ASSIGNMENT 1 NEWSLETTER AND FINANCIAL

STATEMENTS

[Company name] | [Company address]

NEWSLETTER & PREPARATION OF FINANCIAL

STATEMENTS THE CHANGES IN THE FINANCIAL
REPORTING ENVIRONMENT | Issue #

Table of Contents
Financial Reporting Brief..................................................................................................................... 2
International accounting and related developments........................................................................2
IFRS 15 Revenue from Contracts with Customers.........................................................................2
FASBs proposal to simplify the measurement of goodwill impairment.........................................2
Enforcement and Regulatory activities of accounting enforcers in 2015- Report Released by
ESMA............................................................................................................................................. 2
IFRS 15 and the insurance industry.............................................................................................. 2
AASB 16 Leases............................................................................................................................ 3
Amendments to IFRS 2 Share-based Payment.............................................................................. 3
Developments in Financial reporting council and related bodies.....................................................3
Amendments to FRS 105.............................................................................................................. 3
Amendments to FRS 103 Solvency II.......................................................................................... 3
Amendments to FRS 101.............................................................................................................. 3
Preparation of a statement of financial position and statement of profit or loss and other
comprehensive income...............4
References..................................6

Financial Reporting Brief

by

Sabina Salman

Newsletter &
Preparation of
Financial
statements
The Changes in
the Financial
Reporting
Environment

YOUR BUSINESS ADVISOR

This newsletter will try to
enlighten its readers about
the International accounting

1 MAY TO 31 JULY 2016

and related developments,
the changes made by
Financial reporting council

and related bodies and legal

and regulatory developments

highlighted in the quarter

from 1 May to 31 July.

International accounting and

related developments
IFRS 15 Revenue from Contracts
with Customers
In May 2016, IFRS finally
issued clarifications on IFRS
15 which will be effective till
2018. The clarifications
address the areas identified
by Transition Resource Group
(KPMG, 2016). The now
amendments clarify; the
Identification of a
performance obligation and
also determine if a company
is either the principal or the
agent. Last but not the least,
the amendment also
determines when to recognize
revenue from granting a
license; either on at the time
of issuance or over time
(Hackett, 2016).
FASBs proposal to simplify the
measurement of goodwill
impairment
FASB proposed to eliminate
step 2 of the goodwill
impairment test currently in
practice on 12 May 2016. The
proposed change intends to
keep all the goodwill
impairment guidance as same
and is only changing the
computation of goodwill
impairment loss (Bramwell,
2016) (Tysiac, 2016).
Enforcement and Regulatory
activities of accounting enforcers
in 2015- Report Released by ESMA
The report has discussed the
findings of the European
accounting enforcers in
relation to enforcement
priorities for 2014 (Grave,
2016). The main focus of the
report was; the presentation
of consolidated financial
statements and related
disclosures; financial

reporting by parties to a joint

arrangement and also
recognition and measurement
of deferred tax assets and
uncertain tax positions
(Srinivasan, 2016).

SEC and proposed rule on the

incentive-based compensation
arrangements
In May, the SEC and other
agencies expressed interest
to seek comments on a joint
re-proposed rule (Quinlivan,
2016). The rule aimed to
implement the section 956 of
the Dodd-Frank Wall Street
Reform and also Consumer
Protection Act (Mescher &
Gilani, 2016).
IFRS 15 and the insurance
industry
It was stated before that, IFRS
15, explicitly excludes the
revenue from insurance
contracts. But it was
identified that insurance
entities can find their noninsurance contracts with their
customers to be in the scope
of IFRS 15 (King-Jayawardana,
2016).
IFRS 9 Financial
Instruments
The standard is applicable on
reporting periods starting on
or after 1 January 2018. The
impact of this standard is the
revision of principles for the
accounting of financial assets
and liabilities and also
recognition/de-recognition,
measurement, classification,
impairment and also hedge
accounting (CA ANZ, 2016).
AASB 16 Leases
The standard will be effective
from 1 January 2019. It
requires entities to recognize
all the leases, except short
term which are less than 12

months and also low value

leases, on balance sheet (CA
ANZ, 2016).
Amendments to IFRS 2 Sharebased Payment
They cover three areas: the
measurement of the cashsettled share-based
payments, classification and
modification of share-based
payments that are settled net
of tax withholdings (Mendez,
2016). The changes can
impact measurement and
classification of these
arrangements and also the
amount of expense
recognized (Heng, 2016).

Developments in Financial
reporting council and related
bodies
Amendments to FRS 105
FRC issued amendments to
the FRS 105. It was done to
bring the limited liability
partnerships and also
qualifying partnerships within
the scope of micro-entities
regime (FRC, 2016) (Dixon
Wilson, 2016).
Amendments to FRS 103
Solvency II
FRC issued amendments to
FRS 103 as well. These
amendments are done just to
update FRS 103 for the
changes in regulatory
framework for the insurers
(Deloitte, 2016) (FRC, 2016).
Amendments to FRS 101
FRS 101 allows entities within
the groups to manufacture
their financial statements
keeping disclosures limited in
accordance with IFRS. It is in
fact an optional standard and
the amendments to FRS 101
were limited, and focused on
mainly providing exemptions
from the many disclosure
requirements of IFRS 15 (FRC,
2016).

