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Solutions manual Australian Financial Accounting 9th Edition, 9th Australian edition by Craig Deegan CA$37.25
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Solutions manual Australian Financial Accounting 9th Edition, 9th Australian edition by Craig Deegan

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Solutions, Solutions manual for Financial Accounting 9th Australian edition by Craig Deegan. ISBN: 9781743767382, 1743767382, 9781743767399, . chapters 1 to 32 solutions manual for Australian Financial Accounting 9e Deegan.

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  • January 21, 2024
  • 740
  • 2020/2021
  • Exam (elaborations)
  • Questions & answers

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  • solutions
  • financial accounting
  • 9th edition
  • craig deegan
  • solutions manual
  • solutions financial accounting
  • solutions manual australian financial accounting

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  • Accounting
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SOLUTIONS MANUAL Financial Accounting 9th Edition by Craig Deegan.
PART 1: THE AUSTRALIAN ACCOUNTING ENVIRONMENT
Chapter 1
An overview of the Australian external reporting environment


Opening questions
1.1 What is ‘general purpose financial reporting’?
General purpose financial reporting generates general purpose financial statements, which are
those financial statements that are intended to meet the information needs of users who are not
in a position to require an entity to prepare reports tailored to their particular information needs.
General purpose financial statements are expected to comply with accounting standards. They
can be contrasted with ‘special purpose financial statements’, which will not necessarily comply
with accounting standards.

1.2 What is the role of the Australian Accounting Standards Board (AASB) with respect to
general purpose financial reporting within Australia?
The AASB releases the accounting standards that are to be applied within Australia by those
reporting entities generating general purpose financial statements. Some of the accounting
standards released by the AASB are developed within Australia by the AASB. However, the
majority of accounting standards released by the AASB are developed away from Australia by
the IASB.

1.3 Does the AASB have legal power to enforce accounting standards within Australia?
No. The AASB does not directly have any enforcement powers. Within Australia, it is ASIC
that enforces the requirements of the Corporations Act, and it is within the Corporations Act
that there is a requirement for particular forms of organisations to comply with accounting
standards.

1.4 What is the relevance of the International Accounting Standards Board (IASB) to general
purpose financial reporting within Australia?
The IASB is of great relevance to general purpose financial reporting within Australia. The
AASB releases accounting standards that have legal force by virtue of the Corporations Act,
and the majority of these accounting standards are developed outside of Australia by the IASB.

1.5 What power does the IASB have to enforce the accounting standards that it develops, and
which are in use internationally?
The IASB has no power to enforce its accounting standards. It is a standard-setter, not a
standard-enforcer. When a country claims that it is adopting IFRSs, it is the responsibility of
local regulators to ensure compliance with the accounting standards. Because some countries
have minimal enforcement mechanisms in place, together with poor standards of financial
statement auditing, any claims that the financial statements being generated in such countries
comply with accounting standards are often questionable, and should be met with scepticism.

,Review questions


1.1 The main bodies responsible for regulating accounting disclosure in Australia are:
(i) Australian Securities and Investments Commission (ASIC)
On its website, ASIC describes some of its responsibilities as follows:

We are an independent Commonwealth Government body. We are set up under and administer
the Australian Securities and Investments Commission Act 2001 (ASIC Act), and we carry out
most of our work under the Corporations Act.

The Australian Securities and Investments Commission Act 2001 requires us to:
• maintain, facilitate and improve the performance of the financial system and entities in it
• promote confident and informed participation by investors and consumers in the financial
system
• administer the law effectively and with minimal procedural requirements
• enforce and give effect to the law
• receive, process and store, efficiently and quickly, information that is given to us
• make information about companies and other bodies available to the public as soon as
practicable
• take whatever action we can, and which is necessary, to enforce and give effect to the
law.

The Corporations Act, which is administered by ASIC, requires corporations to comply with
accounting standards (as per s. 296 of the Corporations Act). Hence, the law administered by
ASIC requires companies and other disclosing entities to comply with the accounting
standards issued by the AASB.

(ii) Australian Accounting Standards Board (AASB)
The role of the AASB is to develop a conceptual framework. It is also responsible for ‘making’
accounting standards that have the force of law under the corporations legislation, as well as
formulating accounting standards that are to be used by reporting entities that are not governed
by corporations legislation, inclusive of entities operating in the not-for-profit sector and
public sector entities. The AASB is also responsible for Interpretations Advisory Panels, focus
groups (user focus groups and not-for-profit focus groups) and project advisory panels.
As indicated in Chapter 1, however, a great deal of the responsibility for developing
accounting standards released by the AASB is in the hands of the IASB, as is the development
of the Conceptual Framework. It is to be anticipated that only minor changes would be made
to standards being released by the IASB before they are subsequently released within
Australia as AASB standards (for example, the changes might involve adding more
explanatory material to the Australian standard, or to add additional requirements in relation
to not-for-profit or public sector entities). The AASB does release accounting standards that
are unique to Australia where there is believed to be a need for accounting guidance and the
issue has not been addressed by the IASB. The AASB reports to the Financial Reporting
Council (FRC). Once an AASB-released accounting standard is in place, corporate directors
are required to ensure that the company’s financial statements comply with the requirements
of the standard (where applicable).

