a No. The AASB does not directly have enforcement Australia, is ASIC that enforces the
quite drastically in either direction duringorganisational
an accounting period. will be generated,
requirements of thenot the source ofAct,
Corporations theand
economic benefits
it is within (such as the machine).
the Corporations Act that These
there iseconomic benefitsfor
a requirement could come
particular
somewhat incomplete measure of overall performance. As another example, through having
Houghton and Tan alsoand found that the level of support for historical cost or present from two broad sources—either from the asset’s use, or from its sale. If the economic benefits are greater from its use
knowledge of the definitions recognition criteria, we will also know that certain value and fairthat
resources value
areseemed
used to forms of organisations to comply with accounting standards.
by the reporting entity, then the asset would be expected to be retained, otherwise it would likely be sold. That is, the
by andepend on the industry
organisation will nottonecessarily
which the respondent
appear in belonged. Individuals
the balance sheetworking
if theyinare
financial institutions had
not ‘controlled’, or ifa there
statistically
is 4. What Conceptual Frameworkofdoes
is the relevance thenot require an item
International to have a Standards
Accounting value in exchange
Board before
(IASB)ittocan be recognised
general purpose asfinancial
an asset.
significant preference for fair-value measures as opposed to historical cost, while non-financial-institution representatives
some significant doubt about the relevance, or faithful representation, of the information pertaining to the The economic
reporting withinbenefits
Australia?mayLO result
1.7from its ongoing use (often referred to as value in use) within the organisation.
had a significantly stronger preference for historical cost. To explain this difference, the authors note (p. 36):
underlying item.
By their nature, a significant part of the activities of financial institutions involves dealing with assets (investments Review questions
The IASB As already
economicthat
standards
noted,
is of great
benefits
have be
the previous
relevance
probable,
legal force by which
definition
to general purpose
meant
virtue of the
of an
more
asset and
financial
likely than Act,
Corporations
liability
reporting
less and
likely.
had required
within
theThis
Australia.that
Thethe
is no longer
majority of these
AASBexpected
theaccounting
requirement.
future
releases flows of
accounting
Recognition
standards are
and other financial instruments) for which there are active markets. Accordingly, information based on Present is now based uponofthere beingby a ‘potential’
developed outside Australia the IASB. for economic benefits to flow to the reporting entity. For that potential to
Values might be seen by these users as being more appropriate in evaluating financial performance and position.
These questions ask you to reflect on key topics within
5. What
exist, it does not need to be certain, or even likely, that the right will produce economic benefits. It is necessary only that
power
the right doesexists
already the IASB haveoftoa enforce
as a result the accounting
past transaction or event and standards
that, in atthat
leastitone
develops, and which
circumstance, areproduce
it would in use
Although the Houghton and Tan study looked only at the perceptions of financial statement preparers and not
Exhibits financial statement users, the results do imply that perhaps it is not appropriate to expect all industries to favour the
2.10 Measurement principles
the chapter, and help cement your learning. For this
internationally?
The
economic benefits
benefits
IASB has
LO for
are judged
1.7the reporting entity. However, while there is no longer a requirement that the future economic
no powerto beto‘probable’,
enforce itsthe assessed probability
accounting standards. willIt is nevertheless influence
a standardsetter, not the measurement ultimately
a standardenforcer. When
formatConceptualforframeworks
accounting. They
have tended to provide highlight
very limited prescriptionthe relevance
in relation of the
to measurement issues. Assets
and liabilities are often measured in a variety of ways depending upon the class of assets or liabilities being considered. REVIEW QUESTIONS (KEY: Easy • Medium •• Hard •••)
chapter
Given the way content to the
income and expenses practice
are defined—which reliesof accounting,
upon measures attributed to provide
assets and liabilities— dee67382_ch02_059-098.indd 76 10/18/19 07:05 AM
this has direct implications for reported profits. For example, liabilities are frequently recorded at present value, face
another element to the topics covered and help to 1. Describe the roles of ASIC, the AASB, the ASX and the FRC, and the relationships between these regulatory bodies.
LO 1.3, 1.4, 1.5, 1.6 ••
reinforce
168 learning.
PART 3: Accounting for assets
2. What is the IASB and how does it affect financial reporting regulation in Australia? LO 1.4 ••
3. What enforcement powers does the IASB have? LO 1.7 •
CHALLENGING QUESTIONS
12. What is included in a Directors’ Declaration, and what are the implications if a director signs the declaration and the
organisation subsequently fails, owing millions of dollars that it cannot repay? LO 1.3 ••
22.
13. IfWhat
directors
does believe
it mean that thethat
to say application of a particular
some financial statementsaccounting
are ‘true standard
and fair’?isHow
inappropriate to the circumstances
would a director of
try to ensure that
their organisation,
the financial what options
statements are trueare
andavailable to them
fair before he or when compiling
she signs their financial
a Directors’ statements?
Declaration? •• 1.3
LO 1.3 LO
23.
14. Accounting standards change
How are International Financialacross Why? LO 1.8
time. Standards
Reporting developed and revised? Explain the role of the AASB in that
24. Ifprocess. LO 1.4,
a company 1.7 ••
adopted a particular accounting policy that ASIC considered to be questionable, in principle ASIC might
15. consider taking
What is the legal action
relevance against
to Australia ofthe company’s directors
Interpretations issued byfor failing
the IFRS to produce trueCommittee?
