Changes in policies & error corrections for each component of equity Reconcile O/B & C/B for each component of equity – (shows changes from P/L, OCI, owner transactions) Notes Enhance understandibility. Statement of compliance, accounting policies, supporting info for statement items, other. It should include disclosures on key estimate assumptions – nature & carrying amount e.g. interest rates & useful lives (14) Disclosure: Statement of Cash Flows The CF statement provides info on historical changes in cash. It allows users to evaluate the;
Ability to generate cash (ability, certainty, timing) , Financial structure (liquidity, solvency whilst meeting obligations & paying dividends) & Differences between NPAT & OCF Comparisons between entities – operating performance & PV of FCFs General Format of the CF Statement (AASB 107) Cash Concept – cash (deposits) + cash equivalents (ST highly liquid investments, 3mth) + bank overdrafts CF’s are reported on a gross basis except; - Cash receipts & payment on behalf of customers or if there is quick turn over, large amounts & short maturities Direct Method – discloses classes of gross cash receipts & payments o See ACCT1511 + Discounts Allowed/Received + Income Taxes (DTA & DTL – always DR/CR Tax Expense Slide 81) Indirect Method - Start With NPAT, Adjustments (Permanent & Timing Differences [Accrual Effects]), Reconciled All CF’s must be classified into; Operating – I Sales of G&S, fees (maybe interest/dividends received) O supplier payments, tax, (interest paid) Investing – I NCA sales, loan advanced repayments (interest/dividends received) O NCA purchases, lending Financial – I Issuing equity or loans O Repayment of Debentures, Buybacks, Dividends Limitations – historical, non-cash transactions not included, liquidity/solvency not addressed, management manipulation Week 3 – Income Tax
Accounting Tax Basis Accrual Principally Cash (exceptions exist – e.g. PDs) ITAA (ATO) Equations Profit = R – E Taxable Profit = Taxable Income – Tax Deductions Differences between Accounting & Income Tax Treatments Item Accounting Tax Passive Revenue Received in Arrears Recognised when earned Recognised when cash received Revenue Received in Advance Recognised when earned Recognised when cash received Prepaid Expenses Recognised when incurred Recognised when cash paid General Principles of Accounting for Income Tax AASB 112 prescribes the accounting treatment of current tax liabilities , future tax consequences or tax effect accounting (giving rise to deferred assets or liabilities + losses) & certain tax disclosures . Tax effect accounting focuses on the future tax consequences resulting from differences in the carrying amount & tax bases of a firm’s net assets . Current & deferred tax items are to be recognised as income (assets) or expenses (liabilities) in the current reporting period.
You've reached the end of your free preview.
Want to read all 14 pages?