Accounting 1B
1. Accounting
does what?: Identifies, Measures, Records, Communicates 2. Users of
Financial Information: Shareholders, managers, creditors, regulators...
3. Regulatory constraints on Reporting: 1. Corporations act: "true and fair"
reflection of info
2. Accounting Standards (AASB): Must comply
3. ASX Listing Rules: disclosure regime
4. Components of GAAP: 1. Accounting Standards: AASB, AAS
2. AAG: Accounting Guidance Releases
3. Corporations law
4. ASX listing requirements
5. Customs and traditions
5. Accounting Standards: GAAP: common standards and procedures dev by
acc
IASB: International acc stand board: develops int
AASB: Develops 4 Australian comps, 2005 synced IASB
6. Principle Based Approach: 1.IASB sets standards by using principle
approach
- provides gen guidelines rather than spec rules
2. Relies on professional judgement in ethical manner
3. Flexible approach rather than consistent approach
- Flexibility=creative accounting but also break rules
7. Framework: 1. Objective of Financial reports:
- info about fin performance & position & cash flows
-useful to users making fin decisions
8. Accounting Principles/Assumptions: 1. Accrual basis (record when occur,
not when cash)
2. Going concern (entity continue op into future)
3.Accounting Period
4. Accounting Entity (separate from owner)
5. Monetary Unit (
6. Historical Cost (Recorded at historical costs)
9. Characteristics of Financial Info/Conventions: 1. Understandability (easily
understood)
, Accounting 1B
2. Relevance
(info should assist users to make fin dec)
-Materiality (material if omission could influence dec
3. Reliability
-Faithful rep (free of error/bias) (sub over form,
neutrality, prudence)
-Completeness (no omitted material info)
4. Comparability (between periods and other orgs)
10. Assets Definition: Resource Controlled by entity as a result of past events
and from which future eco benefits are expected.
11. Asset: Characteristics: 1. Future Economic benefits
2. Controlled by entity
3. Result of past events
12. Assets: Future Economics benefits: Potential to generate cash for business
in future.
13. Assets: Control: Entity controls benefits expected, not always through legal
rights
14. Assets: Past events: 1. Obtained by purchasing/producing or discovering
2. Expected future transactions not classified as assets
15. Asset: Recognition: 1. Probable FEBS flowing to entity
2. Item has a value/cost which can be measured
16. Tangible vs. Intangible Assets: 1. Intangible: identifiable non monetary asset
without physical substance.
-Must be separable: able to be separated by selling
-Must arise from contractual or legal right
- Must meet characteristics and recognition criteria
17. Intangible Assets: Internally generated: 1. Difficult to tell if qualify for
recognition
-Will it generate FEB?
- Determining cost of asset
2. Classified into Research phase & Development ph
18. Intangible Assets: Research Vs Dev: 1. Research: gain knowledge and
understanding
, Accounting 1B
- Not recognised,
expenditure is an expense, No FEB 2. Dev: Applying
findings from research 2 produce GS -Only recognised
if:
-Technical feasibility of completion:
-Intended to be sold or used
-Can demonstrate it has FEB
-Ability to be used or sold
-Sufficient resources to be completed
-expenditure can be measured reliably
19. Expenses Deffinition: Decrease in Economic Benefits during the
accounting period, other than owners distributions (dividends)
20. Expenses: Characteristics: 1. Decrease in economic benefits 2. Other than
dividends to owners
21. Expenses: Recognition: 1. Decrease in FEB (decrease in asset or increase
liability)
2. Can be measured with reliability
22. Depreciation: Deffinition: 1. Systematic allocation of depreciable amount to
an asset over its useful life 2. Allocation NOT valuation
3. Reflects Matching Principle
23. Depreciation: Methods: 1.Straight line (cost-residual/useful life)
2. Reducing Balance (Carrying amount* rate)
3. Units of production
(Units produced/Total life)*(Cost-residual)
24. Assets: Methods of measuring Value: 1. Historical Cost (what we paid)
2. Current/Market value (get if we sold it?)
3. Value in use (worth to us?)
4. Liquidation value(if we had to sell it fast?)
5. Pre-Adjusted Historical Cost (paid minus inflation)
6. Fair Value = Market value = exchanged bw. 2 valuable parties.
25. Assets: Measurement at recognition - PPE: 1. Measured at historical cost.
-Purchase price
-Other direct costs (transportation, installation)
-Dismantling costs
1. Accounting
does what?: Identifies, Measures, Records, Communicates 2. Users of
Financial Information: Shareholders, managers, creditors, regulators...
