You are a member of a large accounting firm which is responsible for preparing financial reports, including statements and notes to the accounts, and for advising staff in client firms who are responsible for preparing financial reports. The firm only deals with large Australian companies listed on the Australian Stock Exchange (ASX). One of your key tasks is to summarise the changes and developments in the financial reporting environment in a newsletter published quarterly. 

Question 1 [35 marks]
The regulatory environment for financial reporting
You are a member of a large accounting firm which is responsible for preparing financial reports, including statements and notes to the accounts, and for advising staff in client firms who are responsible for preparing financial reports. The firm only deals with large Australian companies listed on the Australian Stock Exchange (ASX). One of your key tasks is to summarise the changes and developments in the financial reporting environment in a newsletter published quarterly.
Prepare a 2 page newsletter that identifies and summarises developments and changes in the financial reporting environment for the quarter from 1 May to 31 July 2016.
Detailed guidelines for completing this task:
1. Identification of changes and developments
This will involve extensive research on a number of sources over the required period. You will need to identify and consider developments/changes relating to:
• Technical issues such as the issue of new accounting standards, exposure drafts or other pronouncements or interpretations.
• Regulation and monitoring of financial reporting.
• Political influences or other potential developments. ‘Political’ does not only mean action from politicians – it would include lobbying/actions by other groups to promote their own interests – for example there may be articles about companies, or particular interest groups such as Group of 100, saying that if certain accounting standards are introduced this will disadvantage or have a negative impact.
You will need to consider both local (Australian) and international sources and developments.
2. Potential sources
Given the scope of the potential influences on financial reporting you will need to research a range of sources. Below is a list of sources that may be of interest, note that this list is not exhaustive, students should search for sources outside of these. Students should not rely on any one type of source, but a range of sources from each category, i.e. do not just look at websites, also check journals, newspapers etc. Examples of possible information sources include:
(a) Websites such as those of:
• Australian Accounting Standards Board
• Financial Reporting Council
• Australian Securities and Investment Commission
• Australian Securities Exchange
• International Federation of Accountants
• Chartered Accountants Australia and New Zealand
• CPA Australia
• International Accounting Standards Board
• Websites of large accounting firms
(b) Professional publications:
• In the Black (CPA)
• Acuity (CAANZ)
(c) Newspapers/journals
3. Contents
The restriction of a 2 page newsletter means that you need to use your own judgment as to whether to include information about specific changes and developments and how much information to include. It is not intended that you provide complete details of changes/developments (although you may consider in particular cases that more detail is needed). The purpose of the newsletter is to alert staff to changes and developments that may impact on their work and provide enough information about these changes/developments to satisfy the following:
1. For staff (the intended audience) to understand the nature of the development/change and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work);
2. Provide sufficient information for staff to be able to obtain further information on the development/change if they wish to;
3. The newsletter should, where possible, be in your own words with sources adequately referenced using the appropriate referencing system.
Some examples of significant items to be considered include:
• Revised or reissued accounting standards or interpretations (both national and international),
• ASIC reviews on financial reporting,
• New ASX disclosures for listed companies.
Given the target audience, it would be assumed that they have a working knowledge of common terms and abbreviations (such as AASB, IASB) so abbreviations may be used.
What not to consider?
Students need to take care that the developments and the changes considered and included in the newsletter are relevant to the objective, in particular the issues/developments that directly relate to the preparation of financial reports for large companies listed on the Australian Stock Exchange. The newsletter should not consider areas only indirectly related to the preparation of financial reports such as (this is not an exhaustive list):
• Fraud
• Auditing
• Taxation
• Other disclosures by listed companies such as: industry disclosures required by peak organisations, and voluntary disclosures in the area of corporate social responsibility.
4. Format and presentation
The following are to be observed for your newsletter preparation.
• The top of the newsletter must include the title (you need to decide on what to call your newsletter) and details of the period the newsletter is considering.
• The newsletter should not read as one continuous ‘essay’. It must include headings and sub-headings that assist in identifying the nature of changes/developments and help to guide the reader, and also enable the reader to distinguish between items of interest and the relative importance of changes.
• You must refer the reader to specific sources so that they are able to obtain more detailed information of the development/change.
• The newsletter must be printed in minimum font set at 11 points (You may wish to use larger fonts etc for headings etc). Apart from minimum font size, there are no specific requirements in relation to line spacing, margins etc. However, you should note that simply reducing line spacings, margins to ‘fit more in’ may impact on the presentation and effectiveness of the newsletter.
• There is no specific ‘word limit’. The newsletter must be no longer than 2 pages. In cases where the newsletter exceeds the 2 page limit, only the first 2 pages will be marked.
• Do not attach actual articles/printouts of web sources etc to your assessment. You are only required to include details of these in the bibliography (see section 5 below).
Don’t be afraid to be creative. The effectiveness of a newsletter is impacted by how interesting the readers find it.
