The document provides an overview and disclaimer for a presentation on financial statements and accounting standards, noting that it is intended for general guidance only and should not be considered a substitute for professional advice. It also states that the accuracy of the information provided cannot be guaranteed given that standards and interpretations may change over time. The document is copyrighted by Hanrick Curran from September 2012.
Corporate Governance - Initiatives and AccountabilityPavan Kumar Vijay
I gave a lecture at ICSI on GOVERNANCE - Initiative and Accountability.
I believe that Corporates are expected to use their Capacity, Knowledge and Resources towards Maximization of stakeholders' value and well-being and progress of humankind.
There are four parts of this presentation-
1. Strengthening Board Framework
2. Stakeholder Interest Protection
3. Transparency and Disclosure
4. Impact of Change
Cayman Compliant Series - Private Funds investing in FinTech, Digital Assets,...Ramona Tudorancea
Brief overview of the 2020 upgrade of the Cayman Islands private investment funds regime, for VC/PE funds investing in the digital assets and blockchain space.
Partner Julie Murphy-O'Connor, Partner Brendan Colgan and Senior Associate Gearóid Carey of the Corporate Restructuring and Insolvency Group co-author an article for Lexology Navigator - Restructuring and Insolvency in Ireland.
8.11.20 Funding 101 for Tech Entrepreneursideatoipo
Veteran Silicon Valley attorney Roger Royse will discuss, compare and contrast the various options available to entrepreneurs when it comes to funding their startup.
The speaker will address some common questions when it comes to funding for startups, including:
1) What are the best funding options for entrepreneurs to scale their business?
2) When should entrepreneurs pursue external funding?
3) How do entrepreneurs choose the right investor?
4) What alternative sources of funding are available?
5) How and why should a founder stage their funding rounds?
6) When should a founder think about exiting?
7) How can advisers help with the funding process?
and more!
Please come with your questions and scenarios.
About the Speaker:
Roger Royse is a partner in the Palo Alto office of Haynes and Boone, LLP and practices in the areas of corporate and securities law, tax, mergers and acquisitions and fund formation. He works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger has been an instructor or professor of legal, tax and business topics for the Center for International Studies (Salzburg, Austria), Golden Gate University School of Law and Stanford Continuing Studies and is a frequent speaker, writer, radio guest, blogger and panelist for bar associations, CPA organizations, and business groups. Roger is a Northern California Super Lawyer, is AV Peer-Rated by Martindale Hubbell, and has a “Superb” rating from Avvo..
Roger is the author of Dead on Arrival: How to Avoid the Legal Mistakes That Could Kill Your Startup and has been interviewed and quoted in the Wall Street Journal, Forbes, Fox Business, Chicago Tribune, Associated Press, Tax Notes, Inc. Magazine, Nikkei Asian Review, China Daily, San Francisco Chronicle, Reuters, The Recorder, 7X7, Business Insurance and Fast Company.
If you have questions for Roger, you can reach him at:
roger.royse@haynesboone.com
Corporate Governance - Initiatives and AccountabilityPavan Kumar Vijay
I gave a lecture at ICSI on GOVERNANCE - Initiative and Accountability.
I believe that Corporates are expected to use their Capacity, Knowledge and Resources towards Maximization of stakeholders' value and well-being and progress of humankind.
There are four parts of this presentation-
1. Strengthening Board Framework
2. Stakeholder Interest Protection
3. Transparency and Disclosure
4. Impact of Change
Cayman Compliant Series - Private Funds investing in FinTech, Digital Assets,...Ramona Tudorancea
Brief overview of the 2020 upgrade of the Cayman Islands private investment funds regime, for VC/PE funds investing in the digital assets and blockchain space.
Partner Julie Murphy-O'Connor, Partner Brendan Colgan and Senior Associate Gearóid Carey of the Corporate Restructuring and Insolvency Group co-author an article for Lexology Navigator - Restructuring and Insolvency in Ireland.
8.11.20 Funding 101 for Tech Entrepreneursideatoipo
Veteran Silicon Valley attorney Roger Royse will discuss, compare and contrast the various options available to entrepreneurs when it comes to funding their startup.
