Tài liệu Issues in financial accounting 16th by henderson peirson

Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson Tài liệu Issues in financial accounting 16th by henderson peirson

Henderson Peirson Herbohn Artiach Howieson Edition 16 Issues in Financial Accounting Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Issues in Financial Accounting Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Dedicated to Margaret, Chris, John, John and Christopher Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Henderson Peirson Herbohn Artiach Howieson E di t i o n 16 Issues in Financial Accounting Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 Pearson Australia 707 Collins Street Melbourne VIC 3008 www.pearson.com.au The Copyright Act 1968 of Australia allows a maximum of one chapter or 10% of this book, whichever is the greater, to be copied by any educational institution for its educational purposes provided that that educational institution (or the body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act For details of the CAL licence for educational institutions contact: Copyright Agency Limited, telephone: (02) 9394 7600, email: info@copyright.com.au All rights reserved Except under the conditions described in the Copyright Act 1968 of Australia and subsequent amendments, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner Senior Portfolio Manager: Joanne Hobson Development Editor: Judith Bamber Project Manager: Bronwyn Smith Production Manager: Liz de Rome Senior Rights and Permissions Editor: Emma Gaulton Production Controller: Bradley Smith Lead Editor/Copy Editor: Robyn Flemming Proofreader: Caroline Hunter, Burrumundi Pty Ltd Indexer: Mary Coe Cover and internal design: Liz Nicholson, designBITE Pty Ltd Cover illustration: © vs148/Shutterstock.com Typeset by Aptara, India Printed in Malaysia 21 20 19 18 17 National Library of Australia Cataloguing-in-Publication Data Creator: Henderson, Scott, author Title: Issues in financial accounting / Scott Henderson, Graham Peirson, Kathleen Herbohn, Tracy Artiach, Bryan Howieson Edition: 16th edition ISBN: 9781488611643 (paperback) ISBN: 9781488611650 (eBook) Notes: Includes index Subjects: Accounting—Australia—Textbooks Financial statements—Australia—Textbooks Other Creators/Contributors: Peirson, Graham, author Herbohn, Kathy, author Artiach, Tracy, author Howieson, Bryan, author Dewey Number: 657 Every effort has been made to trace and acknowledge copyright However, should any infringement have occurred, the publishers tender their apologies and invite copyright owners to contact them Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Brief contents Preface to the sixteenth edition  xiii About the authors  xiv Educator resources  xvi Acknowledgements xvii PART Institutional setting and the conceptual framework Chapter Institutional arrangements for setting accounting standards in Australia CHAPTER The conceptual framework: Purpose, reporting entity, the objective of financial reporting, and qualitative characteristics 33 CHAPTER The conceptual framework: Definition, recognition and measurement of the elements in general purpose financial statements 56 CHAPTER Fair value measurement 97 CHAPTER The choice of accounting methods 117 PART The statement of financial position 147 CHAPTER The statement of financial position: An overview 148 CHAPTER Accounting for current assets 178 CHAPTER Accounting for property, plant and equipment 203 CHAPTER Accounting for company income tax 273 CHAPTER 10 Accounting for intangible assets 325 CHAPTER 11 Accounting for leases 368 CHAPTER 12 Accounting for employee benefits 421 CHAPTER 13 Accounting for financial instruments 475 PART The statement of comprehensive income and further financial reporting issues 527 CHAPTER 14 The statement of comprehensive income 528 Chapter 15 Revenue 565 CHAPTER 16 The statement of cash flows 602 CHAPTER 17 Financial reporting: Segment reporting and highlights statements 624 CHAPTER 18 Further financial reporting issues 661 PART Industry accounting standards 721 CHAPTER 19 Accounting for the extractive industries 722 CHAPTER 20 Accounting for agricultural activity 771 CHAPTER 21 Accounting for superannuation entities 797 CHAPTER 22 Accounting for insurance 825 PART International accounting 853 CHAPTER 23 International accounting standards, harmonisation and convergence 854 CHAPTER 24 Foreign currency translation 874 PART Accounting and the community 923 CHAPTER 25 Accounting for corporate social responsibilities 924 CHAPTER 26 Ethics in accounting 960 Appendix  985 Glossary  989 Author index  999 Subject index  1003 Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e v Detailed contents Preface to the sixteenth edition xiii About the authors xiv Educator resources xvi Acknowledgements xvii Part Institutional setting and the conceptual framework Chapter Institutional arrangements for setting accounting standards in Australia 1.1 Introduction  1.2 Accounting standard setting in Australia  10 1.3 The preparation and enforcement of AASB Accounting Standards and AASB Interpretations  14 Selected references  22 Questions  23 Notes  25 Appendix 1.1: The development of institutional arrangements for standard setting in Australia  26 Notes to Appendix 1.1  32 Chapter The conceptual framework: Purpose, reporting entity, the objective of financial reporting, and qualitative characteristics 33 2.1 Introduction  34 2.2 The nature and purpose of a conceptual framework  35 2.3 The history, structure and status of the Australian conceptual framework  36 2.4 The reporting entity concept and general purpose financial reporting  38 2.5 The objective of general purpose financial reporting  41 2.6 The qualitative characteristics of useful financial information  44 Selected references  49 Questions  50 Notes  52 Appendix 2.1: Documents published by the AARF/AASB in the development of a conceptual framework as at 15 March 2016  54 Chapter The conceptual framework: Definition, recognition and measurement of the elements in general purpose financial statements 56 3.1 Introduction  57 3.2 The elements of financial statements  57 3.3 Definition and recognition  58 3.4 Measurement  58 3.5 Measurement in accounting  60 3.6 Assets  61 3.7 Liabilities  72 3.8 Equity  80 3.9 Income  81 3.10 Expenses  83 vi Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 3.11 Profit  85 3.12 Summary  86 Selected references  87 Questions  87 Problems  89 Notes  93 Appendix 3.1: Proposed changes to the IASB conceptual framework  95 Chapter Fair value measurement 97 4.1 Introduction and the purpose of AASB 13  98 4.2 Fair value defined 100 4.3 The fair value measurement process  106 4.4 Disclosures  110 Selected references  113 Questions  113 Problems  114 Notes  116 Chapter The choice of accounting methods 117 5.1 Introduction  118 5.2 Choice by accounting standard setters  118 5.3 Choice by preparers of financial statements  122 Selected references  140 Questions  140 Problems  141 Notes  142 Part The statement of financial position Chapter The statement of financial position: An overview 147 148 6.1 Introduction  149 6.2 Format of the statement of financial position  150 6.3 Presentation of assets and liabilities in the statement of financial position  151 6.4 Presentation of equity in the statement of financial position and statement of changes in equity  157 6.5 General presentation requirements  165 Selected references  171 Questions  171 Problems  173 Notes  176 Chapter Accounting for current assets 178 7.1 Introduction  179 7.2 Accounts receivable  180 7.3 Inventories  182 Selected references  198 Questions  198 Problems  200 Notes  202 DETAILED Contents Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e vii Chapter Accounting for property, plant and equipment 203 8.1 Introduction  204 8.2 Initial recognition of property, plant and equipment  205 8.3 Subsequent measurement of property, plant and equipment  221 8.4 Depreciation of property, plant and equipment  247 8.5 Accounting for investment properties  256 Selected references  261 Questions  261 Problems  263 Notes  271 Chapter Accounting for company income tax 273 9.1 Introduction  274 9.2 Alternative methods of accounting for company income tax: The fundamentals  275 9.3 Accounting standards  285 9.4 Empirical research on tax-effect accounting  309 Selected references  311 Questions  312 Problems  314 Notes  323 Chapter 10 Accounting for intangible assets 325 10.1 Introduction  326 10.2 Nature of intangible assets  326 10.3 Intangible assets: Purchased or generated internally  327 10.4 Accounting for intangible assets  328 10.5 Accounting standards on intangible assets  330 10.6 Goodwill  348 Selected references  354 Questions  355 Problems  357 Notes  366 Chapter 11 Accounting for leases 368 11.1 Introduction   369 11.2 A new approach to lease accounting  371 11.3 Accounting for leases by the lessee  382 11.4 Accounting for leases by the lessor  393 11.5 Sale-and-leaseback transactions  402 Selected references  405 Questions  406 Problems  407 Notes  411 Appendix 11.1: Accounting for finance leases by the lessee under AASB 117 ‘Leases’  411 Appendix 11.2: Accounting for sale-and-leaseback transactions under AASB 117 ‘Leases’  417 viii DETAILED CONTENTS Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e Chapter 12 Accounting for employee benefits 421 12.1 Introduction  422 12.2 Wages and salaries  427 12.3 Compensated absences  429 12.4 Profit-sharing and bonus plans  439 12.5 Termination benefits  441 12.6 Share-based payment benefits  442 12.7 Post-employment benefits  452 Selected references  466 Questions  466 Problems  468 Notes  474 Chapter 13 Accounting for financial instruments 475 13.1 Introduction  476 13.2 The definition of financial instruments  477 13.3 Distinguishing between financial liabilities and equity instruments  480 13.4 Recognition and measurement of financial instruments  487 13.5 Futures contracts  493 13.6 Option contracts  499 13.7 Swaps  503 13.8 Disclosure  512 Selected references  514 Questions  514 Problems  515 Notes  518 Appendix 13.1: Disclosures of derivative financial instruments: Brambles Limited, Annual Report 2015  519 Part 3 The statement of comprehensive income and further financial reporting issues 527 Chapter 14 The statement of comprehensive income 528 14.1 Introduction  529 14.2 Measurement of profit  529 14.3 Accounting standards  533 14.4 Reporting of non-statutory profit measures  546 14.5 The statement of value added  554 Selected references  556 Questions  557 Problems  559 Notes  564 Chapter 15 Revenue 565 15.1 Introduction  566 15.2 The importance of accounting for revenue  566 15.3 Overview of AASB 15 ‘Revenue from Contracts with Customers’  569 15.4 Applying AASB 15  570 DETAILED Contents Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e ix company income tax continued disclosure 303–306, 310–311 effect on extractive industries 746 evasion of 973 income tax expense 275 current 278 deferred 278–279, 292–297 intangible assets 328 inventory valuation and 191–192 related-party transactions and 690 revalued assets 297–300 taxable income 274–275, 287 tax base 278 of assets 286–289 of liabilities 289–292 tax-effect accounting 309–311 tax rate changes 302–303 unused tax losses 300–302 Company Law Review Act 1998 (Cth) 