conceptual framework is not mandatory, thus the matching principle has influence. There is no overall AASB for expenses. Provisions Recognition Criteria (AASB 137) – the amount recognised should be the best estimate of the expenditure required to settle the obligation at the reporting date. Provisions are liabilities that are uncertain in timing or amount & are recognised on the balance sheet. They may be current or noncurrent & may arise due to legal or constructive obligations (e.g. warranties, employee benefits) . A provision is recognised when an entity has a present obligation (due to a past event), it is probable t hat outflows of resources embodying economic benefits will be required to settle the obligation & a reliable estimate can be made. Otherwise a contingent liability will be disclosed in the notes. Contingent Assets/Liabilities Criteria - are possible obligations/resources arising from past events but whose existence depends on future events or are liabilities that fail the recognition criteria . They are not recognised in the balance sheet but
are disclosed in notes (if information is material & possibility of outflows is not remote ). ( E.g. loan guarantee, possible litigation liabilities, review of tax deductions by ATO ) Measurement – determining the monetary amounts assigned to each element on the financial statement. This requires determining value on initial recognition & thereafter. Historical cost, current cost, realisable value, PV. Assets initially measured at costs & subsequently on relevant ACCT standards recorded on statements by nature o PP&E @ cost or fair value & Inventories @ lower of cost & NRV Liabilities recorded at face value classified by nature o Except some; Employee benefits (LT service leave) & leases @ PV Revenue measured at fair value of consideration received classified by nature Expenses – cost of consumption or loss of EBs by nature Dividends Dividends are distributions of profit to shareholders in the form of cash, bonus shares or assets & can only be paid after satisfying a solvency test. Constitution sets out 2 types of dividend – interim (declared/paid in year) & final (paid next year). Once declared, a legal debt arises (at declaration [no further approval] or after approval of shareholders or on nominated pay date – no payable recorded [silent constitution]). Bonus Share Issues DR Retained Earnings / Reserve, CR Share Cap. Interim Dividend DR Retained Earnings, CR Cash Final Dividend Declared DR Retained Earnings, CR Dividend Payable Reserves Reserves are not defined in the accounting standards. Result from – requirements of ACCT STDs (asset revaluation reserve) , appropriations of profit (general/contingency reserves [signals non-distribution of profits]) or application of Corporations Act (forfeited shares reserve). Note: O/B R.E + NPAT + Transfers from Reserves – Dividends – Transfers to Reserves = C/B R.E Week 2 (12)Disclosure: Legal Requirements & Accounting Policies Accounting Policies are the principles, bases or rules adopted by a company in preparing & presenting its financial reports.
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