Changes in the accounting standards in relation to financial reporting
Preparing the financial statements is one of the most vital financial activities that every company needs to perform. Due to this in order to prepare the financial statements the companies or the accountants need to follow the right methods and standards that have been provided by the accounting standard boards. In the context of Australian companies following the accounting standards provided by the Australian Accounting Standard Board and International Financial Reporting Standard is mandatory (Gonçalves & Lopes, 2017). In this context it must be noted that while preparing the financial reporting standards the accountants must consider the changes that have been taken place in the financial reporting standards.
Being employed at KPMG, every staff must know about the changes in the Australian accounting and financial reporting standards. In this context it must be mentioned that in the last few years the financial reporting standards have been changed much. For example, in 7th august 2018, AASB introduced the new approach ITC 41 for improving the financial reporting quality of the non-profit organization. The primary objective for introducing ITC41 is to enhance the level of transparency in financial reporting of non-profit organization (Stannard, 2017). At the same time ITC 41 also aims to maintain consistency with the financial reporting standard provided by IFRS. On the other hand, in 2nd august 2018, AASB announced the open for registration to replace special purpose financial statements (Svoboda & Bohušová, 2017).
If the focus is made on the amendments in AASB, it can be identified pronouncement of AASB 2016-1 that is amendment to recognition of deferred task assets for unrealized losses states that the value of deferred task assets for unrealised losses on the debt instruments must be measured at their fair value. It means while accounting for deferred tax assets for unrealised losses. The staffs of KPMG must not consider the original value of the assets. AASB2016-2 the amendments for disclosure initiatives states that cash flows of the companies are needed to be disclosed for helping the users of financial statements in understanding organizations changes in terms of debt (Lowe & Campbell, 2017). This amendment has been made to make consistency with IASB’s initiatives for disclosure. Considering these particular amendments the staffs of KPMG must disclose the client firm’s changes in respect to liabilities through financial activities. This disclosures need to include change in both cash flows item and non cash items.
AASB 2016-4 amendment for recoverable amount of non cash generating assets for the non-profit organizations: This particular amendment has been made on the standard of AASB136 to remove the cost of deprecated replacement. Considering the amendment the staffs f KPMG, should not include the AASB 116 ad AASB 138 under the standard of AASB 136. The non-profit organizations, which are holding this kind of assets at the cost value can measure or identify the recoverable amount by flowing the standard of AASB 13, which recommend t measure the assets at their fair value (Bohusova & Svoboda, 2017).
AASB 2017-2 amendment for improving annual reporting cycle 2014-2016: With the help of this amendment the scope of the standard AASB 12 has been clarified. This particular standard of accounting states about the disclosure requirement that is applicable to an organization’s interest on the other organizations. This standard classifies the interest of the organization that is held for discontinued operations or sale in accordance to the AASB 5.
AASB 9 the amendments in relation to financial instruments: the amendments in AASB-9 have been made for replacing the standards under AASB 139 – recognition and measurement of financial instruments. As per the amendment the financial instrument of an organization must be recognised and measured at their fair value plus FVTPL and transaction cost (Ogilvy & Vail, 2018). On the other hand, in the context of debt instruments the measurement must be made at their amortised cost and FBTPL. This measurement must be done based on the debt instrument’s cash flows and the model of business that is used by the organizations for holding debt instruments. In the case of equity instruments the measurements is done generally on the basis of FVTPL. However, sometimes organizations have the option of irrevocable on the instrument-by-instrument method to determine the fair value changes in non trading instruments. Apart from these amendments their measurement requirements and classification requirement for the financial liabilities of an organization are carried forward to the AASB-9 (Keshk et al., 2018). This includes the separation rules for the embedded derivative instruments and the criteria that are required for using FVO. The model for incurred credit loss under the standard AASP139 has been replaced by the model of expected credit loss under the standard of AASB 9. The amendment for hedge accounting as made the hedge account system of method more principle based and this amendment has been made to remove the inconsistencies under the model of hedge accounting stated by or provided by AASB- 139 (Lowe & Campbell, 2017).
AASB15 and relevant amendments: these amendments have been done in respect to recognize ion measuring revenue from the customers of the companies. Under these amendments all the requirements for the revenue recognition under AASB have been replaced. These amendments are applicable to all the contracts with the customers in relation to revenue regeneration (Gonçalves & Lopes, 2017). However, in this context it must be noted that these amendments are applicable only when the contracts with the customers are not associated with the scope of other AASB standard like AASB-117. These amendments under AASB 15 suggests the accountants to recognize the revenue d the organization by the application of certain steps which are suggested by the core principle of revenue recognition. These steps are as follows
Step1: the first step under the core principle of revenue recognition is to identify the contracts with the customers that can generate revenue for the company.
Step 2: The second step under the core principle of revenue recognition is to determine obligations or performance associated with the contracts (Ogilvy & Vail, 2018).
Step 3: the third step is to determine the price of each transaction
Step 4: in the fourth step the ore principle of revenue recognition suggests tp allocate the price of transactions to each contracts performance oblations (Bohusova & Svoboda, 2017).
Step 5: in the fifth step the revenue is recognized after satisfying all obligations for performance.
AASB 2016-5 amendments in relation to measure and classification of share based payments: these amendments have been made to improve the share based payment standard under AASB 2. These amendments clarify the accounting methods for some specific types of transactions in relation to the share based payment. E requirements under this amendment are as follows
- The transactions related to the share based payment must include the settlement featured for the obligations of withholding tax (Svoboda & Bohušová, 2017).
- There must be the effect of conditions related to non-vesting and venting measurement of the share based payments that are cash-settled.
AASB 2016-6 amendments for the application of AASB 9 along with AASB 4: These particular amendments are made to improve the standards under the AASB 4 (insurance contracts). As per these amendments the issuers of the insurance contracts are permitted to select the ‘overlay approach’ which helps to apply the standards under AASB 9. The amendments also state that the select in overlay approach is exempted from the standards of AASB 9. The activities of the issuers are predominantly related to the insurance. However, users are enabled to compare with the issuers application of AASB 9 by making additional disclosure.
Amendments for foreign currency transactions and he advanced considerations: the amendment aims to clarify the determination of the spot exchange rate that has been used for the initial recognition of respective assets, income or expanse. As per these amendments can be considered as the transaction date on which the organization recognizes the value of non monetary asset or the non monetary liabilities that have been generated by the advanced considerations (Gonçalves & Lopes, 2017). An organization must determine the transaction date for each receipt or payment in relation to advance considerations only when the organization deals with multiple receipts or payments in advance.
AASB 16 amendment for leases: as per the standards under AASB 16 all the leases associated with an entity must be accounted under a model of single balance sheet. It is somewhat similar to the accounting for leases under the standard AASB 117. The two exemptions under the standards are – leases of ‘low vale’ asset and the short term leases. A separate recognition of leases will be required on the lease liabilities in respect to interest expense and depreciation expense on the asset (right-of-use).
Therefore, the discussion is indicating that the KPMG staffs are needed to consider several amendments in respect to the financial reporting.Order Now