liabilities for long term employee benefits such as long service leave are

Liabilities for long term employee benefits such as

This preview shows page 66 - 73 out of 78 pages.

liabilities for long- term employee benefits such as long service leave are recorded at discounted present value Per AASB 117 Leases, finance lease liabilities are values using present value techniques AASB 101 Presentation of Financial Statements requires that liabilities be classified in the statement of financial position: – by nature – sub-classified as current or non-current Measurement and classification - liabilities 66
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Australian School of Business A residual, so no separate measurement methods AASB 101 Presentation of Financial Statements requires that equity be classified in the statement of financial position by source (contributed or earned) Major components are: – Contributed equity – Reserves – Retained earnings Measurement and classification - equity 67
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Australian School of Business Under AASB 118 Revenues , revenue is measured at the fair value of consideration received AASB 118 requires that revenue be classified by nature Major components are: – Revenues from sale of goods – Revenues from services rendered – Interest, royalties and dividends Measurement and classification - income 68
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Australian School of Business Most expenses are measured based on the cost of consumption or loss of economic benefits in the current period AASB 101 Presentation of Financial Statements requires that expenses be classified in the Statement of Comprehensive Income by nature or function Measurement and classification - expenses Nature vs function classification discussed in more detail in ch 13 69
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Australian School of Business Represent a distribution of profits to shareholders Dividends can only be paid once the company satisfies a test of solvency Power to declare dividends at any time rests with directors (s254U) Dividends may be in the form of cash, bonus shares or assets Constitution usually provides for the declaration of two types of dividends: Interim (declared and paid during the year) – Final (declared this year, paid next) Commonly expressed as a certain amount of cents per share Dividends 70
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Australian School of Business When does a legal debt arise for dividends? If constitution states that once declared a dividend is not subject to further approval – a legal debt arises on declaration – dividend payable recorded at date of declaration If constitution requires approval by shareholders at a meeting of shareholders – a legal debt arises on the approval by shareholders – dividend payable recorded once approval obtained If there is no constitution/constitution is silent – a legal debt arises on the nominated payment date – no dividend payable recorded Dividends 71
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Australian School of Business INTERIM DIVIDEND PAID Dr Retained earnings $x Cr Cash $x FINAL DIVIDEND DECLARED Dr Retained earnings $x Cr Dividend payable $x Dividend paid/declared accounts are often used in the above entries and closed to retained earnings as part of the annual closing process
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