Interpretations and fair financial
LO 1.7 ••
statements.
However, from a practical perspective, why would it be difficult for ASIC to prove in court that the company’s financial
16. statements
What authority
weredonot
Interpretations
true and fair?issued
LO 1.3by the IASB and AASB have in the Australian financial reporting context? If
they do have authority, from where does this authority emanate? LO 1.4, 1.7 ••
25. Visit the website of a company listed on the ASX. (Hint: some corporate website addresses are provided in this
•
17. chapter.)
What are Review
the functions of the IASB?
the company’s LO 1.7 governance
corporate disclosures and determine whether the company complies xxiii
with the ‘Eight Essential Principles of Corporate Governance’ identified by the ASX. If the company discloses non
compliance, evaluate the reasons provided for this noncompliance. LO 1.6
26. Considered together, does the set of existing accounting standards provide guidance for all transactions and events
that might arise within an organisation? If not, what guidance is available to the organisation? LO 1.3, 1.4
27. The decision
dee67382_ch01_001-058.indd 54 that Australia would adopt IFRSs was in large part based on the view that Australian reporting entities,
10/17/19 07:49 AM
and the Australian economy, would benefit from adopting accounting methods that are the same as those adopted
internationally. Do you think that all Australian reporting entities have benefitted from international standardisation?
LO 1.11
28. Globally, there are variations in business laws, criminal laws and so forth. Such international variations in laws will be a
dee67382_fm_i-xxvi.indd xxiii 10/24/19 04:13 PM
result of differences in history, cultures, religions and so on. While we are apparently prepared to accept international
differences in various laws, groups such as the IASB expect there to be global uniformity in regulations relating to
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Tykkiä Kolja piti kädessään kaikkien edessä, niin että jokainen voi
nähdä ja nauttia. Iljuša kohottautui ja katseli ihastuneena leikkikalua
syleillen edelleen oikealla kädellään Perezvonia. Vaikutus kohosi
suuremmoiseksi, kun Kolja ilmoitti, että hänellä on ruutiakin ja että
voi heti laukaista tykin, »jos se vain ei häiritse naisia». »Äitikulta»
pyysi heti, että hänen annettaisiin lähempää katsella leikkikalua,
mikä pyyntö heti täytettiinkin. Pronssinen tykki, joka oli pyörien
varassa, miellytti häntä tavattomasti, ja hän alkoi kuljetella sitä
polvillaan. Pyyntöön saada ampua hän antoi täydelleen myöntävän
vastauksen ymmärtämättä sentään, mitä häneltä pyydettiin. Kolja
näytti ruudin ja haulit. Alikapteeni entisenä sotilaana ryhtyi itse
lataamaan ja pani tykkiin hyvin pienen määrän ruutia sekä pyysi
jättämään haulit toiseen kertaan. Tykki asetettiin lattialle, suu tyhjää
paikkaa kohti, sankkiin pistettiin kolme ruutijyvää ja sytytettiin
tulitikulla. Tulokseksi tuli mitä loistavin laukaus. »Äitikulta» vavahti,
mutta alkoi heti nauraa ilosta. Pojat katselivat äänettöminä ja
juhlallisina, mutta kaikkein onnellisin oli alikapteeni katsoessaan
Iljušaan. Kolja nosti tykin lattialta ja lahjoitti sen Iljušalle samoin kuin
haulit ja ruudin.
— Äiti, ota itsellesi, tässä on, ota itsellesi! — huudahti äkkiä Iljuša.
— Krasotkin, saanko minä lahjoittaa sen äidille? — kääntyi hän äkkiä
rukoilevan näköisenä Krasotkinin puoleen ikäänkuin peläten, että
tämä loukkaantuu, kun hänen antamansa lahja lahjoitetaan toiselle.
— Ruutia minä tuon sinulle nyt tästä lähin niin paljon kuin vain
tahdot, Iljuša. Me teemme nyt itse ruutia. Borovikov on saanut tietää
sen kokoonpanon: kaksikymmentäneljä osaa salpietaria, kymmenen
rikkiä ja kuusi osaa koivuhiiltä, kaikki on survottava yhdessä,
kaadettava siihen vettä, sekoitettava puuroksi ja hierottava rummun
nahkan läpi — näin saadaan ruutia.
— Hän tietää kaikki, isä, tietää paremmin kuin kaikki muut! — yhtyi
Iljušetškakin puheeseen. — Hän vain on olevinaan tuommoinen,
mutta hän on koulumme paras oppilas kaikissa aineissa…
— Minä se olen.
— Ahaa!
6.
Varhainen kehitys
— Ja ymmärsittekö?
— Oi, kyllä, kaikki… se on… miksi te luulette, että en olisi
ymmärtänyt? Siellä on tietysti paljon rivouksia… Minä tietysti pystyn
ymmärtämään, että se on filosofinen romaani ja kirjoitettu aatteen
esittämiseksi… — sekaantui Kolja jo kokonaan. — Minä olen
sosialisti, Karamazov, minä olen parantumaton sosialisti, — sanoa
paukautti hän yhtäkkiä hyötähyviään.
Rakennuksen muistat sä
Ketjusillan luona.