159 company websites 347–348, 937 comparability choice of accounting policy and 678 fair value hierarchy 107–108 framework definition of 47 interim reporting 707 international harmonisation and 860, 867, 872 profit measurement 530 revenue recognition 569 compensated absences 429, 429–439 compensation employee see employee benefits management 139, 445, 695–699 competence 967–973 complaints procedures 970 complete depiction 46 complete set of financial statements 704 compliance APES 205 ‘Conformity with Accounting Standards’ 10, 18–19, 40, 662–664 differential reporting and 662 ethical issues 18–19, 973–974 history of 29–31 legal requirements 4–10, 17, 19, 22, 40, 120 compliance statements 9, 17, 165 compounded historical cost 777 compound financial instruments 480, 482–486 comprehensive income other see other comprehensive income statement of see statement of profit or loss and other comprehensive income comprehensive income approach 531, 532, 540 computer software 347–348 conceptual framework Australian see Framework for the Preparation and Presentation of Financial Statements development of 36–38, 54–55, 120–121 international see Conceptual Framework for Financial Reporting 2010 purpose of 35–36, 41–44, 57, 120–121 structure of 37–38 United States 37 Conceptual Framework for Financial Reporting 2010 (AASB) 529, 668 Conceptual Framework for Financial Reporting 2010 (IASB) overview 34–35 definitions 95–96 on materiality 668 proposed changes to 34–35, 57, 95–96 on recognition 96 1008 concise financial reports 48, 663, 708, 708–710 condensed financial statements 704–705 conditional employee benefits 422–423 conditional period for long-service leave 433 confidentiality 969 confirmatory role of financial information 46 conglomerate solvency ratio 849 conservatism 778 consideration non-cash 578 payable to customer 578–579 variable 575–576, 580 consignment 587–588 consolidated financial statements insurance 828–829, 847 superannuation plans 809–817, 819–820 constant purchasing power (CPP) accounting 777 construction costs, extractive industries 725, 731 constructive obligation 72 Consultation Paper 150 ‘Disclosing Financial Information Other than in Accordance with Accounting Standards’ (ASIC) 546 Consultation Paper ‘Considerations of Materiality in Financial Reporting’ (ESMA) 671 consumable biological assets 772, 772–774 contingent assets 65 contingent liabilities 74 continuous disclosure 4, 700 accounting standards 704–708 advantages and disadvantages of 699–700 ASX Listing Rules 700–704 Corporations Act on 702 interim financial report 704, 704–708 contra-assets 180, 205 contract(s) 570 choice of accounting policy and 130–136, 139 commodity 478 consideration non-cash 578 payable to customer 578–579 variable 575–576, 580 cost-plus 135 debt covenants 136, 138 executory 63–64 fair value measurement and 99 forward exchange 508, 522–523, 540 futures see futures contracts identification of 571–573 insurance see insurance contracts leases 380–381 modifications 572–573 option see option contracts performance obligations 573, 573–575, 579–583 social 928, 983–984 transaction price 575, 575–580 contract asset 590 contract costs 131, 588–590 contract liability 591 contract-price method 75–76 contributed capital 159–162 see also share(s) contributed equity see equity contributory superannuation plans 798 control see also ownership assets defined by 62–63, 183, 326–327 of inventory 62–63, 183–184 of investee 153–154, 692 joint 153–154, 692 in lease accounting 378–380 revenue recognition 569 convergence period 121–122 see also international convergence conversion costs 185 convertible notes 482 Cooper Review 804 corporate bonds 425–426 corporate collapses 961 Corporate Governance Council (ASX) Corporate Governance Principles and Recommendations (ASX) 5–10 Corporate Law Economic Reform Program (CLERP) 3, 10, 12 corporate legitimacy 928–929 Corporate Register 942 The Corporate Report (ICAEW) 45, 554, 556 Corporate Responsibility Reporting Survey (2015) 930 corporate social responsibility (CSR) 925 overview 929–931 accounting methods 931–946 descriptive performance reporting 931, 932 full cost reporting 933, 933–935 quantitative reporting 932 sustainability reporting 936, 936–944 carbon accounting 946–951 motivations for 925–929 statement of value added 555–556 voluntary initiatives 930–931, 948 Corporations Act 1989 (Cth) Corporations Act 2001 (Cth) overview 3–4 authority and enforcement of standards 17, 19, 120 on concise financial reports 48, 663, 708–709 on continuous disclosure 702, 704 on corporate social responsibility 929 on differential reporting 664–665 entities subject to 40 on equity 158–162 on events after reporting period 672 on interim reporting 704 international convergence and 863 on related-party transactions 698–699 on reporting periods 48 on special purpose financial reports 39 on statement of financial position 150 on statement of profit or loss and other comprehensive income 529 Corporations Amendment (Corporate Reporting Reform Act 2010) Bill 709 Corporations Regulations 150 cost(s) 205 absorption 187 acquisition see historical cost agency 132, 135–136, 139 borrowing see borrowing costs construction 725, 731 of continuous reporting 700 contract 131, 588–590 of corporate social responsibility 925–926 current see current cost defined benefit 458–459 direct 187 in extractive industry see extractive industries of goods sold 184 historical see historical cost in insurance accounting 831, 834–836 of intangible assets 328–329 of international convergence 864–865 inventory see inventories net interest 458–459 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e removal and restoration 732–736 replacement see current cost research and development 337 of segment reporting 627–628 selling 572–573 service 438–440, 453 sunk 211 sustainable 934 transaction 104, 105, 486 cost allocation, depreciation as 249–253 cost approach to fair value 106 cost basis for animals 775–776 for forestry assets 776–778 for inventory valuation 186 cost centres 748 cost constraint 49 cost-flow assumptions in inventory valuation 187–192 cost model disposal of assets 230 extractive industries 730 impairment loss 234, 239–242 intangible assets 329, 332–333 investment properties 258–260 cost-of-sales method 538–539 cost-plus contracts 135 costs written-off method see expense method counterparties 503–504, 570 covenants 134 CPA Australia (CPAA) APES 205 ‘Conformity with Accounting Standards’ 10, 18–19, 40, 662––664 attitude toward standards 18, 26, 29–31 code of ethics 961, 968–972 disciplinary procedures 970 Joint Standing Committee 32 CPM (Carbon Pricing Mechanism) 947 CPP (constant purchasing power) accounting 777 CPRS (Carbon Pollution Reduction Scheme) 947 creative accounting 122–125, 678–679 credit risk 508–509, 513, 525–526, 895 creditworthiness 70 CSL Limited 339–341 CSR see corporate social responsibility cumulative catch-up approach 389–393 currency domestic 875 exchange of see foreign currency translation functional 876, 877, 887 presentation 876, 877, 887 currency risk 513, 522 hedging 892–909 currency swaps 504, 506–509 current assets 166 accounts receivable 180, 180–182 biological assets as 773–774 classification of 179–180, 326 framework definition of 179, 204 inventory see inventories on statement of financial position 152, 166 current cash equivalent see realisable value current (replacement) cost 68 of assets 68–69 biological 777 foreign currency translation 911 of liabilities 78–79 current income tax expense 278 current liabilities 166 current/non-current presentation format 165–168 current-price valuation approaches 253 current-rate method 888, 922 current ratio 651, 653 current-service cost 439, 440, 453, 458 current tax liability 275 customer 570 damage cost approaches 935 DCF (discounted cash flow) method 111 dealer leases 399–400 debt borrowing costs 215–221, 216 see also interest expenses doubtful 180–181 fair value measurement and 99 debt covenants 136, 138 debtors see accounts receivable debt-to-asset ratio 651, 653–654 debt-to-equity ratio 652 decision making, ethical 970–972 decision-usefulness objective 41–44, 68, 71 deductible amount 286 deductible temporary differences 292 deferred employee benefits 422–423 deferred income tax expense 278, 279 deferred tax assets (DTA) 279 measurement of 292–297 offsetting 302 tax allocation 277–285 deferred tax liabilities (DTL) 279 measurement of 292–297 offsetting 302 tax allocation 277–285 tax rate changes and 302–303 defined benefit obligation 456, 456–458 defined benefit plans 427, 452–453, 798 accounting for 454–459, 539, 807–808, 818–819 multi-employer 463–465 defined contribution plans 426, 452, 798 accounting for 454–456, 808, 819 multi-employer 463 definitions 35, 58, 95–96 see also specific definition deflation 909 deontological theories 982, 982–984 dependent users, identification of 39–40 depreciable amount 250, 254 depreciation 247 see also amortisation accelerated method of 279 accumulated 232–234, 239 in extractive industries 736–743 of intangible assets 330 in lease accounting 386 of non-current assets 247–249 of property, plant and equipment see property, plant and equipment temporary differences due to 279 derecognition 229 deregulation of financial markets 476 derivative financial instruments 479 descriptive performance reporting 931, 932 development 335 see also research and development in extractive industries 724 development expenditure 332 differential reporting 663 accounting standards 663–667 justifications for 663 public sector 664 diluted earnings per share 646, 646–650 dilutive potential ordinary shares 647 direct costing 187 direct method of cash flow presentation 614–615 directors see managers directors’ reports in concise financial reports 708–710 corporate social responsibility in 929–930 highlights statement 637 remuneration 445, 695–699 subsequent event disclosure 675–676 direct sale comparison method 111 disability insurance 846 disaggregation 103, 254, 538, 591, 706 see also segment reporting Disciplinary Committee (CPA Australia) 970 disciplinary procedures 970 Disciplinary Tribunal (CPA Australia) 970 disclosing entities 664–665 disclosure 35–36 see also notes to financial statements accounting policies 124, 684–685 additional 710 agricultural activities 788–790 ASX see Australian Securities Exchange Ltd Listing Rules company income tax 303–306, 310–311 continuous see continuous disclosure depreciation 255–256 earnings per share 637, 651 equity 162–165 extractive industries 743–744 extraordinary items 545–546 fair value measurements 110–113 financial instruments 512–514, 519–526 foreign currency translation 909, 911–912 hedging transactions 909 insurance 844–845, 848 inventory valuation 196–198 leases 388–389, 392–393, 401–402, 414–416 legal requirements for 4–10 periodic post-employment benefits 459–463 reduced requirements 666–667 related-party transactions 162, 694–698 research and development 338–341 revenue 537, 591, 600–601 segment information see segment reporting share-based payments 451–452 statement of financial position 167 statement of value added 555 superannuation plans 817 transactions or events 124–125 voluntary see voluntary reporting Disclosure Initiative (IFRS) 672 discounted cash flow (DCF) method 111 discounted market value 775 