The speaker will address some common questions when it comes to funding for startups, including:
1) What are the best funding options for entrepreneurs to scale their business?
2) When should entrepreneurs pursue external funding?
3) How do entrepreneurs choose the right investor?
4) What alternative sources of funding are available?
5) How and why should a founder stage their funding rounds?
6) When should a founder think about exiting?
7) How can advisers help with the funding process?
and more!
Please come with your questions and scenarios.
About the Speaker:
Roger Royse is a partner in the Palo Alto office of Haynes and Boone, LLP and practices in the areas of corporate and securities law, tax, mergers and acquisitions and fund formation. He works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger has been an instructor or professor of legal, tax and business topics for the Center for International Studies (Salzburg, Austria), Golden Gate University School of Law and Stanford Continuing Studies and is a frequent speaker, writer, radio guest, blogger and panelist for bar associations, CPA organizations, and business groups. Roger is a Northern California Super Lawyer, is AV Peer-Rated by Martindale Hubbell, and has a “Superb” rating from Avvo..
Roger is the author of Dead on Arrival: How to Avoid the Legal Mistakes That Could Kill Your Startup and has been interviewed and quoted in the Wall Street Journal, Forbes, Fox Business, Chicago Tribune, Associated Press, Tax Notes, Inc. Magazine, Nikkei Asian Review, China Daily, San Francisco Chronicle, Reuters, The Recorder, 7X7, Business Insurance and Fast Company.
If you have questions for Roger, you can reach him at:
roger.royse@haynesboone.com
EY's Compendium - 2017 AICPA Conference on Current SEC and PCAOB DevelopmentsJaime Eichen
EY's compendium summarizes the highlights of the 2017 AICPA Conference on Current SEC and PCAOB Developments, where regulators and standard setters discussed a wide range of current financial reporting topics and emerging issues.
How Your Company is Affected by the CARES Act and Related LegislationRoger Royse
"Idea to IPO" Webinar description:
The U.S. government is providing relief and stimulating the economy through the $2 TRILLION CARES Act of 2020 and other measures to help corporations, small businesses, and people laid off due to the COVID-19 crisis.
The speaker will discuss:
1) What is the CARES Act of 2020?
2) What does the CARES Act of 2020 hope to achieve?
3) Will there be follow up programs to come?
4) How can entrepreneurs and small businesses benefit from the CARES ACT of 2020?
5) How does one go about applying for grants and loans administered under the CARES ACT of 2020?
6) What are the new rules relating to sick leave and paid leave?
7) What COVID-19 related tax incentives are available to companies?
and more!
This compact presentation elucidates the key elements of the Public Company Accounting Reform & Investor Protection Act, and contemporary inquires related to it, such as steps the corporations should take to comply with the Act and whether or not, the Act has solved all the problems it was intended to address? DOI: 10.13140/RG.2.1.1049.9923
Presented by Adrian Sarchet, Senior Associate at Carey Olsen, and Alan Bougourd, Registrar of the Guernsey Registry, attendees learnt about the effect of the new amendments to the Guernsey Company Law 2008 (the Companies Law).
This chapter is based on Audit and Assurance. explain the auditor’s liabilities to shareholders and auditees. Explain the concept of due care and the circumstances giving rise to negligence in the conduct of an audit. identify issues and rulings of legal cases with respect to the auditor’s liability to third parties. Enumerate the precautions the auditor should take to avoid litigation.
EY's Compendium - 2017 AICPA Conference on Current SEC and PCAOB DevelopmentsJaime Eichen
EY's compendium summarizes the highlights of the 2017 AICPA Conference on Current SEC and PCAOB Developments, where regulators and standard setters discussed a wide range of current financial reporting topics and emerging issues.
How Your Company is Affected by the CARES Act and Related LegislationRoger Royse
"Idea to IPO" Webinar description:
The U.S. government is providing relief and stimulating the economy through the $2 TRILLION CARES Act of 2020 and other measures to help corporations, small businesses, and people laid off due to the COVID-19 crisis.
