Published on

Published in: Technology, Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. CHANGES AND TRENDS IN INTERNATIONAL ACCOUNTING STANDARDS John Hoggett School of Accounting Curtin University
  2. 2. Australia’s road to adopting international standards <ul><li>Europe’s decision </li></ul><ul><ul><li>EU companies listed on stock exchanges to follow IASB standards in consolidated financial reports on or after 1 January 2005 </li></ul></ul><ul><li>Australia </li></ul><ul><ul><li>FRC in July 2002, direction to the AASB to adopt IASB standards as from 1 January 2005 </li></ul></ul><ul><li>New Zealand </li></ul><ul><ul><li>By 2007 </li></ul></ul>
  3. 3. Australian Equivalents to IASB Standards <ul><li>See AASB website: </li></ul><ul><li>AASB and IASB standards exactly the same except for the following: </li></ul><ul><li>IASB Framework + SAC 1 and SAC 2 (SACs 3 and 4 deleted) </li></ul><ul><li>Numbering system: </li></ul><ul><ul><li>IFRS 1 = AASB 1 </li></ul></ul><ul><ul><li>IAS 1 = AASB 101 (three digits) </li></ul></ul><ul><ul><li>AASB 1031 (four digits) etc for no equivalent IASB standard </li></ul></ul>
  4. 4. Differences between AASB and IASB standards <ul><li>Addition of NFP paragraphs </li></ul><ul><li>Additional “Aus” paragraphs for disclosure </li></ul><ul><li>Wording differences eg entity v enterprise </li></ul><ul><li>Deletion of some options eg delete indirect method in cash flow statements </li></ul>
  5. 5. AASB’s influence on the IASB <ul><li>Minimal for most standards – AASB little more than a lobbyist </li></ul><ul><li>Representation on the IASB </li></ul><ul><li>Special projects eg business combinations </li></ul><ul><li>Analysis of exclusively Australian problems, based on Australian law eg treatment of GST </li></ul>
  6. 6. Syllabus changes – the Framework <ul><li>Qualitative characteristics </li></ul><ul><ul><li>understandability, relevance, reliability, comparability </li></ul></ul><ul><ul><li>Substance over form now part of “reliability” </li></ul></ul><ul><ul><li>Materiality part of “relevance” </li></ul></ul><ul><li>Accounting assumptions </li></ul><ul><ul><li>Addition of “accrual basis” </li></ul></ul>
  7. 7. <ul><li>Elements are </li></ul><ul><ul><li>Assets (different wording from SAC 4 but meaning is essentially the same) </li></ul></ul><ul><ul><li>Liabilities (minor change in nature) </li></ul></ul><ul><ul><li>Equity (same) </li></ul></ul><ul><ul><li>Income (same as the definition of “revenue” in SAC 4) </li></ul></ul><ul><ul><li>Expenses (similar wording to SAC 4) </li></ul></ul><ul><ul><li>Major change is with revenues, gains and losses. Revenues and Gains are subcategories of “income” </li></ul></ul>Syllabus changes – the Framework
  8. 8. <ul><li>Revenues are from “ordinary activities of an entity” – sales, fees, interest, dividends, royalties, rent. </li></ul><ul><li>Gains are other items that meet the definition of income and “may or may not arise in the course of ordinary activities” </li></ul><ul><li>Losses are a subcategory of expenses </li></ul><ul><li>Gains/losses are reported eg on the sale of non-current assets </li></ul>Syllabus changes – the Framework
  9. 9. External reporting <ul><li>4 statements required by AASB 101, as named – </li></ul><ul><ul><li>Income statement (not profit and loss statement or statement of financial performance) </li></ul></ul><ul><ul><li>Balance sheet (not statement of financial position) </li></ul></ul><ul><ul><li>Statement of changes in equity </li></ul></ul><ul><ul><li>Cash flow statement (not statement of cash flows) </li></ul></ul>
  10. 10. Income Statement <ul><li>Revenues , as defined in the Framework and AASB 118 – AASB 118 tends to restrict revenues to (i) sale of goods (ii) rendering of services (iii) use by others of the entity’s assets yielding interest, royalties and dividends. </li></ul><ul><li>Expenses , classified either by nature or by function. If by function, then you may disclose gross profit if desired. See AASB 101 paras. 88-92. </li></ul><ul><li>Gains and losses </li></ul><ul><ul><li>Only disclose gain/loss on sale of a non-current asset as an item of profit </li></ul></ul><ul><ul><li>For the purpose of Accounting syllabus, will continue to use Gross Calculation Method in the accounts </li></ul></ul>
  11. 11. Balance Sheet <ul><li>Current/non-current classification, or liquidity </li></ul><ul><ul><li>Assets </li></ul></ul><ul><ul><li>Liabilities - major categories for TEE purposes are </li></ul></ul><ul><ul><ul><li>Payables </li></ul></ul></ul><ul><ul><ul><li>Borrowings </li></ul></ul></ul><ul><ul><ul><li>Current tax liability </li></ul></ul></ul><ul><ul><li>Note: Final dividends – liability when declared </li></ul></ul><ul><ul><ul><li>Not a liability at end of financial year (in most cases) </li></ul></ul></ul><ul><ul><ul><li>See AASB 110 paras. 12-13 </li></ul></ul></ul><ul><ul><li>Equity section – share capital, retained earnings, other reserves </li></ul></ul>
  12. 12. Statement of Changes in Equity <ul><li>Purpose –to show movements in each equity item and total income from all sources </li></ul><ul><ul><li>Profit or loss + any income or expense recognised directly in equity e.g. revaluation surplus (not really a problem at TEE level) </li></ul></ul><ul><ul><li>Movements in share capital, in retained earnings, in each other reserve account </li></ul></ul>
  13. 13. Cash Flow Statements <ul><li>Cash and cash equivalents – new definition AASB 107 </li></ul><ul><ul><li>See: </li></ul></ul><ul><ul><li>Overdrafts may still be included as part of cash in Australia in certain circumstances </li></ul></ul><ul><li>Interest paid – an operating activity </li></ul><ul><li>Interest and dividends received – may be an investing activity. See illustrative example in AASB 107 </li></ul><ul><li>Dividends paid – a financing activity </li></ul>
  14. 14. Changes in terminology <ul><li>Profit, not “net profit” </li></ul><ul><li>Loss, not “net loss” </li></ul><ul><li>Equity, not “shareholders’ equity” </li></ul><ul><li>Cost of sales, not “cost of goods sold” </li></ul><ul><li>Retained earnings, not “retained profits” </li></ul><ul><li>Minor changes to headings in cash flow statement eg cash paid to suppliers and employees </li></ul>
  15. 15. Some other thoughts <ul><li>Re Farm accounting consider AASB 141 “Agriculture” – move toward fair value accounting </li></ul><ul><li>The concept of “matching” is finally buried </li></ul><ul><li>Preliminary expenses now an expense, not an asset under AASB 138 </li></ul>
  16. 16. Future trends at the IASB <ul><li>Cooperation (!) with the FASB </li></ul><ul><li>CF to be amended (overhauled) </li></ul><ul><li>Adoption of fair value measurement </li></ul><ul><li>Performance measurement using a “statement of comprehensive income” </li></ul><ul><li>Liabilities, provisions and contingent liabilities – the term “provision” to be dropped </li></ul>
  17. 17. The end