The Australian Accounting Standards Accounting Essay


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All company assets and liabilities have to be recognized in the financial statement as per Australian Accounting Standards. In addition, situations in which classification of items into assets or liabilities is not permitted by the Australian Accounting Standards should be duly followed. Otherwise, the company shall be held liable for disclosing unnecessary voluntary information. Australian Accounting Standards have to be strictly applied in regards to the measure of all assets and liabilities.

The company is obligated as per the Australian Accounting Standards to draft and present an opening statement of financial position after every financial year.

It shall also use the accounting policies stipulated in its opening statement throughout its financial report. In addition, it shall not apply different Australian Accounting Standards that were effective at earlier dates. However, it can apply new standards that aren't mandatory yet if that Standard permits early application.

The company shall disclose any adjustments in accounting policies that differ from its opening statement of financial position. For comparative analysis, a company's first financial statement shall consist of at least three statements of financial position, two statements of profit or loss, two statements of cash flows, two statements of changes in equity and related notes.

The company may present historical summaries of selected data for periods before the first period for which full comparative information is presented in accordance with Australian Accounting Standards Board (AASB) 101 and Generally Accepted Accounting Practices (GAAP).

However, the historical summaries must be labeled as prominently not to have been prepared in accordance with Australian Accounting Standards. In addition, the company shall disclose the nature of main adjustments it would have to do so as to comply with Australian Accounting Standards. However, these adjustments need not be quantified.

The Company also shall explain how transition from previous Generally Accepted Accounting Practices to Australian Accounting Standards affected its financial performance, financial position and cash flows. To do this, its financial statement must include reconciliations from its equity reported in accordance with previous GAAP to its equity in accordance with Australian Accounting Standards.

The dates of transition to Australian Accounting Standards and; the end of the latest period presented in the company's most recent annual financial statements in accordance with previous GAAP; must also be included in the financial statement.

The reconciliations shall provide sufficient and detailed information to enable users to comprehend material adjustments to the statement of financial position and statement of comprehensive income.

If the company presented a statement of cash flows under its previous GAAP, it shall also elaborate material adjustments to the statement of cash flows.

If the company becomes aware of errors committed under previous Generally Accepted Accounting Standards, the reconciliation segment shall distinguish the correction of those errors from changes in accounting policies. It is also permitted to designate a previously recognized financial asset or liability at fair value via profit, loss or financial asset available for sale.

The company shall reveal the justified value of the financial assets and liabilities designated into each category, the date of designation, adjustments made, classification and carrying amount in precious financial statements.

If the company uses deemed costs in its opening statement of financial position either for a jointly controlled entity, an investment in a subsidiary or an associate in its separate financial statements, the company's financial statement shall disclose;

a) The aggregate deemed cost of those investments for which deemed cost is their previous GAAP carrying amount;

b) The aggregate deemed cost of those investments for which deemed cost is fair value; and

c) The aggregate adjustments to the carrying amounts reported under previous GAAP.

(Australian Accounting Standards Board) AASB 134 obligates for minimum disclosures by the company on the basis of the assumption that the users of interim financial reports also have access to most recent annual financial statements.

However, AASB 134 also requires the company to disclose any material transactions and events to the comprehension of the current interim period. Thus, if the first financial statement didn't disclose information material to an understanding of the current interim period, then its interim financial report should disclose that information and a cross-reference to another published document included in the report.

woolworths limited.PNG

Current Accounting Practice of Woolworths Australia in regards to these disclosures

-In regards to Accounting practice, the financial report has always been;

a) Prepared in Australian dollars, in accordance with the Corporations Act of 2001, Accounting Standards and Interpretations and representing the consolidated statements of the Group. Monetary assets and liabilities denominated in foreign currency are usually translated to Australian dollars at the foreign exchange rate ruling at the balance sheet date. Non-monetary assets and liabilities that are measured in terms of historical costs in a foreign currency are translated using the exchange rate at the date of the transaction.

b) Prepared on the tenets of historical costs except for available-for-sale financial assets, derivative financial instruments, financial instruments held for trading, financial assets valued through other comprehensive income and other financial liabilities that are measured at revalued amounts or fair values..

c) Adopting new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for annual reporting periods beginning on or after 26th June 2011.

d) Stating standards and interpretations that weren't applicable for early adoption and were applicable to the consolidated entity but have not been applied.

e) In conformity with Australian Accounting Standards which requires management to make estimates, judgments, and assumptions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. Management alongside Audit, Risk management and Compliance Committee determines disclosure of the consolidated entity's critical accounting policies and estimates and the application of them.

e) Consolidating financial statements that incorporate the assets and liabilities of all subsidiaries of the Woolworths Limited Company as at 24th June every year and the results of all subsidiaries for the period then ended.

f) Eliminating intragroup balances and transactions and any unrealized gains and losses or income and expenses arising from intragroup transactions in preparation of a consolidated Financial Report.

g) Hedging, fair value, monetary assets and liabilities, and cash flows such as;

-Interest rate swap contracts that convert floating interest rate payments on borrowing into fixed amounts.