, (iii) Australian Securities Exchange (ASX)
The ASX provides numerous disclosure requirements for entities listed on the Australian
Securities Exchange. The principal aim is to help ensure that information is disseminated in
an efficient and timely manner. Failure to comply with the ASX Listing Rules may lead to
delisting from the exchange. The ASX disclosure requirements help to ensure that information
about listed entities is disseminated in an efficient and timely manner. The disclosure
requirements also reduce the likelihood of individuals prospering through access to privileged
information.

The ASX Listing Rules are divided into 20 chapters (details of the listing rules are available
on the ASX website at www.asx.com.au). Of particular relevance are Chapters 3 and 4 of
the Listing Rules, which relate to continuous disclosure and periodic disclosure, respectively.
Listing Rule 3.1 (relating to continuous disclosure) provides the general principle that:
Once an entity is or becomes aware of any information concerning it that a reasonable
person would expect to have a material effect on the price or value of the entity’s
securities, the entity must immediately tell ASX that information.
The ASX also established the ASX Corporate Governance Council. The Principles
released by the Council, which are now referred to as Corporate Governance Principles
and Recommendations, were most recently amended and re-released in February 2019 and
can be accessed on the ASX website. Companies are required to provide a statement in
their annual report disclosing the extent to which they have followed the Corporate
Governance Principles and Recommendations in the reporting period. Where companies
have not followed all of the recommendations, they must identify the recommendations
that have not been followed, and give reasons for not following them. This is often referred
to as an ‘if not, why not?’ approach to disclosure.
(iv) Financial Reporting Council (FRC)
The FRC oversees the operations of the AASB. It also appoints the members of the AASB
(other than the chairperson). The FRC, however, is not to direct the development of
accounting standards by the AASB, or to veto accounting standards that are released by the
AASB.

1.2 The International Accounting Standards Board (IASB) releases International Financial
Reporting Standards (IFRSs). IFRSs are adopted directly by some countries, while others
(such as Australia) release standards under the name of their domestic accounting standard
setter but based upon the standards issued by the IASB. For a detailed overview of the
workings of the IASB, students should review the IASB’s website. For countries that have
decided to adopt IFRSs, such as Australia, a great deal of ‘power’ for developing accounting
standards has been ‘surrendered’ to the IASB, although the IASB does tend to communicate
with national standard-setters when developing accounting standards.

While IFRSs are used in many countries throughout the world, the IASB does not have any
direct enforcement powers. Rather, enforcement is the duty of national governments (for
example, within Australia, ASIC is primarily responsible for the enforcement of accounting
standards).

The IASB also has a committee known as the IFRS Interpretations Committee, which reviews
accounting issues that are likely to receive divergent or unacceptable treatment in the absence

, of authoritative guidance, with a view to reaching consensus on the appropriate accounting
treatment. Its recommended treatment is included within ‘Interpretations’.

1.3 The IASB does not have any direct enforcement powers. For example, in Australia we use
IFRS developed by the IASB, but the IASB has no power within Australia to enforce its
accounting standards. That power in Australia resides with ASIC. Therefore, although many
countries throughout the world claim to be using IFRSs, whether they are actually being
applied properly is really dependent upon the enforcement and compliance policies in place
within the respective countries. Because some countries have very weak enforcement
strategies, the claim that their national organisations are complying with IFRSs is often open
to challenge.

1.4 The auditor acts as an independent reviewer of the financial statements presented by a
reporting entity. Being independent, the auditor is expected to provide an objective assessment
as to whether, in the auditor’s opinion, the financial statements have been prepared in
conformity with the various accounting and other reporting rules applicable to the reporting
entity. The auditor, in a sense, provides greater credibility to the financial statements and
allows financial statement users to rely upon the statements with greater confidence. With
greater confidence, the financial statement users may attribute lower risk to a reporting entity,
and this in turn may translate to the reporting entity being able to attract funds at a lower cost
than may otherwise be possible. Hence, although the reporting organisation will have to pay
for the audit, the benefits of attracting greater funds at a lower cost (because of a perception
that the information about the organisation is more reliable or credible) might more than offset
the costs associated with the audit. In this regard it should be noted that prior to the
introduction of legislation which required certain forms of organisations to have their financial
statements audited, many organisations chose to have their financial statements audited
because of the perceived benefits. Where there are perceived conflicts of interest between
different parties within the organisation (for example, between owners and managers) the
auditor can act to arbitrate on the reasonableness of the accounting rules and assumptions
adopted by the managers.
With this said, it should also be emphasised that an unqualified auditor’s report (that is, a
report that does not indicate any departure from accepted or mandated accounting procedures)
does not give absolute assurance that all transactions have been correctly accounted for, or
that the entity is assured of being viable in the future. Also, it is conceivable that the credibility
of all audit firms will not be deemed to be the same, such that if financial statement users
consider that an auditor is of low ‘quality’ then an audit report produced by such an auditor
may be of limited value. Lastly, it should be stressed that the preparation of the financial
statements is the responsibility of management and the auditor will not make any changes to
those reports: the auditor’s role is to give an opinion on the statements (for example, that they
are true and fair and comply with applicable accounting standards).

1.5 This question may be answered in terms of a ‘free-market’ versus a ‘pro-regulation’
perspective about the provision of accounting information.
Many academics argue in favour of a free-market approach. By this, we mean that there is a
belief the market forces of supply and demand should be allowed to freely operate to
determine the equilibrium amount of accounting information to be provided. It is considered
in this argument that if the users of accounting reports demand information but it is not being
supplied, then this will be priced in to the amount they will charge the firm for the factors of
production they supply to the firm (for example, equity capital). If an individual is able to

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