Also could you please add 600 word for this below question? Choose a Manufacturing Company

Studying Corporate Accounting

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HA2032

Corporate Accounting

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Topic 1

Corporate Regulation & Reporting

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Regulatory

Reporting

environment

Reports &

Company lifecycle

disclosures

Company

formation

Owners

capital

equity

Raising funds

Via

equity

debt

Investing in related entities

Inter-company

Cash flow

transactions

consolidation

Business combinations

Consolidation

Direct minority

interest

and

process &

elimination

Indirect minority

External

Corporate groups

interest

administration

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HA 2032 Corporate Accounting

Characteristics of Companies

Types of Companies

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§ Separate legal identity

§ Limited liability

§ Ownership by share

§ Perpetual succession

§ Ability to raise capital

§ Professional management.

§Allowable company structures in Australia:

Øpublic companies

Øsmall proprietary companies

ØLarge proprietary companies

§ Mode of participation

Øshare company

Øguarantee company.

§ Extent of liability

Ølimited liability

Øno liability

Øunlimited liability.

HA 2032 Corporate Accounting

Types of Companies (cont)

Historical evolution of regulation

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§ Special types of companies

Øinvestment

Øbanking

Ølife insurance

Øforeign.

§ Companies were uncommon until the late 19th Century

§ Based on British system

§ Mainly restricted to government/quasi-government and religious organisations

§ Early concern over fraud and manipulation

§ Limited liability was applicable since 1855

§ Australia

Øinitially administered by states

no uniformity until 1960s

Uniform Companies Act.

ØNational Cooperative Scheme (1981)

National Companies and Securities Commission.

ØCorporations Act 1989and the Corporations Law.

HA 2032 Corporate Accounting

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The Corporations Act and reporting

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§ Accounting requirements are generally of two types:

1 requirements that relate to the way in which financial data are recorded in the companys accounting system

2 requirements that relate to the drawing up of compulsory reports that are prepared for the benefit of company members and others.

HA 2032 Corporate Accounting

The FRC and the AASB

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§The Financial Reporting Council (FRC):

Øformed in 2000

Ø its powers and responsibility are specified in s.225 of ASIC Act:

Øoversees the AASB and its activities

Øfunds AASB

Øprovides oversight of accounting standard-setting process.

HA 2032 Corporate Accounting

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The FRC and the AASB (cont)

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§ The Australian Accounting Standards Board (AASB)

§ Replaced the ASRB in 1991

§ Functions include:

Ødevelop a conceptual framework

Ømake accounting standards

Ø participate in, and contribute to, the development of a single set of accounting standards.

HA 2032 Corporate Accounting

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International standards and AASB

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§ In 2002, the FRC announced that Australia would adopt International Accounting Standards Board (IASB) standards in full from the 1st January 2005.

§ Most AASB standards have been replaced with (IFRS).

§ All of IFRSs have an AASB equivalent, three groups of AASB standards:

1 three-digit numbers: corresponding to IAS series

2 one-digit numbers: corresponding to IFRS series

3 four-digit numbers: existing Australian standards with no corresponding IFRS.

HA 2032 Corporate Accounting

AASB accounting standards

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§AASB accounting standards have the force of law under s.334(1) of the Corporations Act in the following ways:

Øcompany directors must ensure the companys financial statements comply with accounting standards

Øauditors of companies are required to state whether accounts have been made out in accordance with accounting standards.

HA 2032 Corporate Accounting

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Other accounting authorities

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§ Most important sources of authority for financial reporting:

ØThe Corporations Act

ØAASB accounting standards

ØOther authorities:

1 Urgent Issues Group (UIG)

2 Accounting bulletins

3 ASX listing rules

An entity whose securities are listed must agree to abide by the rules of the exchange.

These rules do not conflict with the Corporations law or accounting standards, but are complementary or additional to those authorities.

4ASIC practice notices

HA 2032 Corporate Accounting

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Enforcement of financial reporting reqmt

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§ ICAA and CPA Australia enforce financial reporting-related requirements through rules of professional conduct

§ ASIC is responsible for enforcement of accounting standards

§ Auditor must advise ASIC if the company does not comply with accounting standards.

HA 2032 Corporate Accounting

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Reasons for corporate disclosure

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§ Public interest

§ Protection of members

§ Predicting investment returns

§ Stewardship

§ Information useful for decision-making

§ Arguments against compulsory reporting:

Ødecision usefulness: too little or too much information

Øself-interest of profession

Øaccountability: misleading published financial reports.

