Keyword Index for Financial Reporting
Topic Page Module Comments
A
AASB standards accounting standards developed by the Australian
Accounting Standards Board for all economic
5 1 sectors in Australia
AASB standards - (Reduced Disclosure Requirements) and begin with
prefix ‘AUS’ or ‘RDR’ words that highlight their limited applicability. For
example: ‘Notwithstanding paragraphs xx, in
respect of not-for-profit entities . . . ’. It is the
reporting requirements differ for specific economic
5 1 entities such as Australian not-for-profit entities.
AASB standards - two digits (from 1 to 99) are the equivalent of
specific numbering IFRSs; three digits (from 101 to 999) are the
system equivalent of IASs; four digits (from 1001 onwards)
5 1 have no international equivalent (AASB 2019a)
ACCOUNTING Examples: • bad debts • inventory obsolescence •
ESTIMATES - the fair value of financial assets and liabilities • the
CHANGES useful lives of depreciable assets • warranty
72 2 obligations (IAS 8, para. 32).
ACCOUNTING Cannot be recognised retrospectively. It must be
ESTIMATES - recognised prospectively by including it in P/L. They
CHANGES should be distinguished from the correction of errors
72 2 because they do not relate to a prior period
ACCOUNTING
Change in an Accounting Estimate - Estimating an
ESTIMATES -
allowance for doubtful debts
EXAMPLE 2.2 72 2
Accounting Estimates
(Revision) and
Correction Errors 72 2
Accounting policies - Entity must disclose: • the title of the IFRS• the
CHANGES - due to nature of the change in accounting policy• for the
IFRS current period and each prior period presented,
the amount of the adjustment for each financial
statement item affected and the impact on earnings
per share disclosures if applicable• for periods
before those presented, the amount of the
adjustment to the extent practicable• when there are
transitional provisions, disclose this fact together
with a description of the transitional provisions
and the effect they might have on future periods• if
retrospective application is impracticable, the
circumstance that led to the existence of that
condition, and a description of how and when the
change in accounting policy has been applied (IAS
71 2 8, para. 28).
Accounting policies - Entity must disclose: • the nature of the change in
CHANGES - due to accounting policy • the reasons why the change
voluntary change provides ‘reliable and more relevant information’ •
the amount of adjustment for each financial
statement item affected (current and prior period)
and the impact on earnings per share disclosures if
applicable • the amount of the adjustments relating
to periods before those presented to the extent
practicable • advice (where applicable) that
retrospective application is impracticable for a
particular prior period or for periods before those
71 2 presented
,Accounting policies -
Change in Accounting Policy resulted in an increase
CHANGES - EXAMPLE
in the value of inventory on hand
2.1 70 2
Accounting policies - • is required by an IFRS (it must apply the
CHANGES -IAS 8 transitional provisions in the IFRS); or • results in
permits if: the financial statements providing reliable and more
relevant information (change must be made
70 2 retrospectively)
Accounting policies - accounting policies consistently for similar
CONSISTENCY 69 2 transactions, other events
Accounting policies - (a) the measurement basis (or bases) used in
DISCLOSURE in the preparing the FS; and
Notes (b) the other accounting policies used that are
69 2 relevant to an understanding of FS
ACCOUNTING are defined as ‘the specific principles, bases,
POLICIES - conventions, rules and practices applied by an
SELECTION Definition entity in preparing and presenting financial
68 2 statements’ (IAS 8, para. 5)
ACCOUNTING • International Financial Reporting Standards
POLICIES - standards (IFRSs)
and interpretations • International Accounting Standards (IASs)
adopted by the IASB • Interpretations of accounting standards developed
by the IFRSs Interpretations Committee (referred to
as IFRIC Interpretations)
• Standards Interpretations Committee
68 2 Interpretations previously issued by the IASB
ACCOUNTING
POLICIES -IFRSs do
not apply to a
(a) relevant to the economic decision-making needs
transaction - IAS 8
of users; and (b) reliable, (i) represent faithfully (ii)
requires management
reflect the economic substance of transactions(iii)
to use professional
neutral, ie free from bias; (iv) prudent; (v) complete
judgment to develop
in all material respects
accounting policies that
provide information that
is: 68 2
ACCOUNTING
1. the requirements in the IFRSs that deal with
POLICIES -order of
similar and related issues
using accounting
2. the Conceptual Framework’s definitions,
policies when