The speaker will discuss:
1) What is the CARES Act of 2020?
2) What does the CARES Act of 2020 hope to achieve?
3) Will there be follow up programs to come?
4) How can entrepreneurs and small businesses benefit from the CARES ACT of 2020?
5) How does one go about applying for grants and loans administered under the CARES ACT of 2020?
6) What are the new rules relating to sick leave and paid leave?
7) What COVID-19 related tax incentives are available to companies?
and more!
This compact presentation elucidates the key elements of the Public Company Accounting Reform & Investor Protection Act, and contemporary inquires related to it, such as steps the corporations should take to comply with the Act and whether or not, the Act has solved all the problems it was intended to address? DOI: 10.13140/RG.2.1.1049.9923
Presented by Adrian Sarchet, Senior Associate at Carey Olsen, and Alan Bougourd, Registrar of the Guernsey Registry, attendees learnt about the effect of the new amendments to the Guernsey Company Law 2008 (the Companies Law).
This chapter is based on Audit and Assurance. explain the auditor’s liabilities to shareholders and auditees. Explain the concept of due care and the circumstances giving rise to negligence in the conduct of an audit. identify issues and rulings of legal cases with respect to the auditor’s liability to third parties. Enumerate the precautions the auditor should take to avoid litigation.
The Future of Auditor Reporting Forum, held by Institute of Singapore Chartered Accountants
Sharing from Mr Shariq Barmaky, Deputy Chairman, ISCA Auditing and Assurance Standards Committee; Partner, Deloitte & Touche LLP
Bentleys is proud to present our annual Financial Reporting Update for all financial statement preparers, designed specifically to address the current hot issues & new developments facing our profession.
The update will provide you with practical solutions, tools and skills that will help you identify issues with the preparation of your financial statements.
You will be updated on the key changes to the financial reporting requirements in Australia, ASIC hot topic areas, and enjoy the opportunity to network with your peers and colleagues.
This update is for people in financial reporting, governance or similar roles. It will provide insight into the changing financial reporting landscape and the implications it will have on your financial statements and banking covenant requirements.
If you are a Finance Director, Chief Financial Officer or a Financial Controller this slide pack will benefit you.
Australian Business Forum helps Australian SMEs and businesses to understand the Chinese market and refine their China strategy.
http://abf.events/
ABOUT THE PRESENTATION
Presentation on "How to prepare and present your numbers to Australian investors" by Greg Ellis, Partner, Corporate Finance, BDO Australia.
The presentation covers what Australian investors seek, the regulatory requirements and financial disclosure.
Presented at the Fortune Forum 2015 Australian Summit
This information sheet provides general information on insolvency for directors whose companies are in financial difficulty, or are insolvent, and includes information on the most common forms of external administration.
Data analysis for auditors presented at CA ANZ 2018 Audit ConferenceMatthew Green
How do auditors start their data analysis journey, this presentation to the 2018 Audit Conference of Chartered Accountants Australia & New Zealand provides an insight into testing for fraud using a "Benford's Test". We also address testing for significant and unusual transactions using stratification of data sets and highlight the basic requirements for performing data analysis in Excel, TeamMate, and IDEA.
Hanrick Curran - Graduate Induction - Professional Standards and Ethics - Feb...Matthew Green
Graduate induction training for Hanrick Curran's 2014 graduate intake. The focus of this session was on professional standards and ethics, with a few career pointers thrown into the mix.
Hanrick Curran Audit Training - Materiality - April 2013Matthew Green
Training for assessing materiality as part of audit planning. Designed for intermediate to senior level staff and based on Australian Auditing Standard ASA 320. Also refers to AASB 1031 Materiality, which is an Australian Accounting Standard
Hanrick Curran Audit Training - Internal Controls - March 2013Matthew Green
Training delivered to assisting audit staff as part of their continuing professional development/education (CPE/CPD). Provided in a 60 minute session with substantial discussion and interaction.