discounting, of claims liabilities 835 discount rates 112, 425–426 Discount Rates for Employee Benefit Liability Valuation (Milliman Australia) 425 discrete reporting 707–708 discussion papers 15 on cash flow disclosure 604 The Corporate Report 45, 554, 556 development of 858 DP/2013/1 ‘A Review of the Conceptual Framework for Financial Reporting’ 95 on extractive industries 723 ‘Initial Accounting for Internally Generated Assets’ 329 on insurance 830 ‘Leases – Preliminary Views’ 374 No ‘Accounting for Leases’ 411 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1009 discussion papers continued No 19 ‘Financial Reporting of Life Insurance Activities’ 847 Policy Discussion Paper No ‘Towards International Comparability of Financial Reporting’ 860 ‘Preliminary Views on Financial Statement Presentation’ 533 disposal of assets 229–232 of foreign operations 911 dividends 83 preference shares 481 revenue from 599 divisional data see segment reporting domestic currency 875 donated assets 65, 209–210 double counting 540 double-entry bookkeeping 34 doubtful debts 180–181 Dow Jones Sustainability Index 942 DP series see discussion papers DTA see deferred tax assets DTL see deferred tax liabilities due care 969 Due Process Handbook (IASB) 858 duties 982 E32 ‘Comparability of Financial Statements’ (IASC) 872 earnings cycle 568–569 earnings management 126–127 earnings per share (EPS) 643–651 accounting standards 644–645 basic 645, 646 calculation of 643–650 diluted 646, 646–650 disclosure of 637, 651 tax-effect accounting and 309 earnings, retained 159 earnings yield 651 Earth Sanctuaries Ltd 934–935 Eco Balance 932 economically recoverable reserves 727, 736, 749 economic benefits see future economic benefits economic entities 39 economic life 251, 255 economic performance 936 economic substance, versus legal form 45 ED series see exposure drafts effective interest method 599–600 efficiency motive for accounting policy 133 efficiency ratios 652, 654–655 egoism 980–981 elements of financial statements 35, 57, 95–96 see also specific element elitism 981 Emissions Reduction Fund (ERF) 947 emissions trading scheme (ETS) 948–951 employee benefits 424 overview 422–427 accounting standards 423–427 bonus plans 439–441 compensated absences 429, 429–439 for key management personnel 695–696 long-term 425 non-monetary 428 post-employment see post-employment benefits profit-sharing plans 439–441 see also sharebased payments short-term 424, 425, 428 1010 tax issues 422 termination benefits 441, 442 wages and salaries 427–429 employees and others providing similar services 443 endowment insurance 845 energy use reporting 929, 939–941 enhancement of an asset 81, 327, 732, 779 enhancing qualitative characteristics 47–49, 530 enlightened self-interest 926–927 Enron Corporation 866, 961 entities disclosing 664–665 not-for-profit see not-for-profit sector present obligation to 72–73 reporting see reporting entities environmental performance 929–930, 936, 946–951 ‘Environmental Profit and Loss Account’ (PUMA) 935 Epictetus 980 Epicurus 980 EPRA (European Public Real Estate Association) 964–965 EPS see earnings per share equally proportionately unperformed agreements 73 equipment see property, plant and equipment equitable obligation 72 equity 80 changes in, statement of 163–164 classification of 80, 162–163 components of 158–162 decreases in see losses disclosure requirements 162–165 employee benefits see share-based payments framework definition of 80, 95, 158 increases in see gains versus liabilities 80–81 measurement of 158 in private sector 157–158 in public sector 157 rate of return on 652 residual 80, 158 share capital 159, 159–162 see also share(s) in statement of financial position 157–165 equity instruments 478 see also share(s) as fair value instruments 105–106, 539 versus financial liabilities 480–487 equity-settled share-based payment transactions 442–450 ERF (Emissions Reduction Fund) 947 errors 171 faithful representation and 47 prior-period 687, 687–690 ESMA (European Securities and Markets Authority) 671 estimation 47 changes in see changes in accounting estimates ethical egoism 980–981 ethical elitism 981 ethical parochialism 981 ethical relativism 965 ethical universalism 981–982 ethics overview 961–962 accounting issues 973–974 accounting profession 18–19, 961–962, 967–970 competence in 967–973 decision making 970–972 definition of 962–963 foundational principles 965–967 judgement 963–965 in policy setting 972–973 theories of 979–984 ETS (emissions trading scheme) 948–951 Eumundi Group 227–228 European Public Real Estate Association (EPRA) 964–965 European Securities and Markets Authority (ESMA) 671 European Union Emissions Trading Scheme (EU ETS) 948 international convergence 862–864 evaluation phase see exploration and evaluation events disclosure of 124–125 future, estimates or predictions of 124 insured 827, 833–834 events after the reporting period 672, 673 accounting standards 673–678 adjusting 674 non-adjusting 674, 674–678 types of 673 ex ante policies 135 excess on acquisition 350–351 exchange rates see foreign exchange rate executives see managers executory contracts 63–64 exercise (strike) price 499 exit price 106 expected cost plus margin approach 580 expected realisation 179 expense(s) 83 adding back of 615 classification of 538–539 essential characteristics of 72–73 framework definition of 83, 96, 275 income tax 275 current 278 deferred 278, 279, 292–297 in insurance accounting 831, 834–836 intangible assets 328–329 interest see interest expenses versus losses 83, 85 matching income to see matching measurement of 84 recognition of 84 superannuation plans 819 expense-and-reinstate method 336, 746 in extractive industries 745 research and development 335–336 expense method 335, 745 in extractive industries 745–746, 766 research and development 335–336 expenses, accrued 249 explanatory notes see notes to financial statements explicit contracts 130–131, 134 exploration and evaluation assets 727 accounting standards 254, 726 impairment testing 730–731 exploration and evaluation phase 724 accounting methods 727–729 historical cost-based accounting 745–748 illustrations of 765–770 reserve recognition accounting 748–750, 749, 768–770 choice of accounting policies 138 measurement of costs 729–731 ex post policies 135 exposure drafts 15–16 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e development of 858, 964 ED 59 ‘Financial Instruments’ 487 ED/2015/3 ‘Conceptual Framework for Financial Reporting’ 95–96 ED/2015/8 IFRS Practice Statement: Application of Materiality to Financial Statements 672 on goodwill 351 An Improved Conceptual Framework for Financial Reporting 669 on lease accounting 374, 411 on materiality 668, 672 expulsion from professional bodies 970 external claimants 80 externally managed superannuation plans 798 external revenue test 632 extractive industries overview 723 accounting issue in 725–726 accounting standards 726–744 amortisation/depreciation in 736–743 development and construction phase 724–725 disclosure 743–744 exploration and evaluation see exploration and evaluation phase inventory valuation 731, 736 lease accounting 374 pre-production phase see pre-production phase production phase 724, 725 removal and restoration costs 732–736 revenue recognition 736 stripping costs 731–732 extraordinary items 532, 544–546 face value 75 see also historical cost fair value 100–101 overview 98–100 of biological assets 783–784 debate over 71, 98–100 of financial instruments 156, 488–489 framework definition of 100–106, 223 of goodwill 349 insurance assets 842, 848 of intangible assets 332–334 of investment properties 258–260 of land under roads 212 of leased assets 403, 418–420 measurement of 106–110 disclosure of 110–113 of property, plant and equipment 223 increments and decrements 224–229 recoverable amount 236 related-party transactions and 690–691 versus sales price 418–420 of share-based payments 442, 444 superannuation plans 818 fair value hedges 492–493, 496, 521, 896–902, 909 fair value hierarchy 107–108 faithful representation 46–47, 530 FASB see Financial Accounting Standards Board FBM (Foundation Board of Management) 32 Federal Court of Australia 120, 703 fiduciary relationship 961 FIFO (first-in, first-out) 187, 187–192 finance leases 370 accounting by lessee 411–416 accounting by lessor 396–399 classification of 370–371 dealer 399–400 disclosure 402, 414–416 manufacturer 399–400 sale-and-leaseback agreements 417–418 transition provisions 391, 402 Financial Accountability Act 2009 (Queensland) 4, 22 Financial Accounting Standards Board (FASB) 37 on choice of accounting policies 138 expense method 336 on fair value measurement 99–100 on financial statement presentation 533 on gains and losses 85 international convergence 855, 858–859, 867 on lease accounting 372–373, 964–965 on reserve recognition accounting 750 on revenue recognition 537, 569 on segment reporting 626–627, 629 SFAC series see Statements of Financial Accounting Concepts financial assets 478 amortised cost 156, 488 categories of 487 framework definition of 181–182, 477–478 insurance 836 offsetting of 486–487 recognition and measurement of 487–493, 539 revenue 597 financial capital 944 financial futures 494–496 financial instruments 154 see also specific instrument overview 476–477 classification of 156–157, 479–480, 487–491 compound 480, 482–486 derivative (secondary) 479 disclosure 512–514, 519–526 equity see equity instruments; share(s) framework definition of 154–156, 477–480 hedging using see hedge offsetting 486–487 primary 479 recognition and measurement of 487–493 revenues 569 risk from 513–514, 520–526 simple 480 financial liabilities 478 categories of 487 versus equity instruments 480–487 offsetting of 486–487 recognition and measurement of 487–493 Financial Management Act 1990 (Tasmania) 22 Financial Management Amendment Act 1994 (Victoria) financial performance see performance statement of see statement of profit or loss and other comprehensive income financial position 69–70 statement of see statement of financial position financial reporting choice in see choice of accounting policies concise 48, 663, 708, 708–710 continuous see continuous disclosure cost constraint 49 differential see differential reporting discrete 707–708 entity see reporting entities framework for see conceptual framework general purpose see general purpose financial reporting integrated 930, 944, 944–946 interim 704, 704–708 see also continuous disclosure legal obligations for 3–4, 72 materiality see materiality objective of 41–44, 60, 68–69 qualitative characteristics 44–49, 530 see also specific characteristic by segments see segment reporting triple bottom line 930 voluntary see voluntary reporting Financial Reporting Council (FRC) overview 10–12 on international convergence 37–38, 121–122, 351, 862–863 Financial Reporting Panel (FRP) 19 Financial Reporting Standards Board (NZ) 31, 710 Financial Sector (Collection of Data) Act 2001 (Cth) 804 Financial Services Reform (FSR) Act 2002 (Cth) 804 financial statements see also specific type of statement complete set of 704 condensed 704–705 consolidated see consolidated financial statements elements of 35, 57 see also specific element general purpose see general purpose financial statements highlights 636–643 for