ASIC Current Accounting Practice and Disclosures - Case Study Example

Accounting disclosures Name: Tutor: Course: Date: Table of content Table of content 1 Executive summary 2 Executive summary 3 Accounting policies and disclosures 3 ASIC Current accounting practice and disclosures 4 Company's current practice and the accounting standard requirements 6 Recommendation actions to satisfy the potential ASIC reviewers 8 Appendix1 9 Appendix 2 10 Appendix 3 11 Reference List 12 Executive summary AASB 101 Presentation and disclosure of Financial Statements (reissued in September 2007) is equivalent to International Accounting Standard (1) which is issued by the International Accounting Standards Board IASB. The objective of AASB 101 is to design the basis for presentation of general purpose financial reports. This accounting treatment was applicable for annual reporting periods from   1 January 2009 onwards. Financial Accounting Standards Board (FASB) stipulates the accounting measures that ensure that the accounting policies are represented and applied universally. The guidance instituted by the International financial reporting standards IFRS insinuates that companies should attributively follow the requirements of accounting policies. Consistency in following the accounting principles ensures recuperation of policies from judgments and estimation hence provides appropriate fair view of the company’s financial performances. Accounting for uncertainties probably occurs due to application of judgments and estimation of accounting entries (Booysen, 2008). General Accepted Accounting principles (GAAP) provide policies that are applied to constitute the consistency of accounting standards. In contrast with significant accounting policies, ASIC Company provides considerable discrepancy ratio on critical accounting based on estimates and accounting policies. Critical accounting instructed as a result, of assumption based on the assumption of uncertain matters in accounting statements (ASIC Company, 2012). The critical accounting procedures and estimates provide definite uncertainties in accounting statements that may be material in financial reports. ASIC limited regulatory guide describes the reporting requirements of disclosure of accounting policies as per the requirement of Australian Accounting Standards Board (AASB). Executive summary ASIC partially mergers, the Australian International Accounting standards provided by the framework used determining consistency in representation of accounting statements. The firm management should consider the requirement of accounting framework in representation of accounting statement (Booysen, 2008). Without accounting conceptual framework, the figures in financial statements are materially misappropriated and hence do not show the true and fair view of the companies state of affairs. In accordance with Accounting Standard (AASB 101) the presentation of company’s financial statements should comply with the International Financial Reporting Standards. The audit opinion gives an opinion on the financial statements of the compliance with the International Financial Reporting Standards as disclosures. Accounting policies and disclosures Corporations Act 2001 provides policies on preparation of financial statements. This rules provided by the standards should in line with the International Financial Reporting Framework. Also to ensure that the financial statement prepared represent utmost fair view of the ASIC Company’s financial condition and those errors that can arises from financial estimation. Consequently, in recognizing measuring and Interpretation of the requirements of Australian Accounting Standard board which are utilize to determine the company’s comprehensive income statement and balance sheet. ASIC company observes its recognition, measurement and interpretational Australian Accounting Standards requirements such as amortization of intangible assets, depreciation of non-current assets, accounting for income differed tax, impairment of goodwill, and accounting for the companies liabilities. AASB 101 defines the presentation of debt and equity in the statement of financial position. The ASIC have also issued policies in compliance with the standard to ensure that non-reporting business entities are considered advantageous on concessions and the requirement of International Accounting standards. The Australian Accounting Standard Board provides transitional provisions that require the entities to follow in accounting for the business transactions and reporting. Polices limit the changes of risk that can occur due to use estimates by the company management. This relief ensures that the non-reporting entity takes in account all evenhanded procedures to ensure that the relevancy of financial reports by complying with all recognition and measurement requirements. ASIC Current accounting practice and disclosures The financial information of relevant accounting policies is considered essential for the users of companies’ financial statements. Considerable accounting policies and approximation of financial data portrays a defined vital disclosure rules in accounting statements. Figures based on approximation accounting policies have different treatment in financial reporting. The statue of financial performances represented by observing the measures set by Australian Accounting Standards gives the users reliable evidence on the accounting information. Disclosure of financial statement is considered as the vital component interpreting the adopted accounting policies. ASIC financial position is used in making fiscal decision; this will be significant in adopting all the requirement of the accounting standards. The outrage facing the Australian Securities and investment Commission, and immense critical role of intending to enhance the disclosure accounting policies to give more viable information of the entity. Quality of corporate disclosures in ASIC Company requires to be enhanced to promote transparency of the company’s state of affairs. It is an outstanding critique that the intention of critical accounting policies provided by the standards discloses the principal measures that management will used to form opinions rather than judgments and estimations which will enhance uncertainties. The critical disclosure policies are the fundamental components in note of ASIC management's analysis and discussion. ASIC Company’s financial impairs policies interpreted by (FR-60). Financial position should imply to the precisions, certainties and continuities that can is caused by rapid changes in the company’s financial status and its operating environment (Ron Dagwell, 2007). Consequently, general accepted accounting principles (GAAP) can be too construed on the disclosures hence failing to present imperative information. If they are inappropriately accompanied by policies to clearly provide analytical disclosures that facilitate an investor's understanding on the ASIC Company's financial state of affairs, and the probable changes in the company’s operating condition (ASIC Company, 2011). According to the above disclosure criterion, not only the definitions are different, but also