Professional standards and ethics - graduate presentation - Feb 2013Matthew Green
Short (30 min) presentation to our (@hanrickcurran) graduate intake regarding professional standards for accountants, spcifically the key principles in APES 110 / IFAC Code of Ethics for Professional Accountants
3. Your Presenter – Matthew Green CA
• Over 15 years accounting and auditing experience
• Prepared financial statements for ASX listed companies
• Registered Company Auditor
Contact details: matthew.green@hanrickcurran.com.au
0447 724 595
(07) 3218 3900
Twitter: @matthewjgreenca
LinkedIn: http://au.linkedin.com/in/matthewjgreenca
Financial Statements & Accounting Standards Update
4. Objectives for today
• A refresher in Australian key accounting standards and Corporations Act 2001 (the “Act”)
requirements.
• Overview of company reporting requirements
• A look at topical issues
• Some pointers on common mistakes
We will not cover applied topics such as errors & restatements and estimates & judgments
Financial Statements & Accounting Standards Update
5. Who Cares & Why
Directors Because getting it wrong can have consequences
See “ ASIC v Healey” (The Centro case)
Market Analysts Because they use the information as the basis for price
recommendations
Shareholders Because financial statements are the basis for
investment decisions… or they should be
ATO Financial Statements are the prima facie record of
transactions undertaken by an entity
Financial Statements & Accounting Standards Update
6. Corporations Act 2001
• Sets the requirements for company accounting.
• Section 286 requires that companies keep written financial records that:
1. Correctly explain its transactions and financial position and performance;
2. Would enable true and fair financial statements to be prepared and audited.
• As a profession we generally determine that financial information prepared in
accordance with accounting standards presents a true and fair view. Therefore
accounting standards are a nice place to start from.
• ASIC’s view is that company accounts should comply with the recognition &
measurement requirements in Accounting Standards.
Financial Statements & Accounting Standards Update
7. Corporations Act 2001 – s.286
“Securency exec spared jail over false accounts”
By online business reporter Michael Janda and staff (ABC News On-line)
“A former executive with a subsidiary of the Reserve Bank has avoided jail for his part in
an alleged foreign bribery scandal. David Ellery, 56, was the chief financial officer and
secretary of the company Securency, which is alleged to have bribed foreign officials in
Vietnam, Malaysia and Indonesia to win currency contracts.
Ellery pleaded guilty in the Victorian Supreme Court to falsifying accounting of nearly
$80,000 for a commission to a Malaysian broker. He signed off on the payment as
representing marketing, meeting, materials, hospitality and travel expenses even though
the amount was worked out as a commission and not a reimbursement of expenses.
"You were well aware, when you forwarded it with a request for payment, that the invoice
was false, in that no such marketing expenses had been incurred," said Justice Elizabeth
Hollingworth in her judgment. "Your knowledge that what you were doing was dishonest
at that time is evidenced by the steps you subsequently took to try to conceal what had
actually occurred.“ However, Justice Hollingworth also found that, unlike most cases of
false accounting, Ellery's offence was not motivated by personal financial gain.
Financial Statements & Accounting Standards Update
8. Types of Companies
• Disclosing entities: generally ASX listed, have raised funds under a
prospectus or offer document and have more than 100 shareholders (see Part
1.2A of the Act)
• Public companies: Minimum of three directors with two resident in Australia.
Can have many shareholders/members. Liability may be limited by shares or
guarantee and may be unlimited. (s.112)
• Public companies with No Liability: restricted to companies with the sole
purpose of mining.
• Proprietary companies: Limited to no more than 50 non-employee
shareholders
Financial Statements & Accounting Standards Update
9. Company Reporting Obligations
• Disclosing entities: Must prepare & lodge audited financial statements.
• Public companies: Must prepare & lodge audited financial statements.
• Proprietary companies: Lodgment obligations depend on large vs. small test
in s.45A. (An audit may be required.)
Financial Statements & Accounting Standards Update
10. Large vs. Small test (s.45A)
A company is large if it meets two of the following three criteria:
1. More than 50 FTE employees
2. More than $25 million gross revenue
3. More than $12.5 million gross assets
All tests are on a consolidated basis (determined in accordance with accounting
standards). (NB: structuring opportunities are presented by this!)
