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 environmentand summarise them in a regularly published newsletter.

Required:

Prepare a2pagenewsletterthat identifies and summarises developments and changes in the financial reporting environmentfor the period1January 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 a2 page newslettermeans thatyouneed 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:

  • 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 inyour own wordswith sources adequately referenced using the appropriate referencing system.

Some examples ofsignificant 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 of11 points(You may wish to use larger fonts etc for headings etc). You may wish to set your newsletter out using columnsbutthis 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 isnospecific 'word limit'. The newsletter must beno longer than 2 pages. In cases where the newsletter exceeds the 2 page limit, only the first 2 pages will be marked.

Donotattach 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 ofyour newsletter and tobe 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 forall 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.

Assessment criteria

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

Element / Criteria / Exceeds expectation (HD/D)
Technical content / Local reporting news [25%] / [19-25%]
Correctly identify and report most of the news relating to changes in local financial reporting environment.
International reporting news [25%] / [19-25%]
Correctly identify and report most of the news relating to changes in international financial reporting environment.
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.
Creativity [10%] / [8-10%]
-titles/headings provided attract attention;
-design of newsletter is exemplary.
Presentation / Grammar and spelling [10%] / [8-10%]
-writing is flawless in terms of spelling and grammar.
Language used and clarity [10%] / [8-10%]
-cohesive discussion and message conveyed is clear all the time;
-appropriate use of language consistently throughout.
Referencing system [5%] / [4-5%]
-presented a bibliography in accordance with APA referencing system without flaw.
Evidence of reading / Width of coverage [5%] / [4-5%]
Impressive/very good 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, andthe 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)
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.