recognition criteria and measurement concepts for
applying professional
assets, liabilities, income and expenses
judgement 68 2
Accrual Basis accounting recognises the effects of transactions
and other events when they occur (which may not
correspond to the time that cash is exchanged in
response to a transaction) and reports them in the
financial statements in the periods to which they
14 1 relate
Accrual basis of items are recognised as assets, liabilities, equity,
accounting - IAS 1 para income and expenses when they satisfy the
27 definitions and recognition criteria in the Conceptual
65 2 Framework
Accrual Expense 22 1 Liabilities
acquirer entity that receives the assets and liabilities
224 5 acquired
acquirer - Identification 225 5 • primarily by transferring cash or other assets ->•
the entity that transfers the cash or other assets
• by incurring liabilities-> • the entity that incurs the
liabilities
• primarily by exchanging equity interests ->• the
, entity that issues the equity interests
Acquiring shares - operating in growth markets with high barriers to
acquiring a single entry may be the most appropriate way for investors
asset: the investment to gain exposure to those markets, with the level of
account. exposure sought influencing the level of equity
218 5 interest acquired.
acquisition date - the date on which the acquirer obtains control of the
Definition 225 5 acquiree
acquisition date - 1) direct acquisition - date when the contract of
Determination the sale of the business by the acquiree is signed.
2) indirect acquisition - date when enough shares
in the acquiree that give majority voting power are
225 5 held by the acquirer.
acquisition method acquirer recognises the identifiable assets acquired,
liabilities assumed and any non-controlling interests
in the acquiree, and then identifies any difference at
acquisition date between:
(a) the FV of the consideration transferred plus any
non-controlling interest plus the FV of any
previously held equity interest in the acquiree
222 5 (b) the FV of the identifiable net assets acquired
ACQUISITION
METHOD 224 5
acquisition method - 4 (a) identifying the acquirer;
steps (b) determining the acquisition date;
(c) recognising and measuring the identifiable
assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree; and
(d) recognising and measuring goodwill or a gain
224 5 from a bargain purchase
ACQUISITION
EXAMPLE 5.6 - Applying the Acquisition Method for
METHOD - DIRECT
a Direct Acquisition
ACQUISITION 234 5
ACQUISITION Acquiring the assets and liabilities constituting a
METHOD - DIRECT business results in transferring these items directly
ACQUISITION to the acquirer, which can use them in its own
business, generally without any restrictions imposed
by other parties. As such, the acquirer will need to
recognise them in its financial statements in a
234 5 similar way to an acquisition of individual assets.
ACQUISITION
EXAMPLE 5.7 - Applying the Acquisition Method for
METHOD - INDIRECT
an Indirect Acquisition
ACQUISITION 235 5
ACQUISITION Acquiring the equity interests of another entity that
METHOD - INDIRECT gives the acquirer control over that other entity
ACQUISITION results in the acquirer, in essence, purchasing a
single asset: an investment in the shares of the
acquiree. As such, the acquirer can only recognise
234 5 this new asset in its financial statements
ACQUISITION
METHOD for different
form of business
combination 233 5
acquisition of a recognising those items in the investor’s own
business with all its financial statements, together with any other of its
assets and liabilities own assets and liabilities. Most appropriate
investment for an investor that needs to use the
218 5 acquired assets in its own business
Acquisition-related 230 5 include finder’s fees; advisory, legal, accounting,
costs valuation and other professional or consulting fees;
, general administrative costs, including the costs of
maintaining an internal acquisitions department;
and costs of registering and issuing debt and equity
securities
active market a market in which transactions for the asset or
liability take place with sufficient frequency and
volume to provide pricing information on an ongoing
393 7 basis
Adjusting event those events that provide new or further evidence of
conditions that existed at the end of the reporting
75 2 period
ADJUSTING EVENTS - a court case that was in existence;an asset value
Examples has been estimated; the determination after the
reporting period of profit sharing or bonus
76 2 payments; the discovery of fraud or errors
Alternative use the entity could direct the asset to another
customer. Example: production of identical
inventory items that the entity can substitute across
134 3 different contracts with customers.