If it fails to meet the tests above a company is a small proprietary company
Financial Statements & Accounting Standards Update
11. Large companies must lodge financial statements
A large company must lodge financial statements with ASIC.
“10-186AD Large proprietary companies must lodge financial reports
Wednesday 8 September 2010
A recent decision of the Federal Court in Brisbane has affirmed the primacy of the
statutory obligation of large proprietary companies to lodge financial reports with ASIC.”
(in the matter of ASIC & Dynamic Supplies Pty Ltd. After the Federal Court decision
was handed down, Dynamic Supplies lodged all outstanding financial reports dating back
to 2002.)
(source: ASIC website)
Financial Statements & Accounting Standards Update
12. Large companies must lodge financial statements
“12-212MR Subsidiaries of global gold company fined $127,000 for failing to lodge reports
Friday 31 August 2012
Eight Western Australian public companies have been fined a collective total $127,000 for failing to lodge required
documents with ASIC. The companies are all subsidiaries of the Barrick Gold Corporation of Canada.
An ASIC investigation found that each company had failed to lodge one or more of a number of important documents,
such as financial reports, director’s reports, auditor’s reports or a concise report for the relevant period for each of the
companies, in breach of the Corporations Act 2001.
The eight companies are:
1) Barrick (Cowal) Ltd; 2) Barrick (Plutonic) Ltd; 3) Barrick (Lawlers) NL;
4) Barrick (Darlot) NL; 5) Barrick (Australia Pacific) Ltd; 6) Barrick Mining Company (Australia) Ltd;
7) Barrick (PD) Australia Ltd; 8) Grants Patch Mining Ltd.
The companies each pleaded guilty (refer: 12-122MR) to the various offences with which each had been charged,
being a total of 15 offences which were laid by ASIC. The companies were each convicted of their various offences on
27 August 2012 in the Perth Magistrates’ Court.”
(source: ASIC website)
Financial Statements & Accounting Standards Update
13. Accounting Standards – Key concepts
• Reporting entity
• General purpose vs. Special purpose
• Elements of accounting standards
• Definitions of financial statements
• Underlying assumptions
Financial Statements & Accounting Standards Update
14. Reporting Entity Concept
Statement of Accounting Concept (SAC) 1 Definition of the reporting Entity
Commonly:
“An entity in respect of which it is reasonable to expect the existence of users
who rely on the entity’s general propose financial statements for information
that will be useful to them for making and evaluating decisions about the
allocation of scare resources”
Examples of users are given in the AASB Frameworks and include:
Investor Employees
Lenders Suppliers
Creditors Customers
Government Public entities
Financial Statements & Accounting Standards Update
15. Reporting Entity Concept: A quick test
Q. Who decides if a company is a reporting entity?
Remember:
• Have the client document the decision in a directors minute.
“In considering the attached documents, it has been noted by the Directors that the directors have
considered potential users of the financial report and note that there are unlikely to be users who will
base resource allocation decisions on the reports who do not have specific rights to information.
RESOLVED THAT the Company is a non-reporting entity and that the financial report has been
prepared as a special purpose financial report as outlined in Note 1 to the report.”
• If a party has specific rights to information they are generally not considered
when assessing the reporting entity concept.
Financial Statements & Accounting Standards Update
16. General Purpose vs. Special Purpose
• If a company is a reporting entity they need to prepare a general purpose
financial report (GPFR or GPFS).
• All non-reporting entities can prepare special purpose financial reports.
• General purpose reports include the disclosure of all accounting standards (if
material).
• Special purpose reports only need specific items.
Financial Statements & Accounting Standards Update
17. A Financial Statements Hierarchy
GPFS The complexity and completeness of
(Tier 1) financial statements depends on the scope
of the requirements and the basis for
GPFS – Reduced accounting.
Disclosure
(Tier 2) Tier 2 (generally “non-publicly accountable
entities”) can give reduced disclosure using
SPFS
the “Reduced Disclosure Requirements”
(Corps Act)
set out in AASB 1053. Applies from 1 July
2013 but may be early adopted.
