ACCT2542 Course Map PDF

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Course Map ACCT2542 Corporate Financial Reporting & Analysis - 2019 Staff Lecturer in Charge Lecturer Lecturer

Dr Diane Mayorga Dr. Chuan Yu Dr. Ryan Zihang Peng

[email protected] [email protected] [email protected]

Quad 3070 Quad3101 Quad3059

Preparation eparation! Hit the ground running by completing O Week Course Pr See details on pages 7 and 8

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ACCT ACCT2542 2542 Overview of Course TTopics opics

Australian Accounting Standards Board (AASB) Standards REPORTING & DISCLOSURE ( Week 1) AASB 101 Presentation of Financial Statements AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 110 Events after the Reporting Period

MEASUREMENT (Week 3) AASB 13 Fair Value Measurement AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 136 Impairment of Assets

OTHER ISSUES AASB 112 Income Taxes (Week 2) AASB 128 Investment in Associates (Week 10)

ACCT 2542 focuses on preparing General Purpose Financial Reports (GPFR) for a Group

Financial Reporting for a Single Entity (ACCT 1501 & ACCT 1511 – review assumed knowledge from these courses during O Week)

Entity A

Financial Reporting for a Group (Weeks 4 to 9) AASB 3 Business Combinations AASB 10 Consolidated Financial Statements AASB 121 The Effects of Changes in Foreign Exchange Rates

Entity A (Parent)

has CONTROL over

Entity B (Subsidiary)

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Welcome to ACCT2542 Corporate Financial Reporting & Analysis Sometimes it can be challenging to know how to best study a subject. Use this ‘Course Map’ is to help you navigate and learn in this course.

Overall Learning Outcomes for ACCT2542 This course teaches students the practice of external financial reporting so that they understand how to prepare financial statements and notes to the statements for listed public companies. By understanding how to prepare a financial report, students will be more knowledgeable users of financial reports in their future careers and personal lives. The Course Outline details the Course Learning Outcomes (CLOs). In addition to these CLOs, students should also be able to: Understand the objectives of financial accounting (see diagram on page 1), Think critically about and discuss financial accounting issues, such as measurement, recognition and disclosure, that are of importance to users of financial reports, Understand that applying AASBs requires considerable professional judgment and that there is latitude for reasonable differences on how the AASBs are applied in financial reporting.

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How to Study for ACCT2542 Discussions with prior ACCT2542 students suggest that a structured study plan works best for this course. An example of structured study plan is discussed in the video titled “How to Survive and Thrive in ACCT2542”. This video is available on Moodle in “Topic 1: Reporting & Disclosure”. The structured study plan discussed in the video is also listed below.

Structured Study Plan for ACCT2542 We recommend that you follow the below sequence of steps for each week’s material. Steps 1 to 8 are key steps. DO NOT skip any of these steps. Steps 9 to 11 are optional but may benefit students who have or demonstrate a poor understanding of the topic(s). Step 1 Step 2 Step 3 Step 4

Step 5

Step 6 Step 7 Step 8 Step 9 Step 10 Step 11 Step 12

Prior to attending the lectures, skim the lecture slides and assigned weekly readings. Attend the lecture. Shortly after attending the lecture, review the lecture slides and your lecture notes. Use the lecture slides, your lecture notes, the assigned readings, and any demonstration problems to help you master the key concepts covered in the week’s lecture. Attempt the Pre-Tutorial (Pre-Tut) Practice Questions. Use provided solutions and video resources (if provided) to understand how to do the questions. Once you understand how to do the Pre-Tut questions, attempt the Tutorial Questions to the best of your ability. Attend tutorial. Review solutions to tutorial questions and review lecture slides/notes as necessary. Attend PASS if you would benefit from additional explanation or assistance. Watch audio version of lecture if necessary. Attend staff consultation if necessary. Consistently review materials throughout the term. It will make studying for the final exam much easier.

You will also be provided with Post-Tut Practice questions. We encourage students to use these questions when studying for assessments.

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Guide to Reading Instructions For each week, we have assigned textbook readings. Students are expected to use these resources to satisfy the course requirements. To assist students with using these readings, we use the following terms to describe the different recommended levels of reading intensity.

