MAA310 Accounting and Society - Task 1 Report - Assignment Help

Executive Summary

KiMy Ltd a software service provider which is required to transition its financial reporting system. The basis of this report is to provide and enhance knowledge toward the new adaptation of accounting standard, by understanding its concept, differentiation, identification, analysis, challenges and solution.

Introduction

Australia was the only country in decades which allowed the entities to prepare to self-assess the required financial reporting legislation (Carey, Potter & Tanewski, 2014). The objective here is to understand the recently revised conceptual framework adopted by the Australian accounting standard boards (AASB). KiMy Ltd is a large family-owned software service provider, like many un-listed companies KiMy was also lodging its annual reports to ASIC by preparing and producing special purpose financial statements(SPFS), with SPFS being obsolete, it is now a requirement following the general purpose financial statements (GPFS). This report will create an understanding for the board of directors to effectively implement and transition into GPFS, also define and create an understanding of the history and comparisons, highlighting the requirements, analysis from stakeholders point an agency point of view, challenges and their possible solutions. 

The difference between the SAC1 and RCF reporting entity definition:

The Statement of Accounting Concepts 1 (SAC1) was introduced years back, where the definition of the reporting entity was given as an entity which is required to prepare and produce GPFS, whereas all other non-reporting entities can choose to prepare and produce SPFS which is far less complex and is shorter compared to GPFS (Public sector accounting standards board, 1990). The International Accounting Standard Board (IASB) after revising the conceptual framework for financial reporting (RCF) where they defined reporting entity  as an entity required, or chooses, to prepare financial statements, which cannot necessarily be a legal entity, it could be a portion of an entity or comprising of more than one entity. The boundary is set as to which economic activities are to be included in GPFS, determining the boundary can be achieved by the information required of the users of the entity’s financial statements (KPMG, 2018).

The distinction in the current requirements for GPFS Tier 1 and GPFS Tier 2 under the current reporting framework:

AASB introduced AASB 1053 in June 2010 to set the application of Tiers of different categories of entities preparing and producing GPFS. The differential reporting framework has two tiers, Tier 1: is incorporated with the International Financial Reporting Standards (IFRS) and are included with the requirements to specific Australian entities, whereas Tier 2: an entity can be defined as a ‘reporting entity’ in SAC1 that does not have public accountability. It has all the measurements, recognition and presentation of Tier 1 but with a reduced disclosure requirement.  Both tiers are required to prepare their financial reports in compliance with Part2M.3 of the Corporations Act.