SPFS
18. Definition of Financial Statements
• Financial statement are generally defined as being each of the:
Name: Also called
Statement of Financial Performance* Income Statement/ Profit or Loss
Statement of Other Comprehensive Income*
Statement of Financial Position Balance Sheet
Statement of Charges in Equity
Statement of Cash Flows
• A complete financial report includes all the above statements and the notes to the
accounts (AASB 101.10)
• s.295 – defines a financial report as the above elements and the directors declaration
about the statement, therefore this is the minimum for a Corporations Act 2001
compliant report
• s.314 – the annual report to members includes the above and the director’ report (s.298 –
s.3004) and the auditors’ report (s.307 – s.308)
* Can be combined into one statement
Financial Statements & Accounting Standards Update
19. Some changes in naming conventions
• “Financial report” and “balance sheet” are use in the Corporations Act 2001
• AASB 2007–8 implemented changes in terminology, for example:
Old New
Australian equivalents to IFRS Australian Accounting Standards
Financial Report Financial Statements
Balance sheet date End of the reporting period
Reporting date End of each reporting period
Equity holders Owners
On the face of In
• Some years later we are still seeing the old terminology in use
Financial Statements & Accounting Standards Update
20. Underlying Assumptions for Financial Statement
• Going concern: a presumption that the entity is a going concern and
will continue in operation for the foreseeable future.
• Consider ASIC RG 22 & AICD Guide to Concern Issues
• Example disclosure if there is a prima facie issue with going concern:
The directors have prepared the report on a going concern basis, which contemplates continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. This is
deemed to be appropriate not withstanding that the company has incurred losses for the year of $480,747 (2010: profit
of $283,587) and that as at 30 June 2011 the company has a deficiency of current assets of $894,131 (2010: surplus
of $153,000) and a deficiency of total assets of $619,984 (2010: surplus of $182,095).
The ability of the company to continue as a going concern is dependant on its ability to obtain further funding, manage
cash flows, restructure borrowings and recover funds loaned to borrowers that have currently been provided against
or recover collateral that secured those loans.
There is significant uncertainty whether the company will be able to continue as a going concern and therefore,
whether it will continue its normal business activities and realise its assets and extinguish its liabilities in the normal
course of business and at the amounts stated in the financial statements.
These financial statements do not include adjustments relating to the recoverability and classification of recorded
assets amounts or to the amounts and classification of liabilities that might be necessary should the company not
continue as a going concern.
Financial Statements & Accounting Standards Update
21. Underlying Assumptions for Financial Statement
• Accrual basis of accounting: The effects of transactions and events
are recognized when occur and are recorded and reported in the
period to which they relate.
• Example disclosure:
The directors have prepared the financial statements on the basis that the company is a non-reporting entity because
there are no users dependent on general purpose financial statements. The financial statements are therefore special
purpose financial statements that have been prepared in order to meet the requirements of the Corporations Act 2001.
The company is a for-profit entity for financial reporting purposes under Australian Accounting Standards.
The financial statements have been prepared in accordance with the mandatory Australian Accounting Standards
applicable to entities reporting under the Corporations Act 2001 and the significant accounting policies disclosed
below, which the directors have determined are appropriate to meet the needs of members. Such accounting policies
are consistent with the previous period unless stated otherwise.
The financial statements, except for the cash flow information, have been prepared on an accruals basis and are
based on historical costs unless otherwise stated in the notes. The amounts presented in the financial statements
have been rounded to the nearest dollar.
The financial statements were authorised for issue on _____________ by the directors of the company.
Financial Statements & Accounting Standards Update
22. Elements of Accounting Standards
Recognition Presentation
& VS. &
Measurement Disclosure
Financial Statements & Accounting Standards Update
23. Recognition & Measurement
• Give the “What to account for” and “How to measure it” rules in accounting
standards.
• ASIC’s view (see RG85) is that all Australian companies need to comply with
the Recognition & Measurement requirements in accounting standards to
comply with s.286.
