BA606 FINANCIAL ACCOUNTING. Professor Garry Carnegie Lectures 19 & 20. Lectures 19 and 20 : Further financial reporting issues. Introduction Differential reporting Materiality Events occurring after balance date Accounting polices, changes in accounting estimates and errors
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Professor Garry Carnegie
Lectures 19 & 20
- Costs of complying with accounting standards are significantly greater for small entities
- Information needs for users in the case of small entities are likely to be less elaborate than for larger entities and, therefore, are different
- Users of the financial reports of small entities are usually able to obtain financial and other information to suit their special decision needs
- consolidated gross operating revenue is $25 million or more
- consolidated gross assets is $12.5 million or more
- the company and the entity it controls have 50 or more employees
- Selection and application of accounting policies
- Changes in accounting policies
- Changes in accounting estimates
- Executives and the entities they manage
- A parent company and a subsidiary company
- Subsidiaries of the same parent
- A related party may gain personal benefit
- Related parties may “create” profits and assets
- Related party transactions may be used to minimise tax
- Related party transactions may be used to defraud third parties
- Nature of the related party relationships (see paras. 12 and Aus12.1)
- Compensation of key management personnel (para. 16)
- Transactions and outstanding balances between related parties (paras. 17, 18 and also para. 20 for examples of transactions)
- How should a segment be defined?
- When should segment data be reported?
- What segment data should be disclosed?
- How should segment data be disclosed?
(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);
(b) whose operating activities are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and
(c) for which discrete financial information is available” (para. 5; emphasis in original)
(a) has been identified in accordance with paragraphs 5-10 or results from aggregating two or more of those segments in accordance with paragraph 12; and
(b) exceeds the quantitative thresholds in paragraph 13
Paragraphs 14-19 specify other situations in which separate information about an operating segment shall be reported” (para. 11)
(a) its reported income, including both sales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments;
(b) the absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss;
(c) its assets are 10 per cent or more of the combined assets of all operating segments” (para. 13)
- General information (para. 22)
- Revenues and expenses (para. 23)
- Segment assets (para. 23)
- Segment liabilities (para. 23)
- Also see para. 24