AMORTISATION - amortisation period will be the life of the contract. •
contract cost Amortisation shall occur ‘on a systematic basis that
is consistent with the transfer to the customer of the
137 3 goods or services to which the asset relates’
amortised cost - at
Reporting Date -
EXAMPLE 1.5 30 1
amortised cost - IFRS 9
Financial Instruments 31 1
Asset - control of refers to the ability to direct the use of, and obtain
substantially all of the remaining benefits from, the
133 3 asset’
Asset - Definition a present economic resource controlled by the
entity as a result of past events. An economic
resource is a right that has the potential to produce
13 1 economic benefits (paras 4.3–4.4).
Asset and Liabilities - A temporary difference may arise on initial
Initial Recognition or recognition of an asset or liability if, for example,
Not in Business part or all of the cost of an asset will not be
Combination deductible for tax purposes. DTL are not
recognised. Dr Machinery (property, plant and
179 4 equipment) 100 Cr Cash/accounts payable 100
Assets - key 1. it is a right 2. it has the potential to produce
components future economic benefits 3. the asset is
22 1 controlled by the entity.
Assets — relationship Carrying amount > tax base 1 Taxable temporary
between carrying difference
amount, tax base and Carrying amount < tax base 2 Deductible
temporary differences temporary difference
170 4 Carrying amount = tax base 3 None
ASSETS AND Entity with clearly identifiable operating cycle has
LIABILITIES - current and non-current classification system.
PRESENTATION (Woolworths and Qantas) In contrast, financial
institutions typically use the liquidity basis of
95 2 presentation. (ANZ and Westpac)
ASSETS CARRIED AT 192 4 two possibilities: 1. The TB of the asset is adjusted
REVALUED by the same amount as the change in the CA of the
AMOUNTS asset. Therefore, TD = NIL. 2. TheTB of the asset is
not adjusted, or it is adjusted by an amount that
differs from the amount by which the asset was
Topic Page Module Comments
A
AASB standards accounting standards developed by the Australian
Accounting Standards Board for all economic
5 1 sectors in Australia
AASB standards - (Reduced Disclosure Requirements) and begin with
prefix ‘AUS’ or ‘RDR’ words that highlight their limited applicability. For
example: ‘Notwithstanding paragraphs xx, in
respect of not-for-profit entities . . . ’. It is the
reporting requirements differ for specific economic
5 1 entities such as Australian not-for-profit entities.
AASB standards - two digits (from 1 to 99) are the equivalent of
specific numbering IFRSs; three digits (from 101 to 999) are the
system equivalent of IASs; four digits (from 1001 onwards)
5 1 have no international equivalent (AASB 2019a)
ACCOUNTING Examples: • bad debts • inventory obsolescence •
ESTIMATES - the fair value of financial assets and liabilities • the
CHANGES useful lives of depreciable assets • warranty
72 2 obligations (IAS 8, para. 32).
ACCOUNTING Cannot be recognised retrospectively. It must be
ESTIMATES - recognised prospectively by including it in P/L. They
CHANGES should be distinguished from the correction of errors
72 2 because they do not relate to a prior period
ACCOUNTING
Change in an Accounting Estimate - Estimating an
ESTIMATES -
allowance for doubtful debts
EXAMPLE 2.2 72 2
Accounting Estimates
(Revision) and
Correction Errors 72 2
Accounting policies - Entity must disclose: • the title of the IFRS• the
CHANGES - due to nature of the change in accounting policy• for the
IFRS current period and each prior period presented,
the amount of the adjustment for each financial
statement item affected and the impact on earnings
per share disclosures if applicable• for periods
before those presented, the amount of the
adjustment to the extent practicable• when there are
transitional provisions, disclose this fact together
with a description of the transitional provisions
and the effect they might have on future periods• if
retrospective application is impracticable, the
circumstance that led to the existence of that
condition, and a description of how and when the
change in accounting policy has been applied (IAS
71 2 8, para. 28).
