Accounting Policies, Estimates, Errors & Events After Reporting Period – Lecture & Assessment Guidance

Administrative & Assessment Briefings

Session Logistics

• Non-standard meeting time; session recorded for absent classmates.

• Lecturer invites real-time questions, especially on Assessment 2 (A2).

Assessment 2 Overview

1. Prerequisite Gen-AI Quiz

   • Must be attempted before the A2 submission link (and your individual data file) becomes visible.

   • Allocated workload: 2\ \text{hours}; contains 4 questions with recommended time allocations.

2. Permitted AI Tools

   • Choice between ChatGPT and Copilot.

   • Copilot preferred (institutional licence ⇒ privacy “shield”; ability to delete entire chat).

   • All other tools prohibited to keep cohort outputs comparable.

3. Key Due-Date Warnings

   • Do not confuse return date with due date.

   • Individual task; final upload is one Word file.

4. Question-by-Question Snapshot

   • Q1 (Events after reporting date; 5 marks): no AI allowed. Require paragraph citations—not copy-pasted extracts.

   • Q2 (Presentation & disclosure; 20 marks): AI compulsory.
     • Ignore your own Q1 decision when preparing statements.
     • Decide your own prompt strategy; must embed AI in workflow.
     • Submit up to 5 screenshots (first & last show date/time). No truncation—overlap a few lines for continuity.
     • Provide “Notes” column that cross-references specific \text{AASB}\,101 paragraphs (e.g., para 54\,\text{(i)} for PPE line item).

   • Q3 (Reflection; 20 marks): 500-word guide, three sub-parts specified. Write from personal reflection on the submitted prompts only.

5. Presentation & Documentation

   • Follow detailed Presentation tab instructions.

   • Cover sheet with declaration, financial statements plus explanatory workings, screenshots, reflection, reference list.

   • Explanatory workings ≠ statutory “Notes to Accounts”; they simply justify every figure you altered, added, split or aggregated.

   • For format model, review Topic 3, Exercise 5 template.

6. AI as a Study Partner

   • Treat AI as a *hyper-intelligent friend* ("100 PhDs, never sleeps").

   • Always verify AI output, especially standards paragraphs.

   • Practise prompt engineering before the real attempt.

Topic 4 – Accounting Policies & Events After Reporting Period

Continuation of financial-statement preparation with emphasis on disclosure, materiality and professional judgement.

Standards in scope:

• \text{AASB}\,101 Presentation of Financial Statements

• \text{AASB}\,1054 Australian-specific disclosures

• \text{AASB}\,108 Accounting Policies, Changes in Accounting Estimates & Errors

• \text{AASB}\,110 Events After the Reporting Period

Professional judgement & materiality concepts re-emerge every week.

Accounting Policies

Definition

Principles, bases, conventions, rules and practices an entity adopts for preparing and presenting its financial statements (AASB 108 para 5).

Four Elements a Complete Policy Addresses

1. Definition – What the item is.

2. Recognition – Criteria for recording it.

3. Measurement – How to quantify at initial & subsequent dates.

4. Disclosure – Minimum information to communicate.

Example – \text{AASB}\,116 Property, Plant & Equipment covers all four: defines PPE, states recognition criteria, prescribes cost/revaluation models and lists disclosure requirements (carrying amount, disposals, depreciation method, etc.).

Some standards (e.g.
\text{AASB}\,8 Operating Segments) only address disclosure.

Policy‐Related Disclosures Inside AASB 101

• Para 25: Must disclose if the going-concern assumption is not met.

• Para 122: Disclose key judgements/estimates that affect amounts.

Additional Australian Requirements (AASB 1054)

• Declare compliance with both Australian Accounting Standards and IFRS.

• State whether entity is for-profit or not-for-profit.

• Identify statements as general-purpose or special-purpose.

Westfarmers illustration: first note confirms general-purpose report, Corporations Act & IFRS compliance; key estimates collated and cross-referenced by page.

Changes in Accounting Policies, Estimates & Errors (AASB 108)

Accounting Estimates

• Concern the measurement element of a policy.

• Inevitable because of uncertainty (e.g., depreciation, warranty provisions).

• Changing estimates is common.

Allowable Change in Policy

1. Required by another standard, or

2. Results in more relevant & reliable information (para 14).

Treatment: Retrospective application (paras 19-22) – restate comparatives & opening equity unless impracticable.

Change in Estimate

• Permitted whenever new information or developments arise (para 36).

• Treatment: Prospective – affect current and future periods only.

Errors

• Only material errors must be corrected (para 41).

• Correct via retrospective restatement of comparatives; if error predates earliest period presented, adjust opening balances.

Classification Example (Exercise)

Events After the Reporting Period (AASB 110)

Key Definitions

• Event after reporting period: Event occurring between the end of the reporting period & the date the financial statements are authorised for issue.

• Adjusting event (para 3(a)): Provides evidence of conditions that existed at the reporting date ⇒ adjust amounts.

• Non-adjusting event (para 3(b)): Indicative of conditions arising after the reporting date ⇒ disclose if material.

Timeline illustration (FY 2025 example):
\text{01 Jul 25} \;\longrightarrow\; \text{…} \;\longrightarrow\; \text{03 Sep 25 (authorisation)}
Any event inside this window is assessed under AASB 110.

Practical Scenarios

1. Customer liquidation on 28 July ⇒ Receivable existed 30\,Jun; evidence of impairment ⇒ adjust.

2. Board announces closure on 15 July ⇒ No obligation existed 30\,Jun; treat as non-adjusting; disclose nature & estimated effect.

Disclosure Requirements for Non-Adjusting Events (para 21)

• Nature of the event.

• Estimate of financial effect, or statement that such estimate cannot be made and why.

Exercise – Macau Ltd (30 Jun 2026 / authorise 15 Sep 2026)

Materiality drives whether non-adjusting events warrant disclosure.

Professional Judgement & Materiality

• Essential in borderline cases (policy vs estimate; adjust vs disclose).

• Judgement applies when assessing:
  • Availability/quality of evidence.
  • Magnitude & nature of amounts (qualitative + quantitative).
  • Impracticability of retrospective restatement.

Study & Submission Tips

• Distinguish between explanatory workings (A2) and statutory Notes to Accounts (topic content).

• Use AASB paragraph numbers rigorously in answers.

• When capturing screenshots: include bottom-right clock for 1st and last; overlap lines to prove continuity; limit to 5 prompts.

• Expect large Word files (~30 pages) if many screenshots—plan compression.

• Before prompting AI for graded work, rehearse on “dummy” questions to gauge quality and refine prompts.

Quick Numerical Reference Recap

• Gen-AI quiz: 2 hours, 4 questions.

• A2 marking: Q1 5, Q2 20, Q3 20 (total 45).

• Reflection word guide: 500 words.

• Debenture example: 8\,000 × \$10, interest 5\%; application \$5 + allotment \$5.

End of comprehensive notes – aligned to transcript, standards, and assessment guidance.