life insurance 828–829, 847 notes to see notes to financial statements preparation of see financial reporting segment data in see segment reporting special purpose 39 users of see user groups financial structure of an entity 149 financial summaries see highlights statements financing activities 612 cash flows from 610–612 in contract 576–578 finished goods inventory 183 finite useful life 334, 338 firm commitment 491, 902 First Corporate Law Simplification Act 1995 (Cth) 664 first-in, first-out (FIFO) 187, 187–192 fixed assets 179–180 see also non-current assets fixed-fee service contracts 827, 827–830 fixed-format financial statements 150, 165 fixed manufacturing overhead 214–215 flexible format 150 FOB (free on board) shipping 183 Focus Groups (AASB) 13 forecast transaction 491, 902 foreign currency transactions 879 hedging 492–493, 523, 892–909 foreign currency translation overview 875 accounting standards 875–877 disclosure 909, 911–912 exchange rates 878–879 hyperinflationary economies 909–911 methods of 879–886, 921–922 monetary items 880–883, 910 non-monetary items 883–886, 910 other comprehensive income 539 regulation of 879 reserves 158 unit of measurement 875–877 foreign currency translation reserve 158, 888, 911, 922 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1011 foreign exchange rate 878 changes in 878–879 reserves 158 foreign exchange risk 513, 522 foreign operations 886 disposal of 911 financial statement translation see foreign currency translation hedge of net investment in 492–493, 523 translation of 886–891 forestry industry 776–778 formal contracts 130–131, 134 form method 453–454 Forrest v Australian Securities and Investments Commission 703 Fortescue Metals Group Ltd v Australian Securities and Investments Commission [2012] 703 forward exchange contracts 508, 522–523, 540 forward rate 878 forward rate agreement 493, 879, 892 Foster’s Group Limited 332 foundational ethical principles 965–967 Foundation Board of Management (FBM) 32 Framework for the Preparation and Presentation of Financial Statements (Framework 2014) overview 10, 34–35 contents of 37–38 definitions 35, 58 see also specific definition development of 36–38, 54–55, 120–121 foundations of 38–40 previous version (2010) 529, 668 purpose of 36, 41–44, 57, 120–121 on qualitative characteristics 44–49, 530 on recognition 58 symmetrical recognition rules 778 fraud 690, 802 FRC see Financial Reporting Council free on board (FOB) shipping 183 frequency of reporting 47–48 see also reporting periods; timing Friedman, Milton 981 FRP (Financial Reporting Panel) 19 full capacity 214–215 full cost corporate social responsibility reporting 933, 933–935 full-cost method 745, 746, 747, 767 functional currency 876, 877, 887 function-of-expense method 538–539 funds meaning of 604–606 total resources concept of 606 funds statement see statement of cash flows future economic benefits 61–62 asset valuation 66–67 of heritage assets 211 of intangible assets 326, 329 leases 376, 378–380 liability valuation 74 research and development 336 sacrifice of 73 future events, estimates or predictions of 124, 376 Future Fibre Technologies 607, 610–611 future sacrifice of economic benefits 73 futures contracts 493 accounting for 496 financial futures 494–496 nature of 493–495 versus option contracts 500 futures exchanges 493–496 1012 G4 Guidelines 937 G20 London Summit 490 GAAPs see generally accepted accounting principles gain on bargain purchase 350, 351 gains see also income; revenue actuarial 426, 434–439, 459, 459–463 from currency exchange 878–879 on disposal of assets 229–232 framework definition of 536 holding 188–190 in insurance accounting 836, 846 versus revenues 85 Garnaut Climate Change Review 945–946 gas industry see extractive industries general insurance contracts 830 accounting standards 120, 839–845 disclosure 844–845 investments 830, 836, 838–839 nature of 830–831 underwriting activities 830, 831–837 generally accepted accounting principles (GAAPs) versus Government Finance Statistics 12 international convergence 192, 858–859, 867 lease accounting 372–373 manager behaviour and 127, 135–136, 139 on stripping costs 732 General Manager Professional Conduct (GMPC) 970 general purpose financial reporting conceptual framework for 10, 28 objective of 41–44, 60, 68–69, 275, 530, 555 general purpose financial statements (GPFS) 38 see also specific type of statement entities that must prepare 10, 18 life insurance 847 regulation of from superannuation plans 801–806 tiers of reporting requirements 666–667 timing of publication 48 GFC see global financial crisis GFS (Government Finance Statistics) 12 GLASS (Group of Latin American Accounting Standard Setters) 862 global financial crisis (GFC) ethical issues 961 fair value measurement and 99, 108, 110 financial instruments reclassified during 490 superannuation plans and 454–455 global harmonisation see international convergence Global Reporting Initiative (GRI) database 942 Global Reporting Initiative (GRI) Guidelines 930, 936–938 Global Reporting Initiative (GRI) Sustainability Reporting Standards 937–938 GMPC (General Manager Professional Conduct) 970 GN series (guidance notes) 18, 702–704 going concern basis 43 Golden Rule 966, 983 good/bad perspective 963–965 goods under hire purchase 184 inventory see inventories merchandise in transit 183 revenue from provision of see revenue goods sold cost of 184 revenues from 598 goodwill 348 accounting for 349–350 accounting standards 351–354 cash-generating units and 244–245 gain on bargain purchase 350, 351 impairment testing 240, 349–350, 353–354 versus intangible assets 330, 348, 351 nature and measurement of 348–350, 352–354 as permanent difference 284 recognition of 349–350, 352–353 Governance Review Implementation (AASB and AuASB) Bill 2008 13 government accounting see public sector government bonds 425 government equity see equity Government Finance Statistics (GFS) 12 government grants 788 government legislation see legislation; specific law GPFS see general purpose financial statements grant date 444–450 grants, government 788 greatest happiness principle 981–982 greenhouse gas emissions 929, 939–941, 946–951 GRI (Global Reporting Initiative) database 942 GRI (Global Reporting Initiative) Guidelines 930, 936–938 GRI (Global Reporting Initiative) Sustainability Reporting Standards 937–938 gross approach to carbon trading 948 gross investment in the lease 396 gross method of accumulated depreciation 232–234 Group of 100 harmonisation of standards 121 on sustainability reporting 936 Group of Latin American Accounting Standard Setters (GLASS) 862 guidance notes (GN series) 18, 702–704 half-yearly reports 48, 702 harmonisation of standards see international convergence Harvey Norman Holdings Ltd 197–198 hedge 891 cash flow 492–493, 522–523, 539, 896, 902–909 fair value 492–493, 496, 521, 896–902, 909 foreign operations investments 492–493, 523 hedge accounting 490–493, 491, 894 firm commitment 491, 902 forecast transaction 491, 902 foreign currency transactions 492–493, 523, 892–909 futures contracts 495 option contracts 501–502 swaps 508, 510–511 hedged items 491, 894–895, 899, 902, 905 hedge effectiveness 492 hedge ratio 492, 896 hedgers 495 hedging instruments 491, 539–540, 894, 899, 902, 905 hedging relationship 491 hedonism 980 heritage assets 210, 210–212 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e highest and best use 102, 103, 113 highlights statements 636–643 see also performance indicators advantages and disadvantages of 637 example of 638–643 HIH Insurance 961 hire purchase 184 historical cost 67 of assets 67–68 of biological assets 776–777 compounded 777 equity in 80 in extractive industries 745–748 fair value 151 in foreign currency translation 910–911, 921–922 insurance 836 of liabilities 75–78 of property, plant and equipment 249 Hobbes, Thomas 983 holding gains 188–190 human capital 945 hyperinflationary economies 909–911 IASB see International Accounting Standards Board IASC (International Accounting Standards Committee) 121, 855–857, 871–873 IAS series 13 development of 872–873 IAS ‘Presentation of Financial Statements’ 671 IAS ‘Statement of Cash Flows’ 609 IAS 681 IAS 11 ‘Accounting for Construction Contracts’ 871 IAS 12 ‘Income Taxes’ 285, 871 IAS 17 ‘Leases’ 372 IAS 19 ‘Employee Benefits’ 457 IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ 876 IAS 26 ‘Accounting and Reporting by Retirement Benefit Funds’ 805 IAS 32 ‘Financial Instruments: Disclosure and Presentation’ 477, 894 IAS 36 ‘Impairment of Assets’ 350 IAS 39 ‘Financial Instruments: Recognition and Measurement’ 477, 490, 894 IAS 41 ‘Agriculture’ 780 ICAA see Institute of Chartered Accountants in Australia ICM (Investigating Case Manager) 970 identifiability of assets 326–327 idle capacity 215 IFRIC see International Financial Reporting Interpretations Committee IFRSs see International Financial Reporting Standards IIRC (International Integrated Reporting Council) 944 ILPs (investment-linked insurance policies) 846 impairment cash-generating units 236, 244–246 contract costs 590 extractive industries 730–731 foreign currency transactions 884 goodwill 349–350, 353–354 intangible assets 329, 334–335, 338 leased assets 414 property, plant and equipment 222–223, 234–246 impairment losses 235 recognition of 237–239 reversal of 239–243 implicit contracts 130–131, 134 imputed rate of interest 597 incentives earnings benchmarks 127–130 in lease accounting 370–371 income 81 see also gains; revenue comprehensive other see other comprehensive income statement of see statement of profit or loss and other comprehensive income essential characteristics of 81 framework definition of 81, 96, 537, 567, 596, 778–779 matching expenses to see matching measurement of 82–83 psychological nature of 86 realisation of 568 recognition of 81–82 taxable 274, 287 negative 300–302 income approach to fair value 106 income capitalisation method 111 income-smoothing hypothesis 125–126 income statement see statement of profit or loss and other comprehensive income income tax company see company income tax personal 422 Income Tax Assessment Act 1936 (Cth) 72 Income Tax Assessment Act 1997 (Cth) 274, 746 income tax expense 275 current 278 deferred 278, 279, 292–297 incremental costs 588–589 indefinite life 333–334, 338 indirect method of cash flow presentation 614–615 inflation of claims liabilities 835 hyperinflationary economies 909–911 influence, significant 153–154, 692 informal contracts 130–131, 134 information, for decision making 43–44, 72 information signalling 138–139, 310–311 infrastructure assets 210, 210–212 in-group 981 input methods of revenue recognition 582–583 Inquiry Into the Collapse of Trio Capital (PJC) 801–802 instalment sales 184 Institute of Chartered Accountants in Australia (ICAA) APES 205 ‘Conformity with Accounting Standards’ 10, 18–19, 40, 662–664 attitude toward standards 18, 26, 29–31 code of ethics 968 Joint Standing Committee 32 Institute of Chartered Accountants in England and Wales 45, 864 Institute of Public Accountants (IPA) 10, 18, 662, 968 insurable interest 826 insurable risk 826 Insurance Act 1973 (Cth) 838 insurance contracts 826 overview 826–827 fixed-fee service 827, 827–830 general see general insurance contracts life 826, 845–849 revenue 569, 596 in