ACCT6003 | Accounting | Principles For Non-Current Assets

1. Explain the regulatory framework that governs financial repo.ng in Australia with emphasis on the Conceptual Framework for financial reporting

2. Apply accounting principles and standards when accounting for non-current asets, revenue and liabilities and recognise the judgements required in a range of diverse business contexts

3. Differentiate between shares and debentures and apply appropriate accounting procedures.

Answer:

Regulatory framework in Australia.

In Australia the purpose of financial reporting is to drive financial information in the corporate world for the benefit of the shareholders and other stakeholders. In the conceptual framework guideline, the information should communicate the financial healthiness of the enterprise and that information must be of interests to the users (Christian & Ludenbach, 2013). Generally, shareholders are the owners of the corporate and any financial reports prepared must be aimed for the benefits of the owner. In a conceptual framework, the existing shareholders evaluate and interpret the performance of their enterprises on the effectiveness of the financial reports presented to them. In inconformity to the international financial reporting standards (IFRS) and the Australian Accounting Standards (AAS), accountants and practicing finance managers should present and communicate their accomplishments in the organizations in a well and simple financial statements to the owners periodically as regulated in the act (Lev & Gu, 2016).

According to Tomaszewski “et al” (2018) the conceptual framework represent a structured format pf accounting that is intended to set the fundamentals and objectives for the accounting standards development. Under the regulatory principles the conceptual framework creates the required concept expected to lead the functions, nature and limits of financial reporting whether principally based or under set rules. Further the absence of the conceptual framework would lead to an ad hoc guidance which can be incoherent and inconsistent with the obvious low ramifications (Tomaszewski “et al” 2018).

Accounting principles and standards for non-current assets, revenues and liabilities.

According to Christian & Ludenbach, (2013), IAS 1 presentations of financial statements, the minimum requirements for the presentations of financial statements should be well structured with the overall aim of the going concern of the entity. Generally the concept requires the composite of financial statements to consist the income statements formerly profit and loss, the statements of financial position, the statement of changes in equity, statements of cash flows and the comprehensive income statements. The IAS 1 standards maintains that the presentations of a financial statements in a particular year must be compatible with the entity’s previous financial statements period presented. Further the standards addresses the recognition measurements and disclosure of financial elements and transactions in accordance to the international financial reporting standards (IFRS) (Christian & Ludenbach, 2013).

According to Wang, (2014). non-current assets are assets owned by an organizations with an aim of not turning them into cash within the next financial year. These are assets bought by the entity with the intention of business use to generate profits or long term use with its benefits to accrue over a number of years. The presence of such assets in the entity reveals the short term and long-term investments agenda of the company. In a business context neither in sole proprietorship, partnership or a company, the mutual relations to expense or capitalize on assets depends on the accounting standards as well as the accounting framework adopted by the organizations (Wang, 2014).

Differentiate shares and debentures.

In the company structure the ownership is divided into neither shares nor debentures. According to Surbhi, (2015), shares is that smallest portion rights to the share capital of the company, while the debentures refers to the external parties long term instruments to the total debts of the company. Shares can be offered in the stock market to raise capital for the company. In a company debentures are raised through a charge on assets, although in some cases the company is allowed to offer unsecured debentures to raise funds (Surbhi, 2015).

Major differences are.

In a company shares shows the ownership while debentures shows the indebtedness of the company over a period of time.

Shareholders of a company have voting rights while debentures holders has no voting rights.

Debentures are convertible while shares cannot be converted.

In the winding up of a company debentures holders are given priority for repayment over the shareholders.

Debenture holders investors in a company earns incomes inform of interests while the shares holders earn incomes inform dividends.

In the accounting treatment interest income on debentures is an expense and is allowed as a deduction while the dividend income in shares is not an expenses and therefore not deductible (Surbhi, 2015).

References.

Christian D & Ludenbach N, (2013). IFRS Essentials.

Lev B & Gu F, (2016). The End of Accounting and the Path Forward for investors and Mangers.

Surbhi S, (2015). Differences between Shares and Debentures. Retrieved 12/10/2018. https://keydifferences.com/difference-between-shares-and-debentures.html

Tomaszewski G, Choi S & Yeong C, (2018). The Conceptual Framework: Past, Present, and Future. Retrieved 11/10/2018.From

https://search.proquest.com/docview/2085000705/84168C41CBC4A4BPQ/1?accountid=30552.

Wang X, (2014). Financial Management in the Public Sector: Tools, Applications, and Cases.