Corporate Accounting And Reporting For Financial Performance: AASB 10 And AASB 101
Discuss about the Corporate Accounting and Reporting for Financial Performance.
The objective of accounting is to collect and report on the financial information pertaining to the cash flows, financial performance and position of an entity. The present report undertakes to explain the application and relevance of AASB 10 and AASB 101 of Australian Accounting through practical illustrations.
The primary purpose of AASB 10 Consolidated Financial Statements is to set out principles and guidelines to facilitate the preparation and presentation of consolidated financial reports when one or more sub-businesses are controlled by an organisation (AASB, 2011). This standard gives a novel and extended guidance on recognising whether or not control exists in a company, and hence whether it requires consolidation. The mandates of AASB 10 are based on principles and entail exercising judgment (Crowe Horwath, 2011).
At 1 July 2016
Net fair value of identifiable assets and liabilities = ($100000+$50000+$10000) equity +
=$10000 (1-30%) inventory+
=$10000 (1-30%) plant + 90000 (1-30%) patent
-15000 (1-30%) legal claim
= $226 500
Consideration transferred =$88 000
Capital reserve =$138 500
Worksheet entries
|
Entries |
Dr. |
Cr. |
|
1. Inventory Dr |
10000 |
|
|
Deferred tax liability Cr |
3000 |
|
|
Business combination valuation reserve Cr |
7000 |
|
|
2. Patent Dr |
90000 |
|
|
Deferred tax liability Cr |
27000 |
|
|
Business combination valuation reserve Cr |
63000 |
|
|
3. Accumulated depreciation – equipment Dr |
20000 |
|
|
Equipment Cr |
10000 |
|
|
Deferred tax liability Cr |
3000 |
|
|
Business combination valuation reserve Cr |
7000 |
|
|
4. Deferred tax liability Dr |
4500 |
|
|
Legal claim Dr |
10500 |
|
|
Legal claim Cr. |
15000 |
|
|
5. Business combination valuation reserve Dr |
138500 |
|
|
Capital Reserve Cr. |
138500 |
|
Entries |
Dr. |
Cr. |
|
Retained earnings Dr. |
10000 |
|
|
Share capital Dr. |
100000 |
|
|
General reserve Dr. |
50000 |
|
|
Shares in Kam Ltd. Cr. |
88000 |
|
|
Business combination valuation reserve Cr. |
72000 |
|
Entries |
Dr. |
Cr. |
|
Business combination valuation entries |
||
|
1. Cost of sales Dr. |
10000 |
|
|
Income tax expense Cr |
3000 |
|
|
Business combination valuation reserve Cr |
7000 |
|
|
2. Patent Dr |
90000 |
|
|
Deferred tax liability Cr |
27000 |
|
|
Business combination valuation reserve Cr |
63000 |
|
|
3. Accumulated depreciation – equipment Dr. |
20000 |
|
|
Equipment Cr |
10000 |
|
|
Deferred tax liability Cr |
3000 |
|
|
Business combination valuation reserve Cr |
7000 |
|
|
4. Depreciation expense Dr. |
5000 |
|
|
Accumulated depreciation Cr (1/2 x $10 000) |
5000 |
|
|
5. Business combination valuation reserve Dr. |
138500 |
|
|
Capital reserve Cr. |
138500 |
Pre-acquisition entries
The pre-acquisition entries are affected by:
-transfer from business combination valuation reserve
|
Entries |
Dr. |
Cr. |
|
1. Retained earnings Dr. |
10000 |
|
|
Share capital Dr. |
100000 |
|
|
General reserve Dr. |
50000 |
|
|
Shares in Kam Ltd. Cr. |
88000 |
|
|
Business combination valuation reserve Cr. |
72000 |
|
|
*Alternative BCVR entry for Equipment |
||
|
Accumulated depreciation – equipment Dr. |
20000 |
|
|
Equipment Cr |
20000 |
|
|
Equipment Dr. |
10000 |
|
|
Deferred tax liability Cr |
3000 |
|
|
Business combination valuation reserve Cr |
70000 |
- Asset’s value is presumed to be before depreciation as on 1.1.2006.
- It is presumed that Lisa Ltd. profit margin is 10%.
|
Statement of Affairs
|
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This Standard lays down the grounds for presenting the financial statements thereby ensuring their comparability both with the company’s financial statements of earlier accounting periods as well as with the financial statements belonging to other businesses (Berrington and Bhandari, 2011). It prescribes the complete requisites for presenting the financial statements, minimum disclosures of their content, and principles guiding their structure (AASB Standard, 2015).
|
Statement of Profit or Loss and Other Comprehensive Income |
|||
|
Note |
In $’000s |
||
|
Income |
|||
|
Sales |
50,00,000 |
||
|
Expenses |
|||
|
Cost of Sales |
35,00,000 |
||
|
Expenses |
|||
|
Marketing Cost |
66,000 |
||
|
Administrative Cost |
99,000 |
||
|
Distribution Cost |
2,00,000 |
||
|
Finance Cost |
1,00,000 |
||
|
Profit before Income Tax |
10,35,000 |
||
|
Income Tax |
3,10,500 |
||
|
Profit for the year after tax |
7,24,500 |
||
|
Profit distributed as Dividend |
10,000 |
||
|
Profit retained by the company |
7,14,500 |
||
|
Total other comprehensive Income |
0 |
||
|
Comprehensive profit for the year |
7,14,500 |
Conclusion
The prescribed ways of reporting financial statements have been learnt from the above examples.
References
AASB Standard. 2015. Preparation of Financial Statements. [pdf]. Available through: <https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf>. [Accessed on 15th September 2016].
AASB. 2011. Consolidated Financial Statement. [pdf]. Available through: <https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf>. [Accessed on 15th September 2016].
Berrington, M. and Bhandari, V., 2011. Pinnacle Financial Statements. IFRS System.
Crowe Horwath. 2011. AASB 10, 11 and 12 – How Will They Affect You? [Online]. Available through: <https://www.crowehorwath.net/uploadedfiles/au/insights/insights-assets/a_issue%20of%20aasb%2010%2011%20and%2012_sept11_final.pdf>. [Accessed on 15th September 2016].