Regulatory Environment and Financial Reporting
The regulatory environment and financial reporting
You are employed in a large accounting firm which specialises in preparing general purpose financial reports for large companies that are listed on the Australian Securities Exchange (ASX). As the training manager, one of your key tasks is to prepare a newsletter for staff involved in the preparation of the above financial reports. The purpose of the newsletter is to alert staff to changes and developments that may impact their work, and provide enough information about these changes/developments to satisfy the following:
- For staff to understand the nature of the change/development and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work);
- Provide directions to staff of where they can access further information on the change/development if they wish to (including website links where appropriate).
Prepare a 2 page newsletter that identifies and summarises changes and developments in the financial reporting environment for the period from 1 April 2017 to 31 July 2017
Detailed guidelines for completing this task:
- 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 a range of developments/changes such as:
- Technical issues: for example the issue of new accounting standards, amendments to accounting standards, updates on AASB or IASB projects in progress, amendments to ASX listing rules.
- Regulation and monitoring of financial reporting: for example ASIC reviews on financial reporting.
- Political influences or other potential developments. ‘Political’ does not only mean action from politicians – it would also 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.
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).
Given the target audience, it is 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?
You need to take care that the developments and the changes considered and included in the newsletter are relevant to the objective, in particular that they relate directly to the preparation of general purpose financial reports for large companies listed on the ASX. The newsletter should not consider areas only indirectly related to the preparation of financial reports such as (this is not an exhaustive list):
- Other disclosures by listed companies such as: industry disclosures required by peak organisations, and voluntary disclosures in the area of corporate social responsibility or integrated accounting.
- 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 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 (including website links where appropriate) 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 different formatting (such as larger fonts) 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 or 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 4 below).
Don’t be afraid to be creative. The effectiveness of a newsletter is impacted by how interesting the readers find it.
- Bibliography and referencing
This assessment must include a bibliography rather than a reference list, prepared in accordance with APA referencing style. The bibliography should not be part of your newsletter and is to be submitted 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 that 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 look at a particular publication but most of the content relates to taxation or auditing 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 found to have deliberately plagiarised, with 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.
AUSTRALIAN FINANCIAL REPORTING ENVIRONMENT DEVELOPMENT NEWSLETTER
The considered period: 1st April 2017 to 31st July 2017
Changes and developments in technical aspects
New accounting standards
New accounting standards aim to enhance consistency and adequately align accounting to match transaction economics (YCG, 2017). This implies that the relevant enforced changes are suitable in promoting uniformity in the financial reporting sector. Not–for–profit firms were needed to establish whether a transaction was a genuine donation whereby AASB 1058 income of Not-for-Profit entities is applicable or a contract involving a client in which scenario AASB 15 Revenue from contracts with Clients is applicable (YCG, 2017). This needed the staff to prepare reports to distinguish such relevant transactions vividly. This called for intensive and prudent actions to ensure satisfactory and complete compliance.
Changes required tangible assets to be recognized and concur with share issues (Mark, 2017). This needed the staff to prepare financial reports that comprehensively showed congruence between the entity`s intangible assets and its shares. This amendment ensured that the projection of the two is in harmony.
ASX Listing Rules
Two of the most dominant listing rules for the period included Continuous disclosure and the cessation of trading halts to promote major shareholding sales (ASX, 2016).
ASX had updated its listing compliance rule 3.1, which required listed firms to comply with their disclosure obligations even in cases where they are party to a non-disclosure agreement, which might otherwise need them to keep the information confidential (ASX, 2016). This means that firms had to disclose relevant information in line with compliance rule 3.1 for them to be eligible for listing in the stock exchange market. Staff can get more information by visiting (www.asx.com.au/regulation/rules/recent- rule-amendment.html).
Cessation of trading halts
Effective 31st March 2017, ASX stopped agreeing to requests for a trading halt meant for such purposes, and this is outlined in ASX Listings Rules Guidance Note 16 of Trading Halts and Voluntary Suspensions (ASX, 2016). For instance, where a firm is not given prior warning of the intention by a security holder to sell a major stake in the firm before a disclosure obligation emerges, ASX accepted the firm`s request for a trading halt to permit it enough time to satisfy its disclosure obligations and announce the sale (ASX, 2016). This enabled proper prior communication before the sale of a key stake in an entity.
Financial reporting control and monitoring
Changes in Asset value and Accountancy Policy choices, which required entities to employ realistic assumptions or test asset value and use suitable approaches in revenue recognition and others, were applied (Gilbert & Tobin, 2017). Entities were needed to be realistic in financial reporting. This was coupled with a review that required management and directors of firms to prepare proper records and processes to back their financial information rather than depend on the auditor (Gilbert & Tobin).
The Australian government has established supportive legislation reforms to the AASB Accounting Standards. It was applicable in the financial period mentioned. It served to give more influence to the system and reinforce the government`s commitment and sensitivity to corporate welfare and operations.
References and Bibliography
ASX. (2016, December 19). Recent rule Amendments- ASX. Retrieved from
www.asx.com.au/ regulation/rules /recent-rule-amendments.html
Gilbert., & Tobin. (2017, june 1). ASIC focus areas for 30 june 2017 financial reportsLexology. Retrieved from www.lexology.com/library/detail.aspx? g=91153fif-2c2e4dd3-9b2d…
Mark, R. (2017). Management Incentives to recognize intangible assets. Accounting &
YCG. (2017, June 6). YCG /Australian Accountancy Standards update-income of Not-for…
Retrieved from https://www.ycg.com.au>Hot Topics
Hwlebsworth Lawyers (2016). Changes to ASX Listing Rules: Effective 19 December
2016. Retrieved December 5, 2016, from www.hwlesworth.com.au/…/2273-changes-to-asxlisting-rules-effective-19-december…
Redlich Lawyers (2016). Changes to ASX Listing Rules- Holding Redlich Lawyers- Law
firm. Retrieved November 3, 2016, from
Crowe Horwath (2017). ASIC`s focus areas for June 2017- Crowe Horwath. Retrieved June
27, 2017, from https://www.crowehorwath.com.au/insights/asics-focus-areas-for-june-2017