superannuation plans 808–809, 818 types of 826 insurance policy 826 insurance risk 827 insured events 827, 833–834 intangible assets 151 overview 326–327 accounting standards 330–348 amortisation of 338 brand names 345–347 computer software 347–348 depreciation of 330 in extractive industries 729 framework definition of 326, 331, 348 versus goodwill 330, 348, 351 impairment testing 329, 334–335, 338 measurement of 329–332 patents 344–345 purchased versus generated internally 327, 331–332, 337, 352–353 recognition of 328–332 research and development 335–344 trademarks 345–347 useful life of 333–334, 338, 345 website costs 347–348 integrated reporting 930, 944, 944–946 Integrated Reporting Committee (IRC) of South Africa 944–945 integrity 961, 969 intellectual capital 945 intellectual property 344–348, 375 see also specific type of property intellectual virtues 967 interbank cash-rate contract 494 interest insurable 826 revenue from 577–578, 599–600 interest expenses borrowing costs 215–221, 216 current 78–79 historical 76 in lease accounting 388 interest rate risk 513, 520 interest rates implicit in lease 383 imputed 597 interest rate swaps 504, 504–506, 509–510, 521 Interface Europe 934 interim financial report 704, 704–708 see also continuous disclosure internal claimants 80 internally generated assets 151–152, 331–332, 337, 352–353 internal-yield method 76–78 International Accounting Standards Board (IASB) 12, 855–859 accounting standards see international financial reporting standards advisory groups 857, 858 on carbon accounting 948 conceptual framework see Conceptual Framework for Financial Reporting 2010 discussion papers 858 ‘A Review of the Conceptual Framework for Financial Reporting’ 95 ‘Leases – Preliminary Views’ 374 ‘Preliminary Views on Financial Statement Presentation’ 533 Discussion Papers, on extractive industries 723 DP/2013/1 ‘A Review of the Conceptual Framework for Financial Reporting’ 95 Due Process Handbook 858 ED/2015/3 ‘Conceptual Framework for Financial Reporting’ 95–96 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1013 International Accounting Standards Board (IASB) continued exposure drafts Application of Materiality to Financial Statements 672 An Improved Conceptual Framework for Financial Reporting 669 ‘Leases’ 374 on extractive industries 723, 726 on fair value measurement 99–100, 110 harmonisation period 121–122, 858–859 see also international convergence IAS series see IAS series Interpretations 17 see also Interpretations on lease accounting 371–372 on materiality 668–671 principles-based approach 865–867 on revenue recognition 569 on segment reporting 629 on share-based payments 443 structure of 856–857 International Accounting Standards Committee (IASC) 121, 855–857, 871–873 International Congress of Accountants 855 international convergence Australia 11–13, 17, 38, 121, 710, 860–863, 865 benefits of 863–864 costs of 864–865 definition of 861 European Union 862–864 history of 871–873 international 121, 861–862 objectives of 861–862 period of 121–122 principles-based approach 865–867 United States 192, 855, 858–859, 862, 867 International Federation of Accountants, Public Sector Committee 861 International Financial Reporting Interpretations Committee (IFRIC) IFRIC 10 ‘Interim Reporting and Impairment’ 707–708 Interpretation ‘Emission Rights’ 948–951 Interpretation 20 ‘Stripping Costs in the Production Phase of a Surface Mine’ 723, 731–732 role of 14, 17, 857–858 International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) 665–666 International Financial Reporting Standards (IFRSs) Australian adoption of 11–17, 37–38, 862–863 compliance with 17, 165 development of 855, 858–859 Disclosure Initiative 672 fair value measurement and 99 IFRS ‘Exploration for and Evaluation of Mineral Resources’ 723, 726 IFRS ‘Financial Instruments: Disclosures’ 477 IFRS ‘Financial Instruments’ 477, 490 IFRS 13 ‘Fair Value Measurement’ 100 IFRS 15 ‘Revenue from Contracts with Customers’ 372, 537, 569 IFRS 16 ‘Leases’ 372–374, 376, 389 IFRS for Small and Medium-sized Entities 665–666 Interpretations 17 inventory valuation 192 on materiality 668–671 versus non-IFRS information 546–554 1014 regulatory guidance on non-IFRS information 546–547 US convergence with 192, 855, 858–859, 862 International Financial Reporting Standards (IFRS) Advisory Council 857, 858 International Financial Reporting Standards (IFRS) Foundation 856–857 International IR Framework (IIRC) 944 International Integrated Reporting Council (IIRC) 944 internationalisation 860–861 International Organization of Securities Commissions (IOSCO) 872 International Public Sector Accounting Standards Board (IPSASB) 14, 861 International Standard on Assurance Engagements 3000 (ISAE 3000) 942 International Standard on Assurance Engagements 3410 (ISAE 3410) 942 Internet, financial reporting via 708 inter-period allocations 48, 124 Interpretation Advisory Panels (AASB) 13–14, 16 Interpretations 15 development of 16–17, 857 enforcement of 18–22 AASB 1015 ‘Acquisition of Assets’ 19 AASB 1048 ‘Interpretation of Standards’ 17 Accounting Interpretation ‘Amortisation of Identifiable Intangible Assets’ 330 FASB Interpretation No 48 (FIN 48) 138 Interpretation ‘Changes in Existing Decommissioning, Restoration and Similar Liabilities’ 733–734 Interpretation ‘Members’ Shares in Co-operative Entities and Similar Instruments’ 16 Interpretation ‘Emissions Rights’ 948–951 Interpretation 10 ‘Interim Financial Reporting and Impairment’ 707–708 Interpretation 12 ‘Service Concessions Arrangements’ 374 Interpretation 13 ‘Customer Loyalty Programmes’ 569 Interpretation 15 ‘Agreements for the Construction of Real Estate’ 569 Interpretation 18 ‘Transfers of Assets from Customers’ 569 Interpretation 20 ‘Stripping Costs in the Production Phase of a Surface Mine’ 723, 731–732 Interpretation 131 ‘Revenue – Barter Transactions Involving Advertising Services’ 569 Interpretation 132 ‘Intangible Assets – Web Site Costs’ 347 interval scales 59 intrinsic value 806 inventories 182 accounting for 184–185 classification of 182–183 holding gains on 188–190 items included in 183–184 measurement of see inventory valuation revenue 570 inventory valuation absorption costing 187 biological assets 184, 772, 774 cost components 185–187 cost-flow assumptions 187–192 direct costing 187 disclosure 196–198 extractive industries 731, 736 first-in, first-out (FIFO) 187, 187–192 foreign currency transactions 884 last-in, first-out (LIFO) 187–192, 188 lower of cost and net realisable value rule 192, 192–194 not-for-profit entities 184, 196 periodic inventory method 83, 184 perpetual inventory method 83, 184, 185 specific identification method 190 taxation and 191–192 investees 152 control of 153–154, 692 investor relationships with 152–157 Investigating Case Manager (ICM) 970 investing activities 612 cash flows from 610–612 investment(s) 610 in associates 155 in foreign operations, hedge of 492–493, 523 insurance 830, 836, 838–839 in leases 396 non-current assets 204 in shares of other companies see share(s) investment-linked insurance policies (ILPs) 846 investment properties 257 accounting standards 257–260 framework definition of 256 investment risk 454 investor 152 see also owner; shareholder investee relationships with 152–157 invitation to comment 15, 858 invoice amount 180 inwards reinsurance 836 IOSCO (International Organization of Securities Commissions) 872 IPA (Institute of Public Accountants) 10, 18, 662, 968 IPSASB (International Public Sector Accounting Standards Board) 14, 861 IRC (Integrated Reporting Committee) of South Africa 944–945 ISAE 3000 (International Standard on Assurance Engagements 3000) 942 ISAE 3410 (International Standard on Assurance Engagements 3410) 942 issued capital 159–162 see also share(s) Johannesburg Stock Exchange 944 joint arrangements 155 joint control 153–154, 692 Joint Standing Committee (CPAA-ICAA) 32 Judeo–Christian ethics 982 judgement 47 see also choice of accounting policies in accounting policy choice 122 in creative accounting 122–125, 678–679 in differential reporting 663 ethical 963–965 in goodwill amortisation 350 in useful life determination 333–334 justice 966 Kant, Immanuel 982–983 Kering Group 935 key management personnel 692 see also managers compensation received by 695–696 King Code of Governance for South Africa 944 KPMG 546–548 Kyoto Protocol 946–947 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e land see also property, plant and equipment biological assets attached to 776, 780, 783 insurance 839 leases of 416 under roads 212–214 Landcare Research New Zealand 934 large proprietary companies 665 last-in, first-out (LIFO) 187–192, 188 lease(s) 375 overview 369–370 accounting for by lessee 382–393, 411–416 by lessor 393–402 new approach to 371–382 problem created by 370–371 accounting standards 374–382 classification of 370–371, 393–396, 412 contract components 380–381 control and 63, 378–380 disclosure 388–389, 392–393, 401–402, 414–416 in extractive industries 724, 729, 732, 748 finance (capital) see finance leases hire purchase 184 identification of 375–380 interest rates implicit in 383 operating see operating leases revenue recognition 378, 393, 403, 569, 570, 596 sale-and-leaseback agreements 402, 402–405, 417–420 short-term 389–390 lease capitalisation 370, 414–416 lease liability 383–387 lease receivable 396 lease term 381, 382, 387 leave annual 429, 430 long-service 433, 433–439 sick 431–433 legal form, versus economic substance 45 legal obligations 3–4, 72 legislation see also specific law overview 3–4 compliance 4–10, 17, 19, 22, 40, 120 environmental 929, 947–948 versus ethics 963–965 superannuation plans 804 Legislation Review Board (LRB) 32 Legislative Instruments Act 2003 (Cth) 19 legislative solvency requirement 838 legitimacy gaps 928, 929 lessee 375 see also lease(s) accounting by 382–393, 411–416 lessor 375 see also lease(s) accounting by 393–402 level 1–3 inputs 107 Leviathan (Hobbes) 983 liabilities 72 carbon emissions as 949 classification of 152, 166–167 contingent 74 contract 591 current 166 current tax 275 deferred tax see deferred tax liabilities employee benefits see employee benefits versus equity 80–81 essential characteristics of 83–84 fair value of see fair value financial see financial liabilities framework definition of 72–73, 95, 285 heritage assets as 211 insurance adequacy test 829, 843–844, 848 claims 833–835, 840–841 lease 383–387 measurement of 74–80 non-current 166 post-employment benefits as 457, 459 recognition of 73–74 superannuation plans 807–808 tax base of 278, 289–292 liability adequacy test 829, 843–844, 848 liability claims 833 liability revaluation surplus 539 licensing arrangements 375 life insurance 826, 845–849 Life Insurance Act 1995 (Cth) 845 LIFO (last-in, first-out) 187–192, 188 liquidity of assets 151–152 insurance 838 working capital and 605 liquidity ratios 651–652 liquidity risk 513, 523–525 Listing Rules see Australian Securities Exchange Ltd (ASX) Listing Rules loans see debt longevity of assets 151–152 of liabilities 152 long-service leave 433, 433–439 long-tail business 830, 835 long-term consumables 772, 774 long-term employee benefits 425 losses actuarial 426, 434–439, 459, 459–463 from currency exchange 878–879 on disposal of assets 229–232 versus expenses 83, 85 