Accounting policies - Entity must disclose: • the nature of the change in
CHANGES - due to accounting policy • the reasons why the change
voluntary change provides ‘reliable and more relevant information’ •
the amount of adjustment for each financial
statement item affected (current and prior period)
and the impact on earnings per share disclosures if
applicable • the amount of the adjustments relating
to periods before those presented to the extent
practicable • advice (where applicable) that
retrospective application is impracticable for a
particular prior period or for periods before those
71 2 presented
,Accounting policies -
Change in Accounting Policy resulted in an increase
CHANGES - EXAMPLE
in the value of inventory on hand
2.1 70 2
Accounting policies - • is required by an IFRS (it must apply the
CHANGES -IAS 8 transitional provisions in the IFRS); or • results in
permits if: the financial statements providing reliable and more
relevant information (change must be made
70 2 retrospectively)
Accounting policies - accounting policies consistently for similar
CONSISTENCY 69 2 transactions, other events
Accounting policies - (a) the measurement basis (or bases) used in
DISCLOSURE in the preparing the FS; and
Notes (b) the other accounting policies used that are
69 2 relevant to an understanding of FS
ACCOUNTING are defined as ‘the specific principles, bases,
POLICIES - conventions, rules and practices applied by an
SELECTION Definition entity in preparing and presenting financial
68 2 statements’ (IAS 8, para. 5)
ACCOUNTING • International Financial Reporting Standards
POLICIES - standards (IFRSs)
and interpretations • International Accounting Standards (IASs)
adopted by the IASB • Interpretations of accounting standards developed
by the IFRSs Interpretations Committee (referred to
as IFRIC Interpretations)
• Standards Interpretations Committee
68 2 Interpretations previously issued by the IASB
ACCOUNTING
POLICIES -IFRSs do
not apply to a
(a) relevant to the economic decision-making needs
transaction - IAS 8
of users; and (b) reliable, (i) represent faithfully (ii)
requires management
reflect the economic substance of transactions(iii)
to use professional
neutral, ie free from bias; (iv) prudent; (v) complete
judgment to develop
in all material respects
accounting policies that
provide information that
is: 68 2
ACCOUNTING
1. the requirements in the IFRSs that deal with
POLICIES -order of
similar and related issues
using accounting
2. the Conceptual Framework’s definitions,
policies when
recognition criteria and measurement concepts for
applying professional
assets, liabilities, income and expenses
judgement 68 2
Accrual Basis accounting recognises the effects of transactions
and other events when they occur (which may not
correspond to the time that cash is exchanged in
response to a transaction) and reports them in the
financial statements in the periods to which they
14 1 relate
Accrual basis of items are recognised as assets, liabilities, equity,
accounting - IAS 1 para income and expenses when they satisfy the
27 definitions and recognition criteria in the Conceptual
65 2 Framework
Accrual Expense 22 1 Liabilities
acquirer entity that receives the assets and liabilities
224 5 acquired
acquirer - Identification 225 5 • primarily by transferring cash or other assets ->•
the entity that transfers the cash or other assets
• by incurring liabilities-> • the entity that incurs the
liabilities
• primarily by exchanging equity interests ->• the
, entity that issues the equity interests
Acquiring shares - operating in growth markets with high barriers to
acquiring a single entry may be the most appropriate way for investors
asset: the investment to gain exposure to those markets, with the level of
account. exposure sought influencing the level of equity
218 5 interest acquired.
acquisition date - the date on which the acquirer obtains control of the
Definition 225 5 acquiree
acquisition date - 1) direct acquisition - date when the contract of
Determination the sale of the business by the acquiree is signed.
