This can only be ascertained by a comparison of the

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amount of gain made by the business during the year. This can only be ascertained by a comparison of the assets of the business at the two dates. Assets = Net Assets Case Law on the legal concept of profit for the purposes of paying dividends: Lee v Neuchatel Asphalte Co (1889) 41 Ch D 1: A ‘Dividend’ may be made out of current annual profits, our of profits arising from excess of ordinary receipts over expenses properly chargeable to the revenue account, provided there is nothing in the constitution prohibiting such an application Accounting Standards Accounting standards lie at the heart of financial reporting obligations – s 296 (1) states that the financial report for a financial year must comply with the accounting standards s 254T (2): 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) QBE Insurance Group Ltd v ASC (1992) 38 FCR 270 : Professional accounting standards were regarded as a guide, not binding on courts. However, since the introduction of s296 and s334 and also the case Sun Alliance Investments Pty Ltd (in liq) v FCT (2004) 134 FCR 102 - The Full Court said of the definition in Re Spanish Prospecting Co Ltd that it “seems to imply that such a comparison is to be determined by prevailing accounting principles and standards”. B. Reporting Documents Financial records : invoices, receipts, working paper s 286: obligation to keep financial records s 290: directors’ right of access to financial records “at all reasonable times” Financial reports: s 292 – Who has to prepare annual financial reports and directors’ reports s 314 – Annual financial reporting to members “The Books” wide term that includes records but reports other documents and registers (of members). Include documents that are not just financial Periodic Disclosure s 285 (1) what documents are involved to make up the financial reports Three major documents and separate fourth document: 1. Financial statements s 295(2): e.g. balance sheet, profit and loss statement, cash flow statements 2. Disclosures and notes s 295(3): Details about the assumption, processes in relation to the financial statements 3. Director’s declaration s 295(4): The directors as a group discuss all the issues in as per 295(4). They need to determine s 295(4)(C) – solvency of the organisation 4. Basic contents of financial report s 295(1): the financial statements for the year, the notes to the financial statements, the directors declaration about the statements and notes 5. Director’s reports: s298 (ff) Requirements s 292(2) – Reporting exemption for small proprietary companies. Exemption for reporting may lead to also an exemption for auditors s 302 – Reservation of question of law: ‘Half-yearly reports for ‘Disclosing entities’, listed companies, companies involved in public fundraising, companies involved in off-market takeovers Quarterly reports are also required by companies listed on the ASX
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