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BFA201 Financial Accounting : Superannuation Entities

Questions:

Question 1
The regulatory environment and financial reporting 
You are employed in a large accounting firm which specialises in preparing general purpose financial reports for large companies that are listed on the Australian Securities Exchange (ASX). As the training manager, one of your key tasks is to prepare a regular newsletter for staff involved in the preparation of the above financial reports. The purpose of the newsletter is to keep staff updated on the latest financial reporting news, alerting staff of changes and developments that may impact their work, and provide enough information to staff to satisfy the following:
For staff to understand the nature of the news / change / development and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work);
Provide directions to staff of where they can access further information on the news / change / development if they wish to (including website links where appropriate).
Required:
Detailed guidelines for completing this task:
1. Identification of changes and developments
This will involve extensive research on a number of sources over the required period. You will need to identify and consider a range of developments/changes such as:
Technical issues: for example the issue of new accounting standards, amendments to accounting standards, updates on AASB or IASB projects in progress, outcomes of AASB or IASB meetings, amendments to ASX listing rules.
Regulation and monitoring of financial reporting: for example ASIC reviews on financial reporting.
Political influences or other potential developments. '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.
What not to consider?
You need to take care that the news / changes / developments included in the newsletter are relevant to the objective, in particular that they relate directly to the preparation of general purpose financial reports for large companies listed on the ASX. The newsletter should not consider areas only indirectly related to the preparation of financial reports such as (this is not an exhaustive list):
Fraud
Auditing
Taxation
Other disclosures by listed companies such as: industry disclosures required by peak organisations, and voluntary disclosures in the area of corporate social responsibility.
2. Potential sources
Given the scope of the potential influences on financial reporting, you will need to research 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:
(a) Websites such as those of:
Australian Accounting Standards Board
Financial Reporting Council
Australian Securities and Investment Commission
Australian Securities Exchange
International Federation of Accountants
Chartered Accountants Australia and New Zealand
International Accounting Standards Board
Websites of large accounting firms
(b) Professional publications:
In the Black (CPA)
Acuity (CAANZ)
(c) Newspapers/journals
3. Format and presentation
The following are to be observed for your newsletter preparation.
The top of the newsletter must include the title (you need to decide 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 news / 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 (including website links where appropriate) so that they are able to obtain more detailed information of the news / change / development.  If you include direct quotations in your newsletter, you need to include in-text citations using the APA referencing format.
The newsletter must be printed in minimum font set at 11 points (you may wish to use different formatting (such as larger fonts) for headings etc. 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 or margins to 'fit more in' may impact on the presentation and effectiveness of the newsletter.
Question 2
Financial statement presentation
Cash at bank    18,200     
Cash management account    150,000     
Accounts receivable    123,900     
Interest receivable    6,700     
Inventory    212,400     
Raw materials    100,500     
Prepaid rent    13,600     
Investment property    614,000     
Loan receivable    60,000     
Land (at cost)    1,100,000     
Plant and equipment (at cost)    652,200     
Accumulated depreciation – plant and equipment         104,300
Goodwill    68,300     
Accounts payable         75,800
Allowance for doubtful debts         14,600
Current tax liability         33,500
Accrued wages payable         8,200
Interest payable         8,300
Dividends payable         45,000
Provision for annual leave         36,000
Provision for long service leave         27,000
Provision for warranty         17,000
Debentures (due April 2020)         600,000
Bank loan         500,000
Share capital         500,000
General reserve         276,800
Retained earnings                               873,300
$3,119,800    $3,119,800
Additional information:
All assets other than cash at bank, cash management account, accounts receivable, interest receivable, inventory, raw materials, and pre-paid rent are non-current.
All liabilities other than accounts payable, allowance for doubtful debts, current tax liability, accrued wages payable, interest payable, dividends payable and provisions listed below are non-current.
Provision for annual leave includes $19,000 payable within 1 year.
Provision for long service leave includes $8,000 payable within 1 year.
Provision for warranty includes $5,000 payable within 1 year.
In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Winter Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.
Required:
The purpose of this task 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. 
Given that all reporting entities need to prepare general purpose financial reports, accounting professionals need to be experts in preparing key financial statement reports that comply with the presentation requirements contained in the accounting standards. 
Accounting professionals also need to ensure that they are aware of current developments in the financial reporting environment 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 and prepare financial statement reports in accordance with accounting standard requirements. As such this assignment allows you to:
develop the ability to identify and source changes to accounting/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 accounting and reporting rules and regulations;
develop the ability to provide written material appropriate to the accountancy profession;
appreciate the limitations of the currency of knowledge in a technical financial reporting area; and
research current financial reporting obligations relating to the preparation and presentation of general purpose financial statement reports and apply this knowledge to a range of practical situations.
This assignment will assess your ability to:
discuss critically and comprehensively changes and developments in the statutory and professional requirements upon which published financial statements are based;
prepare basic financial statements for reporting entities, in accordance with accounting standard requirements; and
be able to interpret and apply generally accepted accounting principles and specific financial accounting standards relating to concepts of recognition, measurement, and disclosure of key financial statement elements when preparing general purpose financial reports.

Answers:

Answer 1:

Recent developments in financial reporting:

The year 2017 marks the first year in which the significant global entities would prepare the general purpose financial statements and also submit the same to the Australian Taxation office. These financial statements prepared must correspond to the income year and must be handed over to the Commissioner by the time he company is able to lodge its tax return.