the intentions of using the two accounting disclosure policies are substantially different. The FASB’s purposes considerable disclosure accounting policies which will not be served in the case for ASIC Company’s critical accounting policies. The significant accounting policy stipulated by FASB for the appliances of accounting methods and principles poses a wide range of general description which is in, contrast with the critical policies basing on the proposed estimation (Australia, 20012). ASIC Company only estimates some of the substantially uncertain and material accounting policies which may attributively cause impact on reliance of the financial statements. FASB stipulates the disclosures of important accounting policies that identify the accounting principles and the methods that will fundamentally affect the company’s financial position, and results in different financial operations and treatment. These fundamental accounting treatments include judgments on whether company assets, revenue and obligations are appropriately for in the financial year. According to ASIC annual report, preparation, and presentation fair values of financial instruments such as property plant and equipment, goodwill, inventories, retirement obligation revenue recognition, and allowances made on doubtful accounts (Frank Clarke, 2007). Also policies concerning earnings per common share and provision charged on income statement are pervasive. ASIC company discloses it inventory item using First Hand First Out stock valuation (FIFO) method. The Company recognizes its revenue when delivery has been made or on grounds of persuasive evidence of an agreement. Moreover, the company recognizes revenue of undelivered products using their selling prices. Critical accounting estimation should meet the requirement of FASB in accounting for the current financial affairs. Three major accounting elements should be observed in order to account the business transaction. There should be a clear understanding of the accounting estimates; the ASIC Company reports gives a clearer comprehension of the financial state of affairs for normal investors and lastly is to disclose management development targets. (ASIC Company, 2010).Furthermore, the International standards and accounting policies should be as the enhancement of notes of financial statements, but not replacing the related information that are already presented. The decisive accounting policies of disclosure should presents bearing information (ASIC Company, 2010), to ensure compliance with International financial reporting Standards. Company's current practice and the accounting standard requirements The ASIC Company’s accounting profile reflects well proficient expatriates who are strongly responsible for accounting the company’s estimates and changes (Chh, 2009). Moreover, the accountant’s team should show the chain of accounting transactions explains how the resultant estimates are achieved. For example if the Company describes unrecovered investments in the current financial year, the resultant reports for this coming year will reflect adverse reports and projections of the subsequent years. The current critical accounting policies and estimates in relation to valuation of inventory, valuation of marketable ASIC Company investments, Income Taxes, Revenue recognition and, allowances resulting from doubtful accounts alongside the legal and other company contingencies (Carmona, 2008). The ASIC Company should order necessary investments components for its products and records for the purpose of merchandizing their inventories. The ASIC Company records pertaining accruals for estimated annulment charged on un-gathered investiment policies. ASIC Company purchase investments components through the suppliers purchase orders, and projections orders based on demand factors. The obligation generally covers the ASIC Company’s supplies for periods ranging from one to three months. The investments inventory items that is disclosed in the important accounting policies is very undemanding and such as market cost. However, ASIC Company estimates the future inventory by attributing the consumer behavior and the markets’ demand changes which is generally unpredictable, and hence compel ASIC Company to write-down the records. Also, in income recognition, ASIC Company analyzes the probable decline of the revenue which defines management Management was making estimates based on historical experience. If a greater proportion of customers redeem the incentives other than estimated, the ASIC Company would record credits to revenue, which would have a decrease on revenue (Booysen, 2008). Although the revenue reduction is as a result of approximation based on historical records, the market situation changes that can result to incremental price protection liabilities. Additionally, the ASIC Company gave an estimation of unspecified software upgrade revenue: if the ASIC Company’s ESP for the software upgrade rights related to investment policies would have been fluctuated either higher or lower, the ASIC Company’s net sales of year 2012 would have decreased or increased up to $44.2% million as compared to 2011 financial year. ASIC Company in the critical accounting disclosures and estimates gives an overview of well detailed information on significant accounting treatment concerning provisions of doubtful debts. Moreover from the historical experience (Australia, 2012), ASIC Company considers the future economic environment benefits and the company financial performance. In case of deterioration of company financial affairs, the company defiantly adjusts the allowance accounts. Recommendation actions to satisfy the potential ASIC reviewers ASIC company administers the revenue under Corporation Act 2001 which provides disclosures on the company assets and expenses. This disclosure is based on the registered insolvency practitioners, which accounts the company transactions basing on the anticipation of the cost incurred and amount speculated to be received. The speculation received from the investment policies varies yearly hence the company must not be rigid on the investment returns and the management should form a team of expatriates to disclose the changes in financial statement as per the requirements of the AASB 101 and FASB standards. The amount received from the life investment and the friendly societies should be disclosed in the time of receiving and banked to avoid misconduct activities such as fraud that result in poor disclosure of financial statements. Appendix1 Appendix 2 Appendix 3 Reference List Australia, I., 2012. Chartered Accountants Financial Reporting Handbook. pp.42-24. Booysen, O.B., 2008. Accounting Standards in Brief. Juta and Company Ltd. p.173. Carmona, S..a.T.M., 2008. On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system. Journal of Accounting and Public Policy, 27, pp.455-61. Chh, 2009. Australian Master Accountants Guide. CCH Australia Limited. Frank Clarke, G.W.D., 2007. Indecent Disclosure: Gilding the Corporate Lily. Ron Dagwell, G.L.W.C.L., 2007. Corporate Accounting in Austalia. UNSW Press. p.510. ASIC Ltd (2012) ASIC Ltd Annual report 2012 Retrieved on 22nd Read More