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objectives of segmental reporting
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New Zealand International Financial Reporting Standard 8 (NZ IFRS 8) Operating Segments replaced New Zealand International Accounting Standard 14 (NZ IAS 14) Segments Reporting. Since 2009 NZ IFRS 8 has been compulsory. This essay will be covering the definition of an Operating Segment and the major changes that have occurred. It will also include summary of number and type of operating segments of the five listed companies in Part A and discussion on whether information provided under NZ IFRS 8 is of greater quality and useful for decision makers.
An operating segment as defined in NZ IFRS 8 “is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available”. (External Reporting Board, n.d.).
The main changes that have occurred as a result of the change from NZ IAS 14 to NZ IFRS 8, is how segments are identified. NZ IFRS 8 concentrates on operating segments and various disclosures made on these operating segments. NZ IAS 14 concentrates on the segment reporting of the entity. NZ IFRS 8 identifies operating segments based on internal reports reviewed regularly by the chief operating decision maker to allocate resources to the segment and assess the performance whereas NZ IAS 14 identifies two set of segments based on related products and services, and a secondary segment in order to help financial statement users to have better understandin...
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...three operating segments in the notes and accounting policies. It has disclosed the reconciliations of the totals of segment income to income statement, segment EBITDA to income statement. The 2012 Annual Report contains general information on how operating segments are identified and types of products and services these operating segments derive revenue. However, 2007 Annual report disclosed revenue and expenses as a group in one geographic segment. There are no separate disclosures about each reportable segment.
Thus, the information provided using NZ IFRS 8 provides quality information that is of greater use to the management, investors and other users of financial users for decision making. The detailed information disclosure requirement has improved the consistency with management discussion and analysis, and provides diverse measures of segment performance.
Switching to IFRS will help not just companies but also investors and public globally to compare financial statements. If every country has different financial standards, if would be problematic to compare how each company stands because they are not the same.
Conclusion: It is evident that if these financial practices were to be followed, David Johnston, the CRA, the business, and its stakeholders will be satisfied. A business must obey IFRS standards, as it provides a corporation with accurate measures of finance and
U.S. GAAP and International Financial Reporting Standards (IFRS), formerly known as iGAAP, are two accounting standards used in today’s world of financial reporting. These standards have differences as well as similarities in reporting requirements. Organizations in the United States are required to follow GAAP principles in preparing financial statements and other financial reports. Whereas, organizations outside of the United States may follow IFRS. Balance sheet reporting and formatting is an area in which GAAP and IFRS may differ, yet be similar in many respects. The balance sheet is a financial statement of what a company owns and what it owes at a given date and time (Spiceland, Sepe, & Nelson, 2013). This paper will address differences and similarities in respect to balance sheet reporting and formatting as it relates to fixed assets and liabilities, inventory, and goodwill.
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
IASB revenue recognition benchmarks entering the merging venture comprised of two gauges, IAS 18 and IAS 11. IAS 18 worries about revenues including offer of products, administrations, intrigue, eminences and profits. IAS 11 centers around development contracts. Likewise with all IASB gauges, these standard give standards-based direction without particular direction at the exchange level. The guidelines of U.S. GAAP, gave by FASB, then again comprise of an arrangement of more than one hundred revenue related direction of particular principles on an industry and exchange level; in any case, a great part of the general direction is given by Statement of Financial Accounting Concepts No. 5, a non-legitimate wellspring of U.S. GAAP. The IASB and FASB are ready to embrace a joint standard on revenue recognition. This new world standard would adopt an advantage obligation strategy, for example, that of pre-meeting IFRS, while containing more particular direction than IFRS clients are acquainted with seeing, taking a signal from the GAAP guidelines of the United
Auer (1996) for instance, conducted a study on Swiss firms which switched from Swiss GAAP to either the European Directives or to IFRS. The focus of this study (Auer, 1996) was on market volatility and the basic assumption was that the major indicator of higher information processing by market forces was higher price volatility which by extension is an evidence of greater value‐relevance of accounting data. The results from the study of Auer (1996) however revealed that the variance of abnormal returns changed significantly for firms that switched to the European Directives or IFRS. In Bahrain, Joshi & Basteki (1999) conducted a survey on 36 companies in which questionnaires were designed and administered. Their study found that majority of the respondents (86%) believed that the application of IASs gave the contents of their financial statements more relevance. Contrary to the above, Barth, et al (1998) examined whether the application of IAS is associated with higher accounting quality, but found amongst others that firms applying IAS exhibit less earnings smoothing and a higher degree of association between accounting numbers with share prices and returns. In a similar vein, some studies conducted in Australia (Goodwin & Ahmad, 2006; and Goodwin, Ahmed & Heaney, 2008) found that differences between IFRS and Australian
A dramatic increase in the demand of the financial statements by external users made the reporting entities’ annual reports to meet the objective of general purpose financial reporting and qualitative characteristics of useful financial. According to the IASB Conceptual Framework, it superseded the Framework for the Preparation and Presentation of Financial Statements. As a result, this report could discuss the conceptual framework for financial statements and compare with Bega’ current accounting practice of Property, Plant and Equipment under Accounting Standard AASB116. Then, this report will suggest some actions for Bega to improve its current accountin...
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
... standard and help to reduce the preparer cost. And it has also enhanced the financial statements decision usefulness and make the organization prepare for expanded disclosure requirements.
Differences remain between U.S. GAAP and IFRS when it comes to revenue recognition. U.S. GAAP gives detailed rules covering 200 different pronouncements about how revenue should be recognized while IFRS offers two standards, IAS 18 and IAS 11; these deal with revenue and construction contracts. There is a current proposal for a new revenue recognition standard for both IFRS and U.S. GAAP (Doupnik & Perera, 2014). This standard seeks a main direction and corrects inconstancies between the two different views. This proposal would bring a unity to both entities and more progress toward
An important part of financial planning for corporations is the annual report. Publically held companies are required to submit an annual report to the SEC and private companies, even though not required, can use an annual report to gauge the performance of the company for the past year and use the report to plan for the future. The financial statements that make up an annual report are the income statement, the balance sheet, and the statement of cash flows. (Melicher, 2014) Once all of the financial information has been compiled and the three statements that make up the annual report have been completed a corporation can then start to analyze the data. There are several different categories of financial ratios
IFRS been used as a trail to make consistent accounting to the European Union but the value of IFRS quickly made the concept important around the world. However, it has been discussed that IFRS can really make a huge difference in financial world because that time IAS (International accounting standards) is been used for financial things and after a year is been replaced by IFRS.
This report contains information that is calculated under accrual accounting principle. Because all transactions are recorded at the time when they are made rather than when actual money has been made or received, there is a likelihood that transactions are shown on one accounting period but actual change has not be made it, and it may deliver biased information about the company’s true financial position.
The NZ Framework is an accounting conceptual framework based on the International Accounting Standards Board (IASB) Conceptual Framework. The key objective of the framework is to provide a complete and updated set of accounting concepts to use ...
Consistency – users of the financial statements must be able to compare the performance of the company through the years. It is really important that the classification and presentation of the items in the financial statement is retained from one period to the next, except there is a change un circumstances or a requirement