financial instruments 488–489 impairment see impairment losses on purchase commitments 195–196 statement of see statement of profit or loss and other comprehensive income unused tax 300–302 lower of cost and net realisable value rule 192, 192–194 of biological assets 778 foreign currency transactions 884 low-value underlying assets 389–390 LRB (Legislation Review Board) 32 Mackay, Rob 669 maintenance cost approaches 934 maintenance expenditure 250 management approach to segment reporting 629 managers bonus plans 439–441 choice of accounting methods see choice of accounting policies highlights statements and 637 incentives 127–130 key management personnel 692 compensation received by 695–696 motivations for social responsibility 927–928 opportunistic behaviour by 132–139, 569 owners’ relationship with 131–133 remuneration 139, 445, 695–699 stewardship of see accountability mandated changes in accounting policy 680 manufactured capital 944 manufacturer leases 399–400 manufacturing inventory 182 manufacturing overhead 185–187, 214–215 margin call 494 market approach to fair value 106 market participants 104 see also user groups market risk 513, 520–523 market value see fair value; realisable value market volume/activity, fair value measurement and 108–109 marking-to-market 494 mark-to-market accounting 98, 156, 495–496 Martin Group 476 matching 83 inventory valuation 184 revenue recognition 598 in statement of comprehensive income 529–530 materiality 46 accounting standards 668–672 in depreciation accounting 254 framework definition of 536, 667–671 override 170, 667–668 maturity of biological assets 789 short period to 610 measurement 35, 58–61 of assets 65–72 see also specific type of asset intangible 329–333 of equity 158 of expenses 84 of fair value 106–110 of financial instruments 487–493 foreign currency translation 875–877 of income 82–83 inventory see inventory valuation of leases 383–387, 397–399, 413–416 of liabilities 74–80 see also specific type of liability process of 59–61 quality of 60 of recoverable amounts 236 revaluation see revaluation of revenue 580–584, 597–600 superannuation plans 818 types of 58–59 merchandise in transit 183 merchandise inventory 182 Mill, John Stuart 981–982 mining industry see extractive industries Ministerial Council for Companies and Securities 28–29 miscellaneous inventory 183 Miscellaneous Professional Statements (APS series) 18, 29 mixed measurement model 71–72 monetary assets 151 monetary items 879, 879–883, 910 monetary liabilities 152 money scale 60 money, time value of 76–78, 236, 586, 733, 848 Monitoring Board (IASB) 856 monitoring of managers 132, 134 moral virtues 967 most advantageous market 104–105 multi-employer plans 463, 463–465 multiple measures of assets 71–72 mutual life insurers 845 Namoi Cotton Co-operative Ltd 876, 893 National Companies and Securities Commission (NCSC) 29–30 see also Australian Securities and Investments Commission National Greenhouse and Energy Reporting Act 2007 (NGER Act) 929, 947–948 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1015 National Greenhouse and Energy Reporting System (NGERS) 947–948 natural assets 934–935 see also biological assets natural capital 945 natural gas see extractive industries nature-of-expense method 538 NCSC (National Companies and Securities Commission) 29–30 see also Australian Securities and Investments Commission negative taxable income 300–302 neoclassical economic theory 130 net approach to carbon trading 948 net assets 80 see also equity net interest cost 458–459 net investment in the lease 396 net market rent 111–112 net method of accumulated depreciation 232–234 net-present-value method 777–778 net realisable value application of 192–194 of biological assets 775–776, 778–779 defining and measuring 194–195 in foreign currency transactions 884 net-revenue-contributions approaches 252–253 net-worth method 453–454 neutral depiction 46–47 New South Wales Corporate Affairs Commission 29 New South Wales Treasury 210 New Zealand Chartered Accountants Australia and New Zealand 10, 26, 40, 662 currency translation see foreign currency translation Financial Reporting Standards Board 31, 710 Landcare Research New Zealand 934 Single Economic Market Initiative 862 Trans-Tasman convergence project 710, 862 New Zealand Accounting Standards Board 13, 15 New Zealand Institute of Chartered Accountants 710 NFP sector see not-for-profit sector NGERS (National Greenhouse and Energy Reporting System) 947–948 nominal basis measurement of employee benefits 424–425 nominal scales 59 non-accumulating sick leave 431 non-adjusting events after the reporting period 674, 674–678 non-contributory superannuation plans 798 non-current assets 166 biological assets as 779 classification of 204–205, 326 depreciation of 247–249 extractive industries 732 framework definition of 179–180, 204 held for sale 246–247, 254 intangible 326 property, plant and equipment see property, plant and equipment revaluation of see revaluation on statement of financial position 152, 166 tangible 326 useful life of see useful life non-current liabilities 166 non-monetary items 883 assets 151, 326 1016 in contracts 578 employee benefits 428 in extractive industries 743–744 fair value of 102–103 foreign currency transactions 880, 883–886, 910 liabilities 152 revenues 569 non-performance risk 106 non-redeemable preference shares 481 non-vesting sick leave entitlements 432 normative ethical theories 979, 979–984 Norwalk Agreement (2002) 858 notes to financial statements see also disclosure additional disclosure requirements 710 cash flows 604, 614 in concise financial reports 708–710 on exploration and evaluation assets 730 in interim reports 705–706 leases 388 in statement of financial position 167 Not-for-Profit Focus Group (AASB) 13 not-for-profit (NFP) sector conceptual framework for 34 decisions useful in 42 donated assets 209–210 framework application 62 government see public sector inventory valuation 184, 196 not ordinarily interchangeable 190 Novo Nordisk 944 NRMA Insurance Ltd 120 objectives of financial reporting 41–44, 60, 68–69 objectivity 969 obligations to another entity 72–73 futures contracts 500 of insurers 833–834 legal 3–4, 72 performance 573, 573–575, 579–583 possible 352 present 352 observable inputs 106, 107 obsolescence 248, 333 OCI see other comprehensive income off-balance-sheet items financial instruments 477 leases see operating leases Office of Regulation Review 16 offsetting of cash flows 613–614 deferred tax assets/liabilities 302 financial instruments 486–487 oil industry see extractive industries Omnibus series (AASB standards) 12 on-balance-sheet leases see finance leases on-costs of employees 424 One Person Tribunal (OPT) 970 operating activities 610 cash flows from 604, 610–612, 614–615 operating assets, of insurers 836 operating cycle 166, 179, 774 operating leases 370 accounting by lessor 400–401 classification of 370–371 disclosure 402 sale-and-leaseback agreements 418–420 transition provisions 390, 402 operating-profit approach 530, 531, 544 operating segment 630 see also segment reporting opportunistic behaviour 132–138, 569 OPT (One Person Tribunal) 970 option(s) 499 call 499, 586 put 499, 586–587 option contracts accounting for 500–503, 539 versus futures contracts 500 for hedging purposes 501–502 nature of 499–500 for trading purposes 502–503 option price 499 order-of-liquidity presentation format 165, 167, 169 ordinal scales 59 ordinarily interchangeable 190 ordinary activities 537, 566 see also operating activities ordinary shares dilutive potential 647 earnings per see earnings per share other comprehensive income (OCI) 539 components of 539–540 financial instruments 489 framework definition of 539 political influences 99–100 other price risk 513 other-services approaches 253 output method of revenue recognition 582 outwards reinsurance 837 overheads 185–187, 214–215 owner(s) see also shareholder changes in equity 162 contributions by 81 investor–investee relationships 152–157 managers’ relationship with 131–133 owner-occupied property 257 owners’ equity see equity ownership see also control control defined by 63, 183 investor–investee relationships 152–157 in lease accounting 412 rights to equity 158 paid-up capital 159–162 see also share(s) Parliamentary Joint Committee on Corporations and Financial Services (PJC) 708–709, 801–802 parochialism 981 partners’ capital see equity parts inventory 182 par value 159 past events assets resulting from 63–64 liabilities resulting from 73 unusual items 544–546 past-service cost 438, 439, 453, 458 patents 344–345 PCO (Professional Conduct Officer) 970 pension plans see post-employment benefits; superannuation plans performance economic 936 environmental 929–930, 936, 946–951 information about 43 social 936 performance conditions 445–448 performance indicators 636–655 ASX Listing Rules 637 earnings per share see earnings per share financial ratios 651–655 performance obligations 573, 573–575, 579–583 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e performance statement see statement of profit or loss and other comprehensive income periodic disclosure periodic inventory method 83, 184 permanent differences 284 perpetual inventory method 83, 184, 185 Perpetual Limited 160 personal income tax 422 physical deterioration, depreciation as 248 physical (periodic) inventory method 83, 184 PJC (Parliamentary Joint Committee on Corporations and Financial Services) 708–709, 801–802 plant see property, plant and equipment plant bearers 772–773, 776–778, 781 see also biological assets point of sale, revenue recognition at 82, 288, 736, 785 Policy Discussion Paper No ‘Towards International Comparability of Financial Reporting’ 860 policy setting, ethical 972–973 Policy Statements PS4 ‘International Convergence and Harmonisation Policy’ 861–863 PS6 ‘International Harmonisation Policy’ 860–861 political influences on accounting standards 99–100, 119–120 on choice of accounting methods 136–137, 139 portable benefits 798 possession, control defined by 63 possible obligations 352 post-employment benefits 452 see also superannuation plans accounting for 454–465 background 452–454 defined benefit see defined benefit plans defined contribution see defined contribution plans disclosure 459–463 multi-employer plans 463, 463–465 potential ordinary shares 647 power see also control in lease accounting 378 preconditional period for long-service leave 433 predictive role of financial information 45–46 preference shares 481 convertible 482–483 premium(s) 826–827, 831–833 premium deficiency 833 premium revenue 839–840 prepayments 205, 249 pre-production phase 724, 725 accounting methods 745–750 amortisation 736 historical cost-based accounting 745–748 illustrations of 765–770 reserve recognition accounting 748–750, 749, 768–770 presentation currency 876, 877, 887 present obligation 72–73, 352 present value 71 of employee benefits 425 tables 985–988 price(s) biological assets 779 exercise (strike) 499 exit 106 fair value measurement and 105 fall in, depreciation as 248 option 499 share, choice of accounting policy and 127–130, 137–138 stand-alone selling 380, 572, 579–580 transaction 575, 575–580 price–earnings ratio 651 price per square metre 112 PricewaterhouseCoopers (PwC) 942–944, 964–965 primary