- Cross currency interest rate swaps (CCIRS) that convert foreign currency denominated principal and interest rate payments on offshore loans into fixed Australian dollar amounts; and

- Forward foreign exchange contracts that convert foreign currency denominated payments to offshore suppliers and income of offshore subsidiaries in Australian dollar amounts.

h) Including intangible assets such as brand names, liquor licenses, gaming licenses, research and development.

i) Recognizing borrowings at fair value less attributable transaction costs.

WoolWorth's Balance Sheet analysis for 2012;

- Inventory increased 8.4%, Driven by the construction of Masters' inventory. Excluding Masters, inventory jumped 3.3% the prior year

- Trade payables were in line with previous years.

- Receivables rose by 19.9%, primarily reflecting increased prepayments, property deposits and receivables in the businesses acquired by Danks

- Fixed assets and investments went up by $1,158.3 million to $9,846.5 million, reflecting ongoing capital expenditure offset via depreciation.

- Intangibles jumped $116.0 million to $5,282.0 million depicting intangibles related mainly to Compass Hotel Group and Home Improvement retail outlets acquisitions as well as fluctuations in foreign exchange rates which increased the value of intangibles related to New Zealand Supermarkets

- Net repayable debt (i.e. Borrowings, financial assets & liabilities) jumped by $300.5 million reflecting increased net borrowings to fund capital expenditure and start-up phases of Masters business. The remainder of the increase is due to currency revaluations offset by lower hedge related liabilities

- Return on funds employed dropped 237 bps to 27.8% predominantly reflecting investment in the start up phase Masters and property development undertaken to enable ongoing store roll outs

Other percentages included in the 2012 financial report;

a) Sales increase of 4.8% ;

b) Dividend increase of 3.3%;

c) Increase in earnings before interest from continuing operations of 3.0%;

d) Increase in net profit after tax from continuing operations of 3.6% to $2.18billion;

e) Increase in earnings per share from continuing operations of 3.1%;

f) Decrease in net profit after tax including discounted operations and consumer electronics provision of 14.5%

Potential gaps between Woolworths current practice and the accounting standard requirements

-- AASB 1053 'Application of Tiers of Accounting Standards' and AASB 2010-2 'Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements'. Woolworths

Limited is listed on the Australian Stock Exchange and is not eligible to adopt the new Australian Accounting Standards - Reduced Disclosure Requirements. Applies to annual reporting

Periods beginning on or after 1 July 2013;

-- AASB 1054 'Australian Additional Disclosures' and AASB 2011-1 'Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project'. AASB 1054 sets out the

Australian-specific disclosures for entities that have adopted Australian Accounting Standards. AASB 2011-1 deletes various Australian-specific guidance and disclosures from other Standards and aligns the wording used to that adopted in IFRSs. This amendment is not expected to have a significant impact

on the financial results of the consolidated entity. Applied to annual reporting periods beginning on or after 1 July 2011;

-- AASB 13 'Fair Value Measurement' and AASB 2011-8 'Amendments to Australian Accounting Standards arising from AASB 13'. This standard establishes a single source of guidance for fair value

measurements and disclosures about fair value measurements. Applies to annual reporting periods beginning on or after 1 January 2013;

-- AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets. This makes amendments to AASB 7 Financial Instruments: Disclosures, to

introduce additional disclosures in respect of risk exposures arising from transferred financial assets. This amendment is not expected to have a significant impact on the financial results of the consolidated entity. Applies to annual reporting periods beginning on or after 1 July 2011;

-- AASB 10 'Consolidated Financial Statements'. This standard includes a new definition of control. This standard is not expected to have a significant impact on the amounts reported in the consolidated financial statements;

-- AASB 11 'Joint Arrangements'. This standard deals with how a joint arrangement of which two or more parties have joint control should be classified. It also changes the accounting for jointly controlled entities. This standard is not expected to have a significant impact on the amounts reported in the consolidated financial statements;

-- AASB 12 'Disclosure of Interests in Other Entities'. This is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in AASB 12 are more extensive than those in the

current standards;

-- AASB 127 'Separate Financial Statements' (2011). This standard is amended by the issuance of AASB 10;

-- AASB 128 'Investments in Associates and Joint Ventures' (2011). This standard is amended by the issuance of AASB 10; and

-- AASB 2011-7 'Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards'.

Recommended actions to satisfy the potential ASIC reviewers

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32). Applies to annual reporting periods beginning on or after 1 January 2014;

Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7). Applies to annual reporting periods beginning on or after 1 January 2013;

Mandatory Effective Date of IFRS 9 and Transition Disclosures (Amendments to IFRS 9 and IFRS 7). Applies to annual reporting periods beginning on or after 1 January 2015.

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