Review: indicating that this is material covered in ACCT1501 or ACCT1511. In ACCT2542, it is assumed you have already “mastered” this material. If not, read to “master” this material as fully as possible before moving on to the next task. Skim: read to understand the big picture – pick up the essential vocabulary and understand the basic issues, Grasp: read to understand the computations and concepts underlying the issues, Master: indicating this is material is extremely important. Try to comprehend it as fully as possible before moving on to the next task.

Key to Loftus et al. 2018 questions at the end of each Chapter CQ – Comprehension Questions Case – Case Study AAE – Application and Analysis Exercises We provide Pre-Tut practice questions with their solutions at the beginning of each week. Pre-Tut practice questions are to be used as part of your independent study for the course. They are to help bridge the gap between examples presented in the lectures and tutorial questions. The intention of providing the solutions for the pre-tut practice questions is to help students understand the why of what they are doing and the how of doing it. Questions assigned as “Tutorial” must be attempted prior to your tutorial. Solutions to the tutorial questions will be released on Moodle at 3:00pm on the Friday of the week the questions are discussed in tutorials. Again, after attending your tutorial, use the solutions to assist with your learning of the concepts. We also provide Post-Tut practice questions with their solutions to reinforce concepts covered in the required readings, lectures or tutorials and to assist students in preparing for course assessments.

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O Week Course Preparation ACCT2542 is considered an intermediate to advanced financial accounting course. It is vital that students engage with the course material on a regular and timely basis. We cover a substantial amount of content in this course. ACCT2542 builds on previous selected key concepts covered in ACCT1501 and ACCT1511. Our experience teaching this course indicates that, if students do not remember or understand key concepts covered ACCT1501 and ACCT1511, they are less likely to comprehend the concepts we discuss in ACCT2542. Therefore, we require that ALL students complete the O Week Course Preparation materials in O Week. As indicated, this preparatory work should be completed PRIOR to attending the Week 1 lecture and PRIOR to embarking on new material covered in Week 1 and beyond of this course. Important Note – ACCT2542 exams assume that students have prior knowledge of this course preparation material. Week 0 - Course Preparation Specific Learning Objectives: To ensure that you understand: The double entry system, The accounting cycle, General principles underlying the preparation and presentation of financial statements, Measurement of PP&E post acquisition including both the cost model and the revaluation model The concept of equity How to roll-forward retained earnings

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O Week Course Preparation Instructions – 5 Easy Steps!

Step 1

Step 2 Step 3

Step 4 Step 4

Step 5

• Take the Orientation Week Review Quiz on Moodle as a pre-test to assess your prior knowledge.

• Review ACCT1501 Lecture Slides on ACCT2542 Moodle site as needed. These slides cover key concepts which you are assumed to know PRIOR to embarking on ACCT2542 course material.

• Review Loftus et al. 2018 Chapter's 5 and 13 Slides (on Moodle).

• Review Loftus et al. 2018 Chapter 5 Sections 5.2 to 5.7 • Complete PQs: Case 5.1, AAE 5.2, 5.11, 5.18

• Review Loftus et al. 2018 Chapter 13 Sections 13.8 and 13.9 • Complete PQ: CQs 1, 9, 10, Case 13.3, AAE 13.3, 13.5, 13.9

• Re-take the Orientation Week Review Quiz. • You can take the quiz as many times as you need. • Solutions are provided to assist you in learning the concepts.

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Week 1 Study Guide: Financial Reporting Fundamentals Lecturer: Dr Diane Mayorga Learning Outcomes (LO): After studying this week’s topics, you should be able to: LO1: Assess whether an entity is a reporting entity in the context of Australian regulation of financial reporting (Chapter 1 - covered in lecture) LO2: Identify the roles of the key bodies involved in accounting regulation in Australia (Chapter 1 - covered in independent study) LO3: Explain the structure, role and processes of the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC) (Chapter 1 covered in independent study) LO4: Explain the key components of the conceptual framework (Chapter 1 covered in independent study) LO5: Describe the role of professional judgment in the preparation of financial reports (Chapter 2 - covered in independent study) LO6: Identify the major decision areas in considering policies to account for transactions and other events (Chapter 2 - covered in independent study) LO7: Describe the main components of financial statements (Chapter 16 covered in lecture) LO8: Explain the requirements of the statement of financial position (Chapter 16 - covered in lecture) LO9: Explain the requirements of the statement of profit or loss and other comprehensive income (Chapter 16 - covered in lecture) LO10: Explain the requirements of the statement of changes in equity (Chapter 16 - covered in lecture) LO11: Discuss other disclosures required by AASB 101 in the notes to the financial statements (Chapter 16 - covered in independent study) LO12: Describe how accounting policies and changes to accounting policies are disclosed in general purpose financial statements (Chapter 18 - covered in lecture) LO13: Describe how changes in accounting estimates are accounted for and disclosed in general purpose financial statements (Chapter 18 - covered in lecture) LO14: Explain how prior period errors arise and how they are accounted for and disclosed in general purpose financial statements (Chapter 18 - covered in independent study)

