Solutions Manual for Accounting Business Reporting For Decision Making 5th Edition By Jacqueline Birt, Keryn Chalmers, Suzanne Maloney, Albie Brooks, Judy Oliver (All Chapters, 100% Original Verified, A+ Grade)

© John Wiley and Sons Australia , Ltd 2014 1.1 Solution Manual For Accounting: Business Reporting for Decision Making 5e Jacqueline Birt, Keryn Chalmers, Suzanne Maloney, Albie Brooks & Judy Oliver Prepared by Jacqueline Birt Chapter 1: Introduction to accounting © John Wiley and Sons Australia, Ltd 20 14 1.2 Chapter 1: Introductio n to a ccounting Apply your knowledge 1.1 Provide an example of the different types of activities that would be performed by a management and financial accountant for JB Hi -Fi Ltd. The management accountant would perform activities such as capital budgeting for future store fit -outs, preparation of budgets and cost -volume -profit analysis for a new business venture e.g. diversifying product range to include books. The financial accountant would perform activities such as preparation of financial reports i.e. income statement, balance sheet and the statement of cash flows in accordance with generally accepted accounting principles, which are represented by accounting standards including those issued by both the AASB and the IASB and the Corporations Act. 1.2 What is the difference between a consolidated income statement and a consolidated statement of comprehensive income? Explain with reference to the Qantas Group. A comprehensive income statement would list the revenue less expenses for Qantas Group. Expenses would include; fuel, depreciation and amortisation , operating leases , finance costs and income tax expense. A statement of comprehensive income would include the profit for the year, changes in the fair value of cash flow hedges and exchange differences on translation of foreign operations. 1.3 Carbon accounting is a very important and huge growth area of accounting. Discuss the different stakeholders (and their information needs) that would be interested in the carbon accounting report. Stakeholder Information needs 1. Management Levels of carbon emissions can provide targets to improve environmental performance, can also be tied to executive remuneration. Significant costs can lead to increased costs and reduced sales. 2. Investors Assist in investment decision making. Research has found that firms with higher disclosures of sustainability carbon information can lead to improved financial performance and share price. 3. General public Interested in comparing companies to determine if they are managing their carbon risks and reducing emissions. Solution Manual t o accompany Accounting: business reporting for decision making 5e © John Wiley and Sons Australia, Ltd 20 14 1.3 1.4 The AASB's role has changed since the introduction of IFRS in 2005. Most of the Australian accounting standards mandated in Australia are Australian equivalents to IFRSs. Why do you think Australia has adopted Australian equivalents to IFRS? The Australian standard setter i.e. the AASB has changed its role since the adoption of IFRS in 2005. It is not solely making accounting standards for use by Australian reporting entities, much of that role is now undertaken by the IASB in its development of IFRS. IFRS adoption means that the AASB can now contribute to the development of global financial reporting standards. Most recently, the AASB provided export support on the IASB's discussion paper on 'extractive activities'. Adopting IFRS means that there is a reduction in standard setting costs for Australia. Adopting Australian equivalents of IFRS means that there is still scope for the AASB to tailor the IFRS to meet the needs of Australian entities. For example: certain IFRS standards will be made available to specific Australian entities rather than all Australian entities. Conversely, there will be other IFRS which the intention is for a more narrow group of entities e.g. all listed companies and in Australia it might be applies to both proprietary and limited companies. Adopting Australian equivalents means that there is also the scope to change the wording of certain standards to “fit” the Australian business environment. 1.5 The sustainability report is a recent disclosure by some Australian companies. The Qantas Group’s sustainability report includes disclosures on occupational health and safety, environmental information, customer information including number of on -time arrivals and employee absenteeism. What do you think are the advantages and disadvantages to the company of providing such disclosures? Such disclosures provide a positive signal about the company to various stakeholders such as consumers, investors, general public, employees and suppliers . The disclosures can provide information to in vestors to determine the future of an entity and to assess the future cash flows for dividends and the possibility of capital growth of investment. Employees can use the information to ascertain job security and future promotional opportunities. Suppliers of the entity can use the information to determine an entity’s ability to repay debt associated with purchases. 1.6 The historical cost nature of the annual report is seen as being a limitation of financial accounting information. What do you think are the advantages and disadvantages of using historical costs? Can you think of any alternative ways of measuring assets that my provide advantages over using historical cost? Historical cost accounting requires that items in the annual report such as assets are reported at their original cost. This has various advantages. Historical costs are seen as being reliable figures where there has been evidence of the actual price e.g. invoice, receipt. Other methods of valuation are not always reliable, as management can use their discretion (sometimes opportunistically) to arrive at the value which could be detrimental to the firm. Disadvantages of using historical costs are that they may not be relevant and for that reason may not reflect the real value of the firm. Lenders most likely would be interested in the historical cost of Balance Sheet items and if there are any impairment losses. Other alternative methods include market value for assets such as land . For assets such as inventory, Chapter 1: Introduction to accounting © John Wiley and Sons Australia, Ltd 20 14 1.4 the net realisable value would be worthwhile knowing (expected selling price less any costs of selling).