3. Regulatory constraints on Reporting: 1. Corporations act: "true and fair"
reflection of info
2. Accounting Standards (AASB): Must comply
3. ASX Listing Rules: disclosure regime
4. Components of GAAP: 1. Accounting Standards: AASB, AAS
2. AAG: Accounting Guidance Releases
3. Corporations law
4. ASX listing requirements
5. Customs and traditions
5. Accounting Standards: GAAP: common standards and procedures dev by
acc
IASB: International acc stand board: develops int
AASB: Develops 4 Australian comps, 2005 synced IASB
6. Principle Based Approach: 1.IASB sets standards by using principle
approach
- provides gen guidelines rather than spec rules
2. Relies on professional judgement in ethical manner
3. Flexible approach rather than consistent approach
- Flexibility=creative accounting but also break rules
7. Framework: 1. Objective of Financial reports:
- info about fin performance & position & cash flows
-useful to users making fin decisions
8. Accounting Principles/Assumptions: 1. Accrual basis (record when occur,
not when cash)
2. Going concern (entity continue op into future)
3.Accounting Period
4. Accounting Entity (separate from owner)
5. Monetary Unit (
6. Historical Cost (Recorded at historical costs)
9. Characteristics of Financial Info/Conventions: 1. Understandability (easily
understood)
, Accounting 1B
2. Relevance
(info should assist users to make fin dec)
-Materiality (material if omission could influence dec
3. Reliability
-Faithful rep (free of error/bias) (sub over form,
neutrality, prudence)
-Completeness (no omitted material info)
4. Comparability (between periods and other orgs)
10. Assets Definition: Resource Controlled by entity as a result of past events
and from which future eco benefits are expected.
11. Asset: Characteristics: 1. Future Economic benefits
2. Controlled by entity
3. Result of past events
12. Assets: Future Economics benefits: Potential to generate cash for business
in future.
13. Assets: Control: Entity controls benefits expected, not always through legal
rights
14. Assets: Past events: 1. Obtained by purchasing/producing or discovering
2. Expected future transactions not classified as assets
15. Asset: Recognition: 1. Probable FEBS flowing to entity
2. Item has a value/cost which can be measured
16. Tangible vs. Intangible Assets: 1. Intangible: identifiable non monetary asset
without physical substance.
-Must be separable: able to be separated by selling
-Must arise from contractual or legal right
- Must meet characteristics and recognition criteria
17. Intangible Assets: Internally generated: 1. Difficult to tell if qualify for
recognition
-Will it generate FEB?
- Determining cost of asset
2. Classified into Research phase & Development ph
18. Intangible Assets: Research Vs Dev: 1. Research: gain knowledge and
understanding
, Accounting 1B
- Not recognised,
expenditure is an expense, No FEB 2. Dev: Applying
findings from research 2 produce GS -Only recognised
if:
-Technical feasibility of completion:
-Intended to be sold or used
-Can demonstrate it has FEB
-Ability to be used or sold
-Sufficient resources to be completed
-expenditure can be measured reliably
19. Expenses Deffinition: Decrease in Economic Benefits during the
accounting period, other than owners distributions (dividends)
20. Expenses: Characteristics: 1. Decrease in economic benefits 2. Other than
dividends to owners
21. Expenses: Recognition: 1. Decrease in FEB (decrease in asset or increase
liability)
2. Can be measured with reliability
22. Depreciation: Deffinition: 1. Systematic allocation of depreciable amount to
an asset over its useful life 2. Allocation NOT valuation
3. Reflects Matching Principle
23. Depreciation: Methods: 1.Straight line (cost-residual/useful life)
2. Reducing Balance (Carrying amount* rate)
3. Units of production
(Units produced/Total life)*(Cost-residual)
24. Assets: Methods of measuring Value: 1. Historical Cost (what we paid)
2. Current/Market value (get if we sold it?)
3. Value in use (worth to us?)
4. Liquidation value(if we had to sell it fast?)
5. Pre-Adjusted Historical Cost (paid minus inflation)
6. Fair Value = Market value = exchanged bw. 2 valuable parties.
25. Assets: Measurement at recognition - PPE: 1. Measured at historical cost.
-Purchase price
-Other direct costs (transportation, installation)
-Dismantling costs