5. Bibliography and referencing
This assessment must include a bibliography rather than a reference list (this should not be part of your newsletter and is to be given on a separate page). A bibliography includes all materials used/read in the preparation of your assignment, not just those referenced or cited within the paper. The reason a bibliography is required (rather than a reference list) is that this will provide an insight into the range of your research activities which is part of the criteria for assessment. It is expected that the bibliography will be quite long. The bibliography needs to include specific articles or readings of what you have actually accessed – not just a general link to a website or newspaper etc. Therefore if you use a source such as the AASB website, please reference every article that you have read separately. You should only include sources that are related to the area. For example, if you to look at a particular publication but most of the content relates to taxation issues, it would not be appropriate to include these articles in your bibliography as these are not directly related to the area of interest.
Newsletters without a bibliography may not be accepted or marked.
When citing electronic sources, please also include the date accessed. If you are unsure how to cite and reference your readings check the APA referencing guide here: APA referencing guide.
Please be reminded that plagiarism is regarded as a serious issue within the University system with severe consequences for students who have been found to have deliberately plagiarised, the minimum penalty being zero for the assignment. All students should ensure that they are familiar with the plagiarism policy and referencing requirements before commencing assessment tasks.
Question 2 [15 marks]
Preparation of a statement of financial position and statement of profit or loss and other comprehensive income
The summarised trial balance of Swish Ltd, a clothing retailer, includes the following accounts at 30 June 2016:
DR ($) CR ($)
Sales revenue 3,245,000
Interest revenue 9,000
Rental revenue 73,000
Changes in clothing inventories 25,000
Purchases of clothing inventories 1,020,000
Administrative salaries 168,000
Advertising expense 38,000
Amortisation expense – patent 5,000
Annual leave expense – administrative staff 2,000
Annual leave expense- sales staff 4,000
Depreciation – administration office equipment 8,000
Depreciation – shop fittings 42,000
Depreciation – vehicles 6,000
Delivery costs – freight out 21,000
Doubtful debts expense 63,000
Electricity expense – administration office 4,000
Electricity expense – retail store 17,000
Goodwill impairment loss 20,000
Interest expense 19,000
Long service leave expense – administrative staff 2,000
Long service leave expense – sales staff 10,000
Promotion expenses 26,000
Rent expense – administration office 18,000
Rent expense – retail store 189,000
Sales staff salaries 285,000
Shipping supplies 12,000
Sundry expenses 4,000
Income tax expense 450,000
Gain on revaluation of delivery vehicles ($10,000 less $3,000 tax) 7,000
Cash on hand 17,000
Accounts receivable 545,000
Allowance for doubtful debts 83,000
Inventories 98,000
Prepaid rent – retail store 20,000
Investment property 954,000
Deferred tax assets 23,000
Patent 50,000
Accumulated amortisation – patent 10,000
Trademark – at cost 35,000
Goodwill 50,000
Accumulated impairment losses – goodwill 20,000
Administration office equipment – at cost 46,000
Accumulated depreciation – office equipment 22,000
Shop fittings – at cost 614,000
Accumulated depreciation – sales equipment 96,000
Vehicles – delivery vehicles – at fair value 70,000
Accumulated depreciation – delivery vehicles 3,000
Accounts payable 63,000
Current tax liability 312,000
Bank loan 200,000
Provision for annual leave 37,000
Provision for long service leave 18,000
Deferred tax liabilities 3,000
Share capital – ordinary fully paid shares 500,000
Retained earnings at 1 July 2015 272,000
Asset revaluation surplus 7,000
4,980,000 4,980,000
Additional information:
• All assets other than accounts receivable, cash, prepayments and inventories are non-current. All liabilities other than accounts payable, provision balances listed below and current tax liability are non-current.
• Provision for annual leave includes $9,000 payable within 1 year.
• Provision for long service leave includes $5,000 payable within 1 year.
• On 1 January 2016, the vehicles were revalued from $60,000 to $70,000. The gain, which has been included in the trial balance above, is to be recognised in other comprehensive income in accordance with AASB 116 paragraph 39.
• Swish Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by nature on the statement.
• In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Swish Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.
Prepare the statement of financial position and statement of profit or loss and other comprehensive income of Swish Ltd for the year ended 30 June 2016 in accordance with AASB 101, using the line items that a listed company is likely to use. Show all workings. Notes and comparative figures are not required.
Question 2 Allocated marks
Statement of financial position 6
Statement of profit or loss and other comprehensive income 5
Explanations / workings provided appropriately 2
Presentation 2
The purpose of this assignment is to help you further develop some of the skills and knowledge required and valued by the accountancy profession. The task that you will be required to undertake is similar to the tasks required of a professional accountant working within the financial reporting field. Accounting professionals need to ensure they are aware of current developments and that their knowledge is ‘up to date’. They need to be able to identify changes that have occurred that may impact on their work and to know where they can obtain information about these changes. In this assignment you are asked to provide a summary of recent developments relating to financial reporting.
As such this assignment aims to:
• Develop your ability to identify and source changes to financial reporting requirements so as to update professional knowledge required for practice;
• Assist you to acquire an awareness of current developments and changes (both locally and internationally) that may impact on current and future financial reporting rules and regulations;
• Develop your ability to provide written material appropriate to the accountancy profession;
• Help you to appreciate the limitations of the currency of knowledge in a technical financial reporting area;
• Allow you to understand the relationships between technical issues and community attitude to financial reporting.
This assignment will assess your ability to:
• prepare basic financial statements for reporting entities; and
• discuss critically and comprehensively the statutory and professional requirements upon which published financial statements are based.

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