• Of course, this is subject to the concept of materiality.
• And, not everyone in the profession agrees with ASIC’s view
(but I’m not one of them!)
NB: Don’t forget Materiality is an Accounting standard first and an Audit standard second.
Financial Statements & Accounting Standards Update
24. Presentation & Disclosure
• Gives the rules around what must be disclosed & where
• For a company there are five mandatory disclosure standards, being:
AASB 101 Presentation of Financial Statements
AASB 107 Statement of Cash Flows
AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
AASB 1048 Interpretation and Application of Standards
AASB 1054 Australian Additional Disclosures
Financial Statements & Accounting Standards Update
25. Decoding Mandatory vs. Optional Disclosure Requirements
The Scope of mandatory AASB 101 reads:
“… standard applies to each entity that is required to prepare financial
reports in accordance with Part 2M.3 of the Corporation Act…”
The scope of the optional AASB 102 reads:
“…in accordance with Part 2M.3 of the Corporations Act and that is a
reporting entity…”
NB: The scope section is usually longer & more complex but this shows the key difference
Financial Statements & Accounting Standards Update
27. Revenue Recognition
• Is one of the common areas that companies make significant mistakes in and can be one
of the easiest to manipulate.
• Auditing standards presume a risk of material misstatement in revenue because of
history and ease of manipulation
• Whilst key concepts are relatively simple, their application can be complex and subject to
judgment & uncertainty
• A nice rule of thumb is…
“Revenue has to be earned”
• The conservative approach is to defer revenue over the period that goods/services are
delivered
• Revenue is the subject of an ongoing project by the IASB. A revised standard is
expected mid 2013.
Financial Statements & Accounting Standards Update
28. Leases
• Another standard with simple concepts that can be difficult to apply. In the US,
the SEC released a staff update to remind practitioners of the requirements of
lease accounting because companies just simply got it wrong too often.
• Basic premise of current standard is two types of leases:
1. Operating lease: Off-balance sheet use of an asset for a defined period with no
ownership.
2. Finance lease: On-balance sheet financing of the use of an asset resulting in
effective or economic ownership of the asset.
• Key issue is the transfer of “risks & rewards of ownership”
• Is also the subject of an ongoing project by the IASB that will see all leases
capitalised. No date set for the release of this standard yet.
Financial Statements & Accounting Standards Update
29. Financial Instruments
• Complexity rules! Over 280 pages of dense standards to read.
• Governed by:
• AASB 7 Financial Instruments: Disclosures
• AASB 9 Financial Instruments
• AASB 132 Financial Instruments: Presentation
• AASB 139 Financial Instruments: Recognition & Measurement
• Various interpretations such as Int 9, Int 16 and Int 19.
• If in doubt > phone a friend
Financial Statements & Accounting Standards Update
30. Tax Effect Accounting
• Commonly not applied by SMEs
• If material, would required recognition and measurement of all deferred tax
assets (DTA) and deferred tax liabilities (DTL)
• Disclosures can generally be avoided in SPFS
• If calculated, should apply a balance sheet approach, which is mechanically
similar to the old income statement approach but is conceptually wider in
application
• For example, provision for employee entitlements will generally create a DTA
under both methods, while an asset revaluation would create a DTL under the
balance sheet approach but not under the income statement approach
• R&M necessary for a Corporations Act 2001 compliant report?
Financial Statements & Accounting Standards Update
31. Cash Flow Statements
• Mandatory for financial reports under the Corporations Act 2001 and for all
general purpose reports.
• Voluntary disclosure for everyone else.
• Two types of disclosure: direct vs. indirect, generally the direct method is used.
• Easiest way to prepare them is to use a spreadsheet model that adjusts
changes in balance sheet items against income statement items to calculate a
cash flow.
Financial Statements & Accounting Standards Update
32. Debt and Covenants
• Topical because getting it wrong can have significant consequences. See
ASIC vs. Healey (Centro).
• Per AASB 101 – All debt is current, unless the entity has an unconditional right
to defer settlement for at least twelve months after reporting period.
• Usually governed by the terms and conditions of the borrowing agreements.
• Understanding definitions is key!
• Management should focus on and monitor compliance with conditions.
Financial Statements & Accounting Standards Update
34. Some pointers on common mistakes
• Generally missing key disclosures, such as accounting policies for material
balances and transaction streams
• Not including the cash flow statement
• Incorrect calculation of cash flows and tax effect accounting
• Continuing to recognize non-assets (i.e., establishment costs)
• Internal inconsistencies (i.e., numbers don’t agree)
• Compilation reports
Financial Statements & Accounting Standards Update
35. Compilation reports (APES 315)
• New standard reissued November 2009, effective for engagements
commencing on or after 1 January 2010.
• Significantly expanded the scope of the accountant’s responsibility and the
format of the accountant’s report. The new version should refer to APES 315.
• Requirement to consider obvious misstatements and communicate significant
matters on a timely basis.
• Misstatements includes: a) material mistakes; b) non-disclosure of the
reporting framework and departures therefrom; c) non-disclosure of significant
matters.
• We were still seeing old format reports in late 2011.
Financial Statements & Accounting Standards Update
36. Other things to watch out for…
Dividends
• Change to s.254T
• Now paid based on solvency
• Solvency determined based on accounting standards.
Financial Statements & Accounting Standards Update
37. New (now current) Corporations Act 2001 requirements
LEGISLATION OUR COMMENT
254T Circumstances in which a dividend may be paid
(1) [Payment of dividend] A company must not pay a dividend • Payment of the dividend is only able to
unless: be made when the company’s assets are
(a) the company's assets exceed its liabilities greater than the liabilities.
immediately before the dividend is declared and
the excess is sufficient for the payment of the • Directors must maintain a solvent
dividend; and company, being mindful of their
(b) the payment of the dividend is fair and reasonable to
the company's shareholders as a whole; and
obligations to not trade when insolvent.
(c) the payment of the dividend does not materially • The wording of the Act requires the
prejudice the company's ability to pay its creditors. application of Australian Accounting
Note 1: As an example, the payment of a dividend would
materially prejudice the company's ability to pay its Standards.
creditors if the company would become insolvent as a
result of the payment.
Note 2: For a director's duty to prevent insolvent trading on
payment of dividends, see section 588G.
(2) [Accounting standards] Assets and liabilities are to be
calculated for the purposes of this section in accordance
with accounting standards in force at the relevant time (even
if the standard does not otherwise apply to the financial year of
some or all of the companies concerned).
38. So what should you do before you pay a dividend:
Check your company constitution
Confirm the net asset position at the date declared exceeds the
amount of the dividend
Consider if any adjustments are required to net assets to ensure
compliance with Australian Accounting Standards
Consider the tax issues associated with payment of the dividend
39. A quick example Answer
Can a company with this No . . .
balance sheet pay a
dividend? Its assets do not exceed its
$ liabilities before it pays a
Assets 100,000 dividend, therefore, it
Liabilities 200,000 doesn’t meet the
Equity -100,000 requirements of s.254T
40. Hanrick Curran
t. (07) 3218 3900
f. (07) 3218 3901 Questions?
Level 11
307 Queen Street
Brisbane Qld 4000
GPO Box 2268
Brisbane Qld 4001 Topic Date
www.hanrickcurran.com.au
41. About Hanrick Curran
Our client base is mainly located in South East
Queensland, but also extends to Northern New
South Wales, Western Queensland, Sydney,
Melbourne, Darwin, Townsville and Mackay as well
as other regional areas.
We have a strong position with clients in Papua
New Guinea and we also serve a growing Asian
business sector. While these international
connections may not be of immediate interest but
we believe they are important in enabling us to
effectively serve our clients.
Hanrick Curran’s Client Base
42. Hanrick Curran
t. (07) 3218 3900
f. (07) 3218 3901 Thank you
Level 11
307 Queen Street
Brisbane Qld 4000
GPO Box 2268
Brisbane Qld 4001 Topic Date
www.hanrickcurran.com.au