Executive Summary 2
Current accounting policies and relative accounting standards 4
Accounting policies 4
Judgement in applying accounting standards 4
Sources of estimation and uncertainty 5
AASB 101 5
AASB 108 5
The current accounting practice of Discovery Metals 7
Property, Plant and Equipment 7
Impairment of assets 8
The potential gap 10
Appendix A 13
The purpose of this research report is to analyse whether disclosures in Discovery Metals’ annual report comply with the requirements in Australian Accounting Standards (accounting estimate and ...view middle of the document...
This research report will divide into four main aspects; firstly, it will contain some detailed explanation about accounting standards which involved in accounting estimation uncertainty and accounting judgements. Secondly, it is about the analysis of disclosures in annual report. Thirdly, this part will cover the differences between company’s current practice and the accounting standard requirements. Finally, it will provide some recommendations to the company’s annual report that are not comply with the relevant accounting standards.
Current accounting policies and relative accounting standards
According to AASB standards the accounting policies are the specific principles and procedures that used by a company to prepare its own financial statements. For listed companies, the accounting policies are usually display in very first note of financial statements. These policies usually concern the methods, high subjective elements and measurement systems which relate to present disclosures. It is important to look into a specific company’s accounting policies in order to analyse whether it conform to accounting principles (AASB108,).
Judgement in applying accounting standards
The contends of AASB 1011from paragraph 122 to 124 illustrate the disclosure about how the management makes judgements in the process of applying the entity’s accounting policies. These judgements are not only those involved in estimation but also those which have the most material impact on the financial statements, such as whether a lease is an operating lease or a finance lease. In addition some of these disclosures made in accordance with paragraph 122 are already require required to be disclosure by other Australian Accounting Standards, such as AASB 12 , AASB127 and AASB 140.
Sources of estimation and uncertainty
Accounting estimates play a significant role in preparation of financial statements. As many estimates are made of accounting information in business, they may not undermine their reliability. The contents of the sources of estimation and uncertainty are broadly outlined in paragraph 125 of AASB 101. It claims that if the assumptions have significant risk of inducing a major adjustment to the carrying amounts of assets and liabilities within the next financial year, then the note in financial report should include information about the assumptions that company makes about future and other material sources of measurement uncertainty at the end of reporting period. However, if the measurement of assets and liabilities are based on fair value, these requirements do not apply to them. In order to help users of financial statement understand assumptions and judgements made by management about future, AASB 101 paragraph 129 also provide some specific disclosure.
The objective of AASB 108 is to define standards for selecting and changing accounting policies. Moreover, it also...