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LO15: Explain the requirements when it is impracticable to make retrospective adjustments for changes in accounting policies or correction of errors (Chapter 18 - covered in independent study) LO16: Describe the concept of materiality and how material items are identifies (Chapter 18 - covered in independent study) LO17: Explain the difference between types of events occurring after the end of the reporting period and how they are to be treated in the financial statements (Chapter 18 - covered in lecture)

Main Ideas this Week 1. The Corporations Act requires certain types of entities to prepare financial reports. In ACCT2542 we focus on the reporting requirements for disclosing entities which are required to prepare a ‘general purpose financial report’ (GPFR). A GPFR needs to comply with Australian Accounting Standards (AASBs). 2. Accountants may need to exercise ‘professional judgment’ when applying AASBs as these are predominately principles-based (rather than rules-based as in US GAAP). 3. AASB 101 prescribes the basis for the presentation of a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and related notes. Each financial statement has specific recognition requirements. There are also prescribed disclosures for the related notes. 4. AASB 108 discusses how to account for changes in accounting policies, accounting estimates and prior period errors. Most changes in accounting policies are recognised retrospectively. Changes in accounting estimates are always recognised prospectively. Material errors are accounted for by a retrospective application. 5. AASB110 discusses accounting for events after the reporting period. Events are classified as either adjusting or non-adjusting events.

Assigned Readings Chapter 1 Master Sections 1.1.1 to 1.1.4 Skim Sections 1.2 to 1.3 Master Section 1.4 Review Sections 1.5 to 1.10 Chapter 2 Master Sections 2.1 to 2.2 Chapter 16 Master Section 16.1 Review Section 16.2 Master Sections 16.3 to 16.6 Chapter 18 Master Section 18.1 to 18.6

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Pre-Tutorial Practice Questions Chapter 16: AAE 16.11, 16.14 AND Chapter 18: AAEs18.4, 18.5

Tutorial Questions Chapter 16: AAEs 16.18 AND Chapter 18: AAE 18.10

Post-Tutorial Practice Questions Chapter 16: AAE 16.19 AND Chapter 18: AAE18.11

Once you complete all the above, TAKE the WileyPlus Practice Quiz for Topic 1

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Week 2 Study Guide: Accounting for Income Tax Lecturer: Dr Chuan Yu Learning Outcomes (LO): After studying this week’s topics, you should be able to: LO1: Discuss the reason for a standard on income taxes LO2: Discuss differences in accounting treatments and taxation treatments for a range of transactions LO3: Explain that some transactions and other events have both current and future tax consequences LO4: Calculate and account for current tax LO5: Calculate and account for deferred tax LO6: Account for changes in tax rates LO7: Explain the disclosure requirements of AASB 112

Main Ideas this Week Think two stages Think about accounting for company income tax in two stages. The first stage is to calculate the taxable profit (taxable income) we can determine the current tax liability and write the journal for current tax which is usually of the form Dr Income tax expense; Cr Current tax liability. The first stage involves income statement concepts. We are adjusting from accounting profit to taxable profit. The second stage is to calculate the temporary differences that arise on certain assets and liabilities based on future tax consequences. This is how we determine the deferred tax balances. The second stage involves balance sheet concepts. We are comparing the accounting book value for an asset or liability (the carrying amount) to the tax laws value for an assets or liability (the tax base) Full accrual model versus partial accrual model The differences between the full accrual model of accounting and partial accrual model of income tax are what drive the show. When preparing a current tax worksheet note the following: (1) we adjust the accounting profit by removing certain expenses based on accruals and replace them with deductions based on cash payments, e.g. long service leave, prepaid insurance; (2) we remove expenses that are not recognised in the partial accrual tax model e.g. entertainment expenses; and (3) we replace depreciation based accounting rules with depreciation based on tax rules. When preparing a deferred tax worksheet note how the accrual balances give rise to

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temporary differences and deferred tax balances, i.e. it is the accrual balances where the asset or liability has a carrying amount that is different to its tax base e.g. provision for long service leave, accounts receivable net of allowance, deferred costs.