financial instruments 479 principal–agent relationships 131–133 principal market 104, 105 principles-based approach 865–867 prior-period errors 687, 687–690 probability criterion asset recognition 64–65 expense recognition 84 income recognition 82, 779 liability recognition 74 production phase 724, 725 product obsolescence 248 professional behaviour 18–19, 969 professional competence 967–973 Professional Conduct Officer (PCO) 970 profit 85 financial instruments 488–489 framework definition of 85–86 insurance 838 measurement of 529–533 non-statutory 546–554 versus taxable income 275 underlying 548–554 profit and loss statement see statement of profit or loss and other comprehensive income profit-sharing plans 439–441 see also sharebased payments profit smoothing 531, 545 Project Advisory Panels (AASB) 13–14, 857 Projected Unit Credit Method 434, 457, 818 project proposals 14–15 pronouncement, issuance of 16 property claims 833 property, plant and equipment 205 see also buildings; land borrowing costs 215–221 depreciation of 247–256 accounting standards 254–256 cost allocation 249–253 disclosures 255–256 fall in price 248 fall in value 248 implementation problems 249–254 physical deterioration 248 summary of 249 investment 257–260 lease of 416 see also lease(s) recognition of 205–221 acquired by exchange 208–209 donated assets 209–210 heritage assets 210–212 impairment loss 222–223 infrastructure 210–212 land under roads 212–214 self-constructed assets 214–221 revaluation of 158, 221–247 accumulated depreciation 232–234, 239, 251 assets held for sale 246–247, 254 cost model 234 disposal of assets 229–232 impairment of assets 222–223, 234–246 increments and decrements 224–229 revaluation model 223–234, 540 tax treatment of 297–300 proprietorship see equity prospective application 680, 680–683 provision 152 prudence 967 Prudential Standard GPS 110 ‘Capital Adequacy’ 838 Prudential Standard SPS 160 ‘Defined Benefit Matters’ 804 Prudential Standard SPS 310 ‘Audit and Related Matters’ 804 PSASB (Public Sector Accounting Standards Board) 12, 28, 32 PSC (Public Sector Committee) of the International Federation of Accountants 861 psychological nature of income 86 public accountability 666, 667 public comment 15, 118–119 public companies 665 see also companies public equity see equity Public Finance and Audit Act 1987 (SA) public interest 969 public sector accounting in heritage assets 210–212 infrastructure assets 210–212 land under roads 212–214 sector neutrality 39–40, 62 financial reporting obligations 4, 22, 62 government departments 22 Public Sector Accounting Standards Board (PSASB) 12, 28, 32 Public Sector Committee (PSC) of the International Federation of Accountants 861 PUMA Corporation 935 purchase commitments, anticipated loss on 195–196 purpose-led measurement 487 put option 499, 586–587 Qantas Airways Ltd defined benefit plan 455 discount rates 426 events after reporting period 676 financial overview 548–554 long-service leave 435 related-party transactions 695–698 Qantas Group Limited 305–306 QBE Insurance Group 120 qualifying assets 216 qualifying hedged items 491, 894–895 qualifying hedging instruments 894 qualitative characteristics 44–49, 530 see also specific characteristic quantitative corporate social responsibility reporting 932 quantitative threshold tests 632 quarterly reporting 699 Queensland 4, 22 RACQ 828–829 rate of return on equity 652 rate of return on total assets 652, 654–655 rationalism 982–983 ratio scales 59 Rawls, John 984 raw materials inventory 182 RDR (Reduced Disclosure Requirements) 40, 666–667 realisable (market) value see also fair value of assets 69–71 biological 775–776, 778–779 of liabilities 79–80 net see net realisable value SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1017 realisation 82 expected 179 income 568 probable 779 receivables 590–591 see also accounts receivable reclassification on disposal of foreign operations 911 other comprehensive income 540 recognition 35, 58, 96 of assets 64–65, 204 see also specific type of asset goodwill 349–350 intangible 328–332 of deferred tax assets/liabilities 292–297 versus definition 58 derecognition 229 of expenses 84 in extractive industries 736 of financial instruments 487–493 of impairment losses 237–239 of income 81–82 of leases 396–397, 412–413 of liabilities 73–74 see also specific type of liability research and development 335–337 of revenue 566–569, 580–584, 597–600 superannuation plans 818 symmetrical rules for 778 reconciliations, in agricultural activity accounting 789–790 recoverable amount 236 redeemable preference shares 481 Reduced Disclosure Requirements (RDR) 40, 666–667 registered schemes 665 regulation government see legislation; specific law sources of of superannuation plans 803 Regulation Impact Statement (RIS) 16, 49 Regulatory Guide 85 ‘Reporting Requirements for Non-Reporting Entities’ (ASIC) 39 Regulatory Guide 230 ‘Disclosing Non-IFRS Financial Information’ (ASIC) 546–547 reinsurance 836, 837 related parties 690 identification of 691–694 nature of relationship 694–695 related-party transactions 690 accounting standards 691–698 Corporations Act on 698–699 disclosure of 162, 694–698 uses of 690–691 relationship capital 945 relevance 45–46, 530 of asset valuation 68–69, 70 of fair value measurement 98–99 framework definition of 669 reliability of asset valuation 65, 68–69 of continuous disclosure 700 of expense recognition 84 of fair value measurement 98 of income recognition 82 of liability valuation 74 of segment reporting 627–628 religious ethics 982 removal costs 732–736 remuneration employee see employee benefits management 139, 445, 695–699 renewal of insurance 832 rental revenues 256–257 1018 repairs and maintenance expenditure 250 replacement cost see current cost replication 60 reporting entities 38 framework definition of 39–40, 663 present obligation 72–73 reporting periods depreciation costs allocated to 251–253 events after see events after the reporting period in insurance business 828–835 interim 704, 704–708 see also continuous disclosure Report of the Committee of Inquiry into the Australian Financial System (Campbell Report) 29–30, 476 repurchase agreements 586–587 research and development 335 disclosures 338–341 in extractive industries see exploration and evaluation measurement of 337–338 recognition of 335–337 reserve(s) 158 cash flow hedge 902 economically recoverable 727, 736, 749 foreign currency translation 888, 911, 922 reserve base 736 reserve recognition accounting 748–750, 749, 768–770 residual approach 580 residual equity holders 80, 158 residual (scrap) value 250, 394 unguaranteed 394 residual value guarantee 394 resources controlled by an entity 149 see also asset(s) respect for persons 966 restoration costs 732–736 restricted egoism 981 retail inventory method 191 retained earnings 159 retirement see superannuation plans retrocession 830 retrospective application 680, 680–683 retrospective application of accounting policy 389–393 return, right of 585–586 revaluation 221 of biological assets 778 cost model see cost model of property, plant and equipment see property, plant and equipment tax treatment of 297–300 revaluation model 223–234 in extractive industries 730 impairment losses 237–239, 242–243 intangible assets 329, 332–333 other comprehensive income 540 tax treatment 297–300 revaluation surplus 539 revenue 537, 566 see also gains; income accounting for 570–588 buy-and-hold arrangements 587–588 consignment 587–588 contract 570, 571–573 see also contract(s) contract costs 588–590 performance obligations 573, 573–575, 579–583 recognition of 566–569, 580–584, 597–600, 736 repurchase agreements 586–587 sales with right of return 585–586 transaction price 575, 575–580 accounting standards 569–570 categories of 596, 598–599 disclosure 537, 591, 600–601 in extractive industries 736 framework definition of 537, 596 versus gains 85 premium 839–840 presentation 590–591, 601 received in advance 291–292 in statement of comprehensive income 536–538 reversal of impairment losses 239–243 Ricoh Group 932 right-of-use assets 383–388, 403 rights 982 right/wrong perspective 963–965 Rio Tinto 938–941 RIS (Regulation Impact Statement) 16, 49 risk actuarial 454 credit 508–509, 513, 525–526, 895 currency 513, 522, 892–909 in extractive industries 723, 725, 743 from financial instruments 513–514, 520–526 foreign currency translation 878–879 hedging see hedge insurable 826 insurance 827 interest rate 513, 520 investment 454 liquidity 513, 523–525 market 513, 520–523 non-performance 106 other price 513 revenue recognition 569 roads, land under 212–214 roadworks 212 royalties, revenue from 599–600 rules-based standards 865–867, 963–965 SACs see Statements of Accounting Concepts salaries 139, 427–429 sale-and-leaseback agreements 402, 402–405, 417–420 sale of goods revenue from 598 with right of return 585–586 sales commissions 588–589 sales price, versus fair value 418–420 Sanford Ltd 945–946 Santos Ltd 511 Schedule (Corporations Regulations) 150 Schnurr, James 859 scrap (residual) value 250, 394 unguaranteed 394 seasonal patterns 699 SEC see Securities and Exchange Commission secondary (derivative) financial instruments 479 sector neutrality 39–40, 62 securities see also financial instruments as equity or liabilities 81 Securities and Exchange Commission (US) Accounting Series Release No 253 750 on capitalisation of exploration costs 138 on fair value measurement 99 Financial Reporting Release (FRR) No ‘Supplemental Disclosures of Oil and Gas Producing Activities’ 750 international convergence 855, 859, 867 on lease accounting 372 on reserve recognition accounting 749–750 on segment reporting 626 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e segment 630 segment reporting 625–636 accounting standards 629–636 case against 627–629 case for 626–627 Select Harvests Ltd 781 selective capitalisation method 335–337, 336 self-constructed assets 214–221 self-interest assumption of 130, 135–136, 139 enlightened 926–927 pursuit of 981 self-managed superannuation plans 798 selling costs 572–573 selling price see realisable value separability of assets 326–327 service concession arrangements 374 service conditions 445–446 service cost 438–440, 453, 458 service(s), revenue from 599 service standard 17 set-offs see offsetting settlement costs, anticipated 834 SFAC series see Statements of Financial Accounting Concepts share(s) bonus issues of 646 choice of accounting policy and 127–130, 137–138 earnings per see earnings per share issue of 159–160 ordinary, dilutive potential 647 preference 481 convertible 482–483 on statement of financial position 152–157 share-based payments 442–452 accounting standards 423–424, 427, 439, 442 with cash alternatives 450–451 cash-settled 442, 450 disclosures 451–452 equity-settled 442–450 modification of terms and conditions 448–450 recognition and measurement 444–445 vesting conditions 444, 444–448 share-based payment transaction 427 share buyback scheme 160, 160–162 share capital 159, 159–162 shareholder(s) see also owner choice of accounting method and 125–126 information needs of 38–39, 42, 44 investor-investee relationships 152–157 managers’ relationship with 133–134 shareholder-owned life insurers 845 shareholders’ equity see equity Share Price Index contracts 494–498 