BAO3309: Advanced Financial Accounting International Campus - Financial Accounting Assignment

Internal Code: MAS3595

Financial Accounting Assignment:

On 7 November 2014, the Australian Securities and Investment Commission (ASIC) announced its areas of focus for 31 December 2014 financial reports of listed entities and other entities of public interest with many stakeholders. One of those areas of focus was accounting policy choices. According to ASIC preparers and auditors need to focus on the appropriateness of key accounting policy ASIC’s surveillance continues to focus on material disclosures of information useful to investors and others using financial reports, such as assumptions supporting accounting estimates, significant accounting policy choices, and the impact of new reporting requirements. ASIC does not pursue immaterial disclosures that may add unnecessary clutter to financial reports. ASIC’s surveillance continues to focus on material disclosures of information useful to investors and others using financial reports, such as assumptions supporting accounting estimates, significant accounting policy choices, and the impact of new reporting requirements. ASIC does not pursue immaterial disclosures that may add unnecessary clutter to financial reports.

Questions:

1. Explain, with reference to the research literature, how accounting policy choices can affect financial results?

2. Why did ASIC choose to focus its investigation on material disclosures of decision-useful information such as assumptions supporting accounting estimates, significant accounting policy choices? Explain your answer with reference to the research literature.

3. Explain, with reference to the research literature, why CPA Australia, with reference to ASIC, believes that ‘a suitable revenue recognition policy’ requires the ‘appropriate application’ of ‘the timing of recognition’ therefore ‘reflecting the substance of underlying transactions’?

4. Explain and analyze the extent to which the revenue recognition criteria in AASB 118 / IAS 18 Revenue and AASB 15 / IFRS 15 Revenue from Contracts with Customers meet the ASIC and CPA requirements of an ‘appropriate application’ of ‘the timing of recognition ‘of revenue and therefore represents the substance of the underlying transaction.

5. Review the annual financial reports of a company of your choice for the reporting years 2014, 2015 and 2016. Analyze how revenue was recognized in each of the reporting years, and explain any variations in the firm’s reported revenue over this period by examining the accounting policies section in the notes to the accounts with regards to AASB 118 / IAS 18 Revenueand AASB 15 / IFRS 15 Revenue from Contracts with Customers.

6. Explain the choices of accounting policies with regards toAASB 118 / IAS 18 RevenueandAASB 15 / IFRS 15 Revenue from Contracts with Customers by reference to the relevant accounting research literature on factors influencing firms’ accounting policy choice (e.g. Positive Accounting Theory).