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1、Chapter 14 Disclosure: legal requirements and accounting policies Prepared by Mark Vallely,Learning objectives,Discuss the objectives of general purpose financial statements and the definitions of financial performance and financial position (p. 688) Discuss the legislative requirements for preparat
2、ion of a companys annual reports so as to comply with accounting standards and provide a true and fair view (p. 690) Explain the nature of a disclosing entity and the legal requirements for half-year financial reporting (p. 698) Describe how accounting policies and changes to accounting policies are
3、 disclosed in general purpose financial statements (p. 698) Describe how changes in accounting estimates are accounted for and disclosed in general purpose financial statements (p. 717) Explain how prior period errors arise, and how they are accounted for and disclosed in general purpose financial s
4、tatements (p. 718) Explain the requirements when it is impracticable to make retrospective adjustments for changes in accounting policies or correction of errors (p. 720) Describe the concept of materiality and how material items are identified (p. 721) Explain the difference between types of events
5、 occurring after the end of the reporting period and how they are to be treated in the financial statements (p. 723).,Introduction,Focus of this chapter: The need for and objectives of external reporting Legislative requirements for financial reporting We will examine four accounting standards AASB
6、101 Presentation of Financial Statements AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 110 Events after the Reporting Period AASB 1031 Materiality,The preparation of financial statements is covered in CH 15 and 16,General Purpose Financial Statements (GPFS),Are prepar
7、ed for users who depend on reports for information to enable them to make decisions about the allocation of scarce resources Accountability for use of resources by directors/management is a secondary aim IASB Conceptual Framework identifies users and their common information needs: Financial Positio
8、n (Statement of Financial Position) Financial Performance (Statement of Profit or Loss and Other Comprehensive Income) Cash Flows (Statement of Cash Flows),Resources controlled Financial structure Capacity to adapt Liquidity Solvency Profitability Sources of cash Uses of cash,Annual reporting requir
9、ements Legislative requirements,Chapter 2M of the Corporations Act requires ALL Disclosing entities Public companies and Large proprietary companies Registered schemes Special rules apply to small proprietary companies Components of an annual financial report (s295(1): The financial statements for t
10、he year The notes to the financial statements The directors declaration about the statements and notes,Annual reporting requirements Annual financial report,Financial Statements (s295 (2): Annual financial report must include financial statements as required by accounting standards Consolidated fina
11、ncial statements are also to be prepared if required by accounting standards AASB 101 requires presentation and disclosures: Statement of financial position (as at the end of the year) Statement of profit or loss and other comprehensive income Statement of changes in equity AASB 107 Statement of Cas
12、h Flows requirements for: Statement of cash flows AASB 12 Disclosure of Interests in Other Entities Sets out the disclosure requirements for consolidated financial statements,Annual reporting requirements Annual financial report,2. The notes to the financial statements (ss. 295(3) and 297) The notes
13、 must provide all disclosures required by corporate regulations and accounting standards Must also contain additional information necessary to ensure that the financial report provides A true and fair view of the financial position and performance of the company / consolidated entity.,Annual reporti
14、ng requirements Annual financial report,3. The directors declaration about the statements and notes This declaration must state whether, in the directors opinion: there are reasonable grounds to believe that the company is solvent that is, able to pay its debts as and when they become due and payabl
15、e; the financial statements and notes are in accordance with the Corporations Act (s. 296 comply with accounting standards) and give a true and fair view (s. 297); and A company whose financial statements comply with IFRSs Shall include in the notes an explicit and unreserved statement of compliance
16、 with IFRS The Directors declaration shall draw attention to this note Special rules for listed companies (CEO and CFO declarations),Annual reporting requirements Annual financial report,4. Compliance with accounting standards Corporations Act Chapter 2M Companies preparing a financial report must ensure compliance Some exceptions for small proprietary companies Reduced disclosure regime under AASB 1053 Application of Tiers of Australian Accounting Standards is releva