2) indirect acquisition - date when enough shares
in the acquiree that give majority voting power are
225 5 held by the acquirer.
acquisition method acquirer recognises the identifiable assets acquired,
liabilities assumed and any non-controlling interests
in the acquiree, and then identifies any difference at
acquisition date between:
(a) the FV of the consideration transferred plus any
non-controlling interest plus the FV of any
previously held equity interest in the acquiree
222 5 (b) the FV of the identifiable net assets acquired
ACQUISITION
METHOD 224 5
acquisition method - 4 (a) identifying the acquirer;
steps (b) determining the acquisition date;
(c) recognising and measuring the identifiable
assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree; and
(d) recognising and measuring goodwill or a gain
224 5 from a bargain purchase
ACQUISITION
EXAMPLE 5.6 - Applying the Acquisition Method for
METHOD - DIRECT
a Direct Acquisition
ACQUISITION 234 5
ACQUISITION Acquiring the assets and liabilities constituting a
METHOD - DIRECT business results in transferring these items directly
ACQUISITION to the acquirer, which can use them in its own
business, generally without any restrictions imposed
by other parties. As such, the acquirer will need to
recognise them in its financial statements in a
234 5 similar way to an acquisition of individual assets.
ACQUISITION
EXAMPLE 5.7 - Applying the Acquisition Method for
METHOD - INDIRECT
an Indirect Acquisition
ACQUISITION 235 5
ACQUISITION Acquiring the equity interests of another entity that
METHOD - INDIRECT gives the acquirer control over that other entity
ACQUISITION results in the acquirer, in essence, purchasing a
single asset: an investment in the shares of the
acquiree. As such, the acquirer can only recognise
234 5 this new asset in its financial statements
ACQUISITION
METHOD for different
form of business
combination 233 5
acquisition of a recognising those items in the investor’s own
business with all its financial statements, together with any other of its
assets and liabilities own assets and liabilities. Most appropriate
investment for an investor that needs to use the
218 5 acquired assets in its own business
Acquisition-related 230 5 include finder’s fees; advisory, legal, accounting,
costs valuation and other professional or consulting fees;
, general administrative costs, including the costs of
maintaining an internal acquisitions department;
and costs of registering and issuing debt and equity
securities
active market a market in which transactions for the asset or
liability take place with sufficient frequency and
volume to provide pricing information on an ongoing
393 7 basis
Adjusting event those events that provide new or further evidence of
conditions that existed at the end of the reporting
75 2 period
ADJUSTING EVENTS - a court case that was in existence;an asset value
Examples has been estimated; the determination after the
reporting period of profit sharing or bonus
76 2 payments; the discovery of fraud or errors
Alternative use the entity could direct the asset to another
customer. Example: production of identical
inventory items that the entity can substitute across
134 3 different contracts with customers.
AMORTISATION - amortisation period will be the life of the contract. •
contract cost Amortisation shall occur ‘on a systematic basis that
is consistent with the transfer to the customer of the
137 3 goods or services to which the asset relates’
amortised cost - at
Reporting Date -
EXAMPLE 1.5 30 1
amortised cost - IFRS 9
Financial Instruments 31 1
Asset - control of refers to the ability to direct the use of, and obtain
substantially all of the remaining benefits from, the
133 3 asset’
Asset - Definition a present economic resource controlled by the
entity as a result of past events. An economic
resource is a right that has the potential to produce
13 1 economic benefits (paras 4.3–4.4).
Asset and Liabilities - A temporary difference may arise on initial
Initial Recognition or recognition of an asset or liability if, for example,
Not in Business part or all of the cost of an asset will not be
Combination deductible for tax purposes. DTL are not
recognised. Dr Machinery (property, plant and
179 4 equipment) 100 Cr Cash/accounts payable 100
Assets - key 1. it is a right 2. it has the potential to produce
components future economic benefits 3. the asset is
22 1 controlled by the entity.
Assets — relationship Carrying amount > tax base 1 Taxable temporary
between carrying difference
amount, tax base and Carrying amount < tax base 2 Deductible
temporary differences temporary difference
170 4 Carrying amount = tax base 3 None
ASSETS AND Entity with clearly identifiable operating cycle has
LIABILITIES - current and non-current classification system.
PRESENTATION (Woolworths and Qantas) In contrast, financial
institutions typically use the liquidity basis of
95 2 presentation. (ANZ and Westpac)
ASSETS CARRIED AT 192 4 two possibilities: 1. The TB of the asset is adjusted
REVALUED by the same amount as the change in the CA of the
AMOUNTS asset. Therefore, TD = NIL. 2. TheTB of the asset is
not adjusted, or it is adjusted by an amount that
differs from the amount by which the asset was