Preparation of a statement of financial position and

statement of profit or loss and other comprehensive income
SWISH LTD
Statement of Profit or Loss and Other Comprehensive Income
For the Year ended 30 June 2016

Income
Revenues
Sales
Less: Sales Return
Interest revenue
Rental revenue
Total Income
Expenses
Selling Expenses
Changes in clothing inventories
Purchases of clothing inventories
Total Cost of Sales
Advertising expense
Annual leave expense- sales staff
Depreciation - shop fittings
Depreciation - vehicles
Delivery costs - freight out
Electricity expense - retail store
Long service leave expense - sales staff
Promotion expenses
Rent expense - retail store
Sales staff salaries
Shipping supplies
Sundry expenses
Total Selling Expense
Administrative Expenses
Administrative salaries
Annual leave expense - administrative staff
Depreciation - administration office
equipment
Electricity expense - administration office
Long service leave expense administrative staff
Rent expense - administration office

3,245,000
3,245,0
00
9,000
73,000
3,327,0
00

25,000
1,020,000
1,045,0
00
38,000
4,000
42,000
6,000
21,000
17,000
10,000
26,000
189,00
0
285,00
0
12,000
4,000
1,699,0
00
168,00
0
2,000
8,000
4,000
2,000
18,000

Total Administrative Expense

Financial Expenses
Amortisation expense - patent
Doubtful debts expense
Goodwill impairment loss
Interest expense
Total Financial Expenses
Profit before Income Tax
Income Tax Expenses
Profit for the Year
Gain on revaluation of delivery vehicles
($10,000 less $3,000 tax)
Total Comprehensive Income

202,00
0
5,000
63,000
20,000
19,000
107,00
0
131900
0
450,00
0
869,00
0
7,000
876,00
0

References

Bramwell, J. (2016, May 16). FASB Proposal Would Simplify Goodwill Impairment Test. Retrieved
from Accounting Web: http://www.accountingweb.com/aa/standards/fasb-proposal-wouldsimplify-goodwill-impairment-test
CA ANZ. (2016, June 1). Australian Reporting Essentials. Chartered Accountants Australia and New
Zealand.
Deloitte. (2016, May 26 ). FRC issues amendments to FRS 103 as a result of Solvency II. Retrieved
from Deloitte: http://www.iasplus.com/en-gb/news/2016/05/frc-frs-103-amendments
Dixon Wilson. (2016, May 17). FRS 105 to include LLPs and qualifying partnerships. Retrieved from
Dixon Wilson: http://www.dixonwilson.co.uk/frs-105-to-include-llps-and-qualifyingpartnerships/
FRC. (2016, July 08). FRC concludes annual review of FRS 101 and proposes further changes in
response to feedback. Retrieved from Financial Reporting Council:
https://www.frc.org.uk/News-and-Events/FRC-Press/Press/2016/July/FRC-concludes-annualreview-of-FRS-101-and-propose.aspx
FRC. (2016, May 26). FRC issues amendments to FRS 103 to update it for changes in the regulatory
framework for insurers. Retrieved from FRC: https://www.frc.org.uk/News-and-Events/FRCPress/Press/2016/May/FRC-issues-amendments-to-FRS-103-to-update-it-for.aspx
FRC. (2016, May 17). FRC issues amendments to FRS 105 to bring limited liability partnerships and
qualifying partnerships within the scope of the micro-entities regime. Retrieved from
Financial Reporting Council: https://www.frc.org.uk/News-and-Events/FRCPress/Press/2016/May/FRC-issues-amendments-to-FRS-105-to-bring-limited.aspx

Grave, K. D. (2016, April 7). ESMA Report on Enforcement and Regulatory Activities of Accounting Enforcers in 2015. Retrieved from PWC: https://news.pwc.be/esma-report-enforcementregulatory-activities-accounting-enforcers-2015/
Hackett, D. (2016, May). Financial reporting news - May 2016. Retrieved from Chartered Institute of
Management Accountants: http://www.cimaglobal.com/Thoughtleadership/Newsletters/Insight-e-magazine/Insight-2016/Insight-May-2016/Financialreporting-news---May-2016/
Heng, K. (2016, June 21). Clarifying share-based payment accounting. Retrieved from KPMG:
https://home.kpmg.com/xx/en/home/insights/2016/06/share-based-payment-accountingmeasurement-classification-final-amendments-ifrs2-200616.html
King-Jayawardana, S. (2016, June 06). IFRS News - June 2016. Retrieved from PWC:
https://inform.pwc.com/inform2/s/IFRS_News_June_2016/informContent/1603062206176435#
IFRS_News_June_2016_IFRS_15_and_the_insurance_industry
KPMG. (2016, May 23 ). Reporting News . Retrieved from KPMG:
https://home.kpmg.com/content/dam/kpmg/pdf/2016/05/Reporting-News-16RN04.pdf
Mendez, E. (2016, July 06). IFRS News - July 2016. Retrieved from PWC:
https://inform.pwc.com/inform2/s/IFRS_News_July_2016/informContent/1638055107139481#i
frs_news_july_2016_ifrs2_amendments
Mescher, B., & Gilani, S. (2016, May 12). Flashline - Week ending May 12, 2016. Retrieved from
PWC: http://www.pwc.com/us/en/cfodirect/publications/flashline/accounting-reporting-201619.html
Quinlivan, S. (2016, April 21). New Proposed Rules on Banker Incentive Compensation Released.
Retrieved from DODD-FRANK: http://dodd-frank.com/new-proposed-rules-on-banker-incentivecompensation-released/
Srinivasan, M. R. (2016, May). Regulator focus: What can we learn from the ESMA report? Retrieved
from PWC: http://www.pwc.com/us/en/cfodirect/assets/pdf/ifrs-news/may-2016.pdf
Tysiac, K. (2016, May 13). FASB proposes simplifying goodwill impairment testing . Retrieved from
Journal of Accountancy: http://www.journalofaccountancy.com/news/2016/may/fasb-proposessimplifying-goodwill-impairment-testing-201614427.html