Accounting Estimates and Policy
Executive Summary
Disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies are two important requirements in financial reporting, although these are the most subjective and complex areas, they are of significance in making business decisions to users of financial statements.
This paper compares our company 's current accounting practice with the requirements in respective accounting standards in relation to disclosure of sources of estimation uncertainty and judgments in applying accounting policies with the aim the identify any gaps between these two which may trigger ASIC ' reviewers attention. It takes a look first at the requirements in respective accounting standards (Chapter 2). It then examine the current accounting practices in our company (Chapter 3 and 4) and identify the gaps between company 's practice and accounting standard (Chapter 5). At the end recommendations are made for a better-compliