Lecture 3 Shareholders Equity and Principles of Disclosure

Lecture 3 Shareholders Equity and Principles of Disclosure...

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1 Lecture Topic 3 Shareholders Equity and Pi i l f Di l Principles of Disclosure Corporate Financial Reporting and Analysis (ACCT2542) 1 LEARNING OBJECTIVES 1. Distinguish between different forms of corporate entities 2. Account for share issues and reconcile movements in retained earnings 3. Understand and apply the requirements of AASB 108 regarding the selection and application of accounting policies 4. Distinguish and understand accounting treatment of changes in accounting policies, changes in accounting estimates, and errors 5. Determine transactions/events that are under the scope of AASB 110. 6. Distinguish and understand accounting treatment between adjusting and non adjusting events after balance date 2 Reference Readings Prin. Of Disclosures Picker et al. (2009), 2 nd edition: Chapter 3 Chapter 18 Australian Standards AASB 101 “Presentation of FS” AASB 108 “Accounting policies, changes in accounting estimates and errors” AASB 110 “Events after the balance sheet date” Note that these standards can be obtained via: Financial Reporting Handbook (ICAA), or Accounting Handbook (CPA Australia), or AASB’s website – www.aasb.com.au 3
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2 Shareholders’ equity The key components of equity are: Contributed capital Reserves (current or retained earnings) The textbook considers accounting for equity for two types of companies: Not for profit companies For profit companies Characteristics of for profit companies For profit companies can take a number of forms: Proprietary (private companies) Pty Ltd Pty = public cannot purchase shares Ltd = limited liability May be classified as large or small Public companies Large number of issued shares Commonly widespread ownership Characteristics of for profit companies For profit companies may be: Listed > shares are traded on a stock exchange Unlisted >shares are traded through brokers/financial institutions Limited by guarantee >the members undertake to contribute a guaranteed amount in the event of the company going into liquidation Unlimited >members are liable for all the debts of the company No liability >members are not required to make any further contributions if they wish to discontinue being shareholders in the company.
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3 Key features of the corporate structure Shares represent company ownership rights The ownership is normally transferable Rights of shareholders include: The right to vote for directors of the compan The right to vote for directors of the company The right to share in assets on the winding up/liquidation of the company The right to share in new share issues (for the same class of shares) Key features of the corporate structure Ordinary shareholders have no specific right to dividends.
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Lecture 3 Shareholders Equity and Principles of Disclosure...

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