Assigned Reading Chapter 12 Master Sections 12.1 to 12.5 Skim Sections 12.6 to 12.7

Practice Questions: Chapter 12: AAE 12.12

Tutorial Questions: Chapter 12: AAE 12.13

Post-Tutorial Practice Questions Chapter 12: AAE 12.14

Once you complete all the above, TAKE the WileyPlus Practice Quiz for Topic 2

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Week 3 Study Guide: Fair Value, Intangibles and Impairment Lecturer: Dr Chuan Yu Learning Outcomes: After studying this week’s topics, you should be able to: LO1: discuss the merits of using fair value versus historic measurement in financial reporting LO2: explain the criteria relating to the initial recognition of intangible assets and their measurement at point of initial recognition, distinguishing between acquired and internally generated intangibles LO3: explain how to measure intangibles after initial recognition, including the principles relating to the amortisation of intangibles LO4: describe when and how to undertake impairment testing LO5: identify a cash-generating unit, and account for an impairment loss for a cash-generating unit LO6: apply the impairment model to a cash generating unit and accounting for impairment of goodwill

Main Ideas this Week Good form for revaluation journals Revaluation of non-current assets is introduced in ACCT 1511. We go a bit deeper into it in ACCT 2542 using the accounting standards. 1. What is fair value and how is it determined? 2. the journals to revalue PPE to fair value and the related tax entries 3. how a revaluation reserve can be transferred to retained earnings after the revalued PPE is no longer on hand A separate account for “Gain on revaluation (OCI)” is good form because this information is needed for the statement of profit or loss and other comprehensive income. The gain account will be closed off against the asset revaluation reserve at the end of the period. Compare and contrast A good way to learn the material this week is to think about the differences in the accounting standards for AASB 116 Property, Plant and Equipment versus AASB 138 Intangible Assets. Consider the following: 1. Definitions: What are the key characteristics of the asset? 2. Initial recognition: What are the criteria? 3. Initial measurement: Is it cost and, if so, how is cost determined? 4. Subsequent measurement: When can the revaluation model be used? Depreciation/amortisation: How is depreciation/amortisation determined?

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5. Internally generated: Under what conditions are internally generated assets recognised? Recoverability of assets We will also discuss the impairment of assets regulated under AASB 136. The focus is on: 1. What is meant by impairment loss, carrying amount and recoverable amount? 2. What are indicators of impairment? 3. When we do impairment testing for goodwill and other assets? 4. How is an impairment loss recognised? 5. What is a cash generating unit? 6. How is an impairment loss allocated to the assets in a cash generating unit? 7. Can impairment losses reverse and what is the accounting treatment?

Assigned Readings Chapter 3 Skim Section 3.1 Master Section 3.2 Skim Sections 3.3 to 3.7 Chapter 6 Skim Section 6.1 Master Sections 6.2 to 6.6 Skim Section 6.7 Chapter 7 Skim Section 7.1 Master Sections 7.2 to 7.6 Skim Section 7.7

Practice Questions: Chapter 3: CQ 3 Chapter 6: AAE 6.13 Chapter 7: AAE 7.1

Tutorial Questions: Chapter 3: AAE 3.1 Chapter 6: AAE 6.11 Chapter 7: AAE 7.21

Post-Tutorial Practice Questions Chapter 3: CQ 8 Chapter 6: AAE 6.8 Chapter 7: AAE 7.13

Once you complete all the above, TAKE the WileyPlus Practice Quiz for Topic 3

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Week 4 Study Guide: Business Combinations Lecturer: Dr Chuan Yu Learning Outcomes: After studying this week’s topics, you should be able to: LO1: explain the key steps in the acquisition method LO2: account for a business combination in the records of the acquirer LO3: describe how to recognise and measure the assets acquired and liabilities assumed in a business combination LO4: prepare an acquisition analysis and account for the recognition of goodwill or gain from bargain purchase LO5: gain an underst...