Superannuation entities:

The superannuation investments in the country of Australia totals to about $2 trillion. And it is for this reason that the members of the superannuation funds must have an access to the information which is easy to understand whe


n it comes to the overall performance. From this year, the financial statements of the superannuation funds would show in the benefits that the members are entitled to and also, whether this fund is likely to be able to pay in the benefits. These new requirements replaces the AAS 25 which relates with the financial reporting by the superannuation plans. These apply to the larger superannuation companies which are regulated by the Australian Prudential Regulation authority and also to the superannuation entities of the public sectors. These new requirements fails to apply to the self-managed superannuation funds and also results in some of the significant changes in the presentation, measurement and also to the disclosure requirements. When it comes to the initial application, these entities are not required to present the statement of financial position (EY, 2017).

The next steps would include in the facts for the entities that have not yet adopted the ASC 606. The effective date for the same would be aligned in with ASC 606. In respect of the business entities that are already following it, the same is effective for the fiscal years which begins after December 15, 2017. This includes the interim period within the stated fiscal year. As for the other companies, the effective data is after the fiscal year December 15, 2018 and also the interim periods within the fiscal years which begins on or after December 15, 2019.

Share-Based Payment:

The FAS issued ASU 2017-09 which deals with the amendment in the scope of the modification accounting for the arrangements pertaining to the share based payments. It provides insight into the terms and the conditions of the wards of the share based payments that would be required for the application of the modification accounting under the ASC 718. An entity would not apply the modification in case, the fair value, vesting conditions, classification of the wards are somewhat same as were before and after the modification took place. The following is the link for the same: 

IASB Issues New Insurance Contracts Standard: 

IASB released the IFRS 17 which deals with the principles for the recognition, measurement, presentation and the insurance contract disclosures. The main aim of this standard is the reduction of the diversity in practice which rose due to the IFRS 4. This standard allowed the company to carry on the accounting for the insurance contracts by the way of using the national accounting standards which results in many of the different approaches.

The development would be lead to an increased comparability by the way of requiring in all of the insurance contracts to be accounted for in a consistent manner.

PCAOB Issues Standard on Auditor’s reporting Model: 

The PCAOB has recently released a standard relating with the reporting by the auditors wherein a new section by the auditors will have to be added in their report which is named as “Critical audit matters” wherein the main considerations that contorts to CAM and the way in which he has addressed these issues and also would contain the other accounts and the disclosures in the financial statement (IAS plus, 2017). 

FASAB Issues Statement on Tax Expenditures: 

The FASAB has issued a statement wherein the narrative disclosures and the information pertaining to the tax expenditures will have to be reported in the governments consolidated financial report. This would help the users of the financial statements in understanding the tax expenditures, their purposes, impact on the collection of the taxes and the contribution to the costs pertaining to the programs (FASB, 2017). 

GASB Issues Guidance on Certain Debt Extinguishment Issues 

The GASB had issued a statement wherein the transactions which includes cash and other monetary assets that have been acquired using the existing resources or the resources other than the proceeds of refunding the debt would be placed in a trust that would be irrevocable for the purposes of extinguishment of the debt (IFRS, 2017). 

GASB Issues Implementation Guide Related to OPEB Standard: 

As per this development, a guide including the scope and the applicability of the statement 74, types of the post employ mental benefits, defined benefit OPEB plans which have bene administrated through the trusts etc have bene defined out.

Answer 2:

The following is the Statement of financial position:

Statement of financial position

 Current assets:

 Amounts in $

 Cash at bank

                    18,200.00

 Cash management account

                 1,50,000.00

 Accounts receivable

                 1,09,300.00

 Interest receivable

                      6,700.00

 Inventory

                 2,12,400.00

 Raw materials

                 1,00,500.00

 Prepaid rent

                    13,600.00

 Total current assets

                 6,10,700.00

 Non-current assets:

 

 Land (at cost)

               11,00,000.00

 Plant and equipment, net of accumulated depreciation

                 5,47,900.00

 Goodwill

                    68,300.00

 Investment property

                 6,14,000.00

 Loan receivable

                    60,000.00

 Total non-current assets

               23,90,200.00

 Total assets

               30,00,900.00

 Current liabilities:

 

 Accounts payable

                    75,800.00

 Current tax liability

                    33,500.00

 Accrued wages payable

                      8,200.00

 Interest payable

                      8,300.00

 Dividends payable

                    45,000.00

 Provision for annual leave

                    19,000.00

 Provision for long service leave

                      8,000.00

 Provision for warranty

                      5,000.00

 Total current liabilities

                 2,02,800.00

 Non-current liabilities:

 

 Debentures (due April 2020)

                 6,00,000.00

 Bank Loan

                 5,00,000.00

 Provision for annual leave

                    17,000.00

 Provision for long service leave

                    19,000.00

 Provision for warranty

                    12,000.00

 

 

 Total non-current liabilities

               11,48,000.00

 Total liabilities

               13,50,800.00

 Net assets

               16,50,100.00

 Equity:

 

 Share capital

                 5,00,000.00

 General reserve

                 2,76,800.00

 Retained earnings

                   8,73,300.0

 Total equity

               16,50,100.00

References:

Accounting Roundup — May 2017. (2017). Iasplus.com. Retrieved 29 August 2017, from https://www.iasplus.com/en/publications/us/accounting-roundup/2017/05

Accounting Standards Update 2017-09—Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. (2017). Fasb.org. Retrieved 29 August 2017, from https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176169021134&acceptedDisclaimer=true

Accounting Standards Updates—Effective Dates. (2017). Fasb.org. Retrieved 29 August 2017, from https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137102

Developments. (2017). www.ey.com. Retrieved 29 August 2017, from https://www.ey.com/.../financialreportingbriefs...22june2017/.../financialreportingbriefs_038

IFRS. (2017). Ifrs.org. Retrieved 29 August 2017, from https://www.ifrs.org/

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