HA 2032 Corporate Accounting

Thrust of legislative reforms

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§ Streamlining reporting requirements

§ Specification in accounting standards rather than the law

§ Simplification of corporate administration

§ Differential reporting requirements

§ Re-organisation of legal provisions

§ Changes to corporate governance

§ 1st Corporations Law Simplification Act 1995

§ Company Law Review Act 1998

§ Corporations Act 2001.

HA 2032 Corporate Accounting

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Objectives of Corporations Act

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§ The Act requires financial reports give a true and fair view of the financial position and performance of the entity (s. 297)

ØMeaning that mere compliance with accounting standards may be insufficient (s.295(3))

ØTrue and fair is not defined by the Act

ØHowever, it is based on reasoned judgment and ethical fair play

ØFlexibility and interpretation are integral to relevance and reliability of financial information.

HA 2032 Corporate Accounting

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Objectives of Corporations Act (cont)

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§ AASB 101 Presentation of Financial Statements states that:

Ø A financial report shall present fairly the financial position, financial performance and cash flow of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of [accounting standards], with additional disclosure when necessary, is presumed to result in a financial report that achieves a fair presentation.

HA 2032 Corporate Accounting

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The conceptual framework (cont)

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§ SACs are benchmarks used in developing accounting standards and can be used to analyse and understand accounting standards requirements.

§ The IASB Framework predates the SACs in 2005. However, it is not as comprehensive as the four Australian SACs.

§ Thus, the AASB retains SACs 1 & 2 to fill in the gaps in the Framework. SACs 3 & 4 are withdrawn.

HA 2032 Corporate Accounting

The conceptual framework

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§In the 1990s, a set of Statements of Accounting Concepts (SACs) started to develop. The four issued SACs are (were):

ØSAC 1: Definition of the Reporting Entity

ØSAC 2: Objectives of General Purpose Financial Reporting

ØSAC 3: Qualitative Characteristics of Financial Information

Ø SAC 4: Definition and Recognition of the Elements of Financial Statement.

HA 2032 Corporate Accounting

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The reporting entity and its users

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§ Reporting entity concept to help decide which entities must comply with accounting standards

§ Each reporting entity is required to prepare financial reports in accordance with Part 2M.3 of the Corp Act

§ Financial reports are general purpose financial reports

§ Part 2M.3 requires financial report each year from:

Øall disclosing entities formed in Australia

Øall public companies

Øall large proprietary companies

Øall registered schemes

Øsmall proprietary companies under some circumstances e.g. controlled by a foreign company.

§ However, they are not necessarily reporting entities.

HA 2032 Corporate Accounting

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The reporting entity and its users (cont)

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§ Most small proprietary companies are not reporting entities

§ Most accounting standards only apply to reporting entities, except core accounting standards, AASB 101 & 107.

HA 2032 Corporate Accounting

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Elements of financial statements

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§ Definition and recognition criteria of elements are now contained under the Framework, prior to 2005 they appear in SAC 4.

§ Assets

ØFuture economic benefits are expected to flow in to the entity

ØResource controlled by the entity

ØResulting from past transactions or other past events

§ Liabilities

ØThe entity is presently obliged

ØResulting from past transactions or events

ØThe settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

HA 2032 Corporate Accounting

Characteristics of financial information

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§All reports should be characterised by:

Øaccrual basis

Øgoing concern.

§ All reports should possess these desirable characteristics:

Øunderstandability

Ørelevance

Ømateriality

Øreliability

Øcomparability.

HA 2032 Corporate Accounting

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Classification related terms

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§Current versus non-current

§ Tangible versus intangible

§ Monetary versus non-monetary

§ Financial instruments (AASB 132)

ØFinancial assets versus other assets

ØFinancial liabilities versus other liabilities

ØEquity instruments.

HA 2032 Corporate Accounting

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Measurement related terms .0/msohtmlclip1/01/clip_image022.jpg”>.0/msohtmlclip1/01/clip_image024.jpg”>.0/msohtmlclip1/01/clip_image026.jpg”> Topic 1 tutorial questions

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Historical cost

Replacement cost

§ Chapter 2

Current cash equivalent

Qu 2.7, 2.11,

2.12

Net present value

Net realisable value

§ Chapter 3

Lower of cost and net realisable value

Qu 3.1, 3.8,

3.14

§ Recoverable amount

§ Fair value

§ Marking to market.

HA 2032 Corporate Accounting

Also could you please add 600 word for this below question? Choose a Manufacturing Company

Merger valuation and synergy forcasting

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Positive accounting theory

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