share splits 646 Sharp, Michael 121 shipped free on board (FOB) 183 short period to maturity 610 short-tail business 830 short-term consumables 772, 774 short-term employee benefits 424, 425, 428 short-term leases 389 sick leave 431–433 Sigma Pharmaceuticals Ltd 567 signalling 138–139, 310–311 significant influence 153–154, 692 simple financial instruments 480 Single Economic Market Initiative (Aus-NZ) 862 single-statement approach 533 small and medium-sized entities (SMEs) 665–666 small proprietary companies 665 SMEs (small and medium-sized entities) 665–666 Smith, Adam 981 social capital 945 social contract 928, 983–984 social performance 936 social responsibility see corporate social responsibility socioeconomic operating statement 933 solvency 70, 149, 838 solvency ratios 651–654, 849 source of assets 151–152 South Africa 944–945 South Australia Southcorp Ltd 332 S&P/ASX 200 Share Price Index 494–498 S&P/ASX 300 Index special purpose financial statements 39 specific identification method 190 speculators 495 see also hedge accounting SPI 200 contracts 494–498 spot rate 878 SSAP13 ‘Accounting for Research and Development’ 336 stage-of-completion method 599 stakeholders 927, 928 see also user groups stand-alone selling price 380, 572, 579–580 standard cost 191 Standard & Poor's (S&P) All Ordinaries Index standards see accounting standards; specific standard standard value 775 stand method 777 state and territory governments see also specific state or territory financial reporting by see public sector legislation A Statement of Basic Accounting Theory (AAA) 44 statement of cash flows 604 see also cash flow accounting standards 609–615 advantages of 606–609 development of 603–604 empirical evidence on 608–609 format of 612–613 funds, meaning of 604–606 leases on 388 statement of changes in equity 163–164 statement of financial performance see statement of profit or loss and other comprehensive income statement of financial position 149 attributes of 149 elements of 57 presentation of 151–157 equity on 157–165 errors in 171 financial instruments on 486–487 format of 150, 165–169 general presentation requirements 165–171 insurance 844 leases on 371, 388 notes 167 revenue recognition 567–569 tax allocation in 277–285 statement of profit or loss and other comprehensive income 529 elements of 57 financial instruments on 489 form and content of 533–536 insurance 844 leases on 371, 388 profit measurement 529–533 non-statutory 546–554 revenue recognition 567–569 versus statement of value added 555 unusual items 544–546 statement of value added 554–556 Statements of Accounting Concepts (SACs) 32 SAC1 ‘Definition of the Reporting Entity’ 37–40, 663–664 SAC2 ‘Objective of General Purpose Financial Reporting’ 41 SAC3 ‘Qualitative Characteristics of Financial Information’ 37, 45 SAC4 ‘Definition and Recognition of the Elements of Financial Statements’ 37, 326–327, 336 Statements of Financial Accounting Concepts (FASB) 37 SFAC1 ‘Objectives of Financial Reporting by Business Enterprises’ 45 SFAC2 ‘Qualitative Characteristics of Accounting Information’ 45 SFAS 69 ‘Disclosures about Oil and Gas Producing Activities’ 750 SFAS 87 ‘Employers’ Accounting for Pensions’ 454 SFAS 106 ‘Employers’ Accounting for Post-Retirement Benefits Other than Pensions’ 454 SFAS 109 ‘Accounting for Income Taxes’ 285 SFAS 130 ‘Reporting Comprehensive Income’ 532 SFAS 142 ‘Goodwill and Other Intangible Assets’ 350 stewardship (accountability) 41, 68, 70 public 666, 667 stock see inventories stock exchange see Australian Securities Exchange Ltd straight-line method 738 strike (exercise) price 499 stripping costs 731–732 Stronger Super body of legislation 804 subsequent events see events after the reporting period subsidiaries, foreign 876–877 substance over form principle 393 substantially reduced disclosure requirements 666–667 substitution rights 376–377 successful-efforts method 745, 747, 748, 766–767 ‘Summary of Financial Transactions for the Year’ 603 sunk costs 211 Superannuation Industry (Supervision) (SIS) Act 1993 (Cth) 802, 804, 805 Superannuation Legislation Amendment (Further My Super and Transparency Measures) Act 2012 (Cth) 804 Superannuation Legislation Amendment Act (My Super Core Provisions ) Act 2012 (Cth) 804 superannuation plans 798 see also post-employment benefits overview 798–800 accounting and reporting 800–803 consolidated financial statements 809–817, 819–820 general purpose statements 801–806 individual statements 801 insurance 808–809, 818 plan assets 806–807 plan liabilities 807–808 accounting standards 803–820 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e 1019 superannuation plans continued defined benefit see defined benefit plans defined contribution see defined contribution plans disclosure 817 framework definition of 805 types of 798 supermajority vote 858 supplies inventory 183 sustainability reporting 936, 936–944 sustainable cost 934 sustained-yield method 776 swaps 503–511 accounting for 509–511 currency 504, 506–509 interest rate 504, 504–506, 509–510, 521 nature of 503–504 symmetrical recognition rules 778 tangible assets 151, 326, 729 Tasmania, legislation in 22 Tassal Group Ltd 773, 782–783, 789 tax(es) company see company income tax employee benefits and 422 evasion of 973 personal 422 taxable income 274–275, 287 negative 300–302 taxable temporary differences 292 tax allocation 277, 277–285 tax base 278 of assets 286–289 of liabilities 289–292 tax-effect accounting 309–311, 529 tax-payable method 276, 277 Tax Reform Act 1986 (US) 309 technical insolvency 838 technical issues, identification of 14 technical language, user’s understanding of 49 technological obsolescence 248, 333 teleological theories 980, 980–982 temporal method 922 temporary differences 279 deductible 292 taxable 292 terminal yield 112 termination benefits 441, 442 term insurance 845–846 theological ethics 982 Tier reporting requirements 667 Tier reporting requirements 667–668 timeliness 47–48, 530, 699 times dividends earned ratio 652, 655 times interest earned ratio 652, 654 time value of money 76–78, 236, 586, 733, 848 time weighting factor 645 timing see also reporting periods of amortisation 737 of financial reports 699 of foreign currency translation 922 in insurance business 828–835 of performance obligations 581–583, 599 of segment reporting 625 of share-based payments 442 of transactions 125 total assets, rate of return on 652, 654–655 total resources concept of funds 606 trade-ins 209 trademarks 345–347 trade receivables see accounts receivable trading purposes, financial instruments used for 496, 498, 502–503 1020 transaction(s) characteristics of 103–105 disclosure of 124–125 foreign currency 879 not orderly 109–110 related-party see related-party transactions timing of 125 transaction costs 104, 105, 486 transaction neutral policy 804–805, 863 transaction price 575, 575–580 transfer of assets 403–405 transparency 863 Trans-Tasman convergence project (AASB) 710, 862 Treasurer’s Instructions Treasury Bond contracts 494 Trio Capital 801–802 triple bottom line reporting 930 true and fair view 4, 119–120, 150 Trueblood Committee (US) 45 trust 961 trustees’ reports 802–803 Tweedie, Sir David 866 two-statement approach 533, 540–544 UIG see Urgent Issues Group unclosed business 832 unconditional period for long-service leave 433 underinvestment 133–134 underlying assets 375, 389–390 underlying profit 548–554 understandability 530 underwriting activities 830, 831–837 unearned premium income 833 unearned premium liability 843–844 unethical behaviour 961 unguaranteed residual value 394 United Kingdom The Corporate Report 45, 554, 556 Institute of Chartered Accountants in England and Wales 45, 864 SSAP13 ‘Accounting for Research and Development’ 336 United Nations Environment Programme (UNEP) 930 United Nations Industrial Development Organization 925 United States 1929 stock market crash 36–37 accounting bodies 37 see also specific body cash flow statements in 603, 605 conceptual framework 37 expense method 336 international convergence 192, 855, 858– 859, 862, 867 inventory valuation in 191–194 lease accounting in 372 pension plan accounting in 454 reserve recognition accounting in 749–750 SEC see Securities and Exchange Commission segment reporting in 626–627 tax-effect accounting 309 Trueblood Committee 45 unit of account 101 units-of-production method 736, 738 universalism 981–982 unobservable inputs 106, 107 unused tax losses 300–302 unusual items 544–546 Urgent Issues Group (UIG) 14, 16, 32 Interpretation ‘Emission Rights’ 948–951 Interpretation 132 ‘Intangible Assets – Web Site Costs’ 347 useful life 255 in extractive industries 738, 746 of intangible assets 333–334, 338, 345 of leased assets 386 User Focus Group (AASB) 13 user groups comments on standards 15, 118–119 fair value measurement and 104 identification of 39–40 information needs of 38–39, 42, 44 input into standard setting 15 sustainability reporting 937 utilitarianism 980–982 valuation see measurement valuation approaches to depreciation 253 valuation premise 103 value of assets 66–67, 222–223 face 75 see also historical cost fair see fair value fall in, depreciation as 248 intrinsic 806 present see present value realisable see realisable value residual (scrap) 250, 394 value added statement 554–556 value-in-exchange 66–67 value-in-use 66–67, 71, 236 of intangible assets 334–335 value judgements 963–965 values clarification 967–970 variable consideration 575–576, 580 verifiability 47, 530 verification of sustainability reports 941–944 vested benefits 798 vesting conditions 444, 444–448 vesting sick leave entitlements 432 Victoria, legislation in Virgin Australia Holdings Limited 128–129 virtue ethics 967 Vision Super Pty Ltd 464 voluntary change in accounting policy 680 voluntary reporting of corporate social responsibility 930–931, 948 of segment data see segment reporting as signalling 139 statement of value added 555–556 wages 427–429 Wallis Committee 476 wealth 85–86 websites company 347–348, 937 government legislation Weeks case 703 weighted average cost 187–192 weighted average number of ordinary shares 645 well-offness 85–86 Wesfarmers Ltd 155, 164, 168, 445 Westpac Banking Corporation 169, 481–482 Westpac Bicentennial Foundation 927 ‘where-got-where-gone’ statements 603 whole-of-life insurance 845 working capital 603, 605, 651 work-in-process inventory 182 workplace agreements 429, 431 WorldCom 866, 961 write-downs depreciation 250 excess on acquisition 350–351 goodwill 349 SUBJECT INDEX Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017—9781488611643—Henderson/Issues in Financial Accounting 16e This page intentionally left blank This page intentionally left blank ... Management, Accounting and Finance and Australian Accounting Review Tracy’s teaching and research interests are in the area of financial reporting and accounting standards, including issues relating... Business Finance and Accounting, Journal of Business Ethics, British Accounting Review, Accounting and Finance and Australian Accounting Review TRACY ARTIACH is a Senior Lecturer in financial accounting. .. Accounting and Finance at Monash University He undertakes research in the area of financial accounting and reporting In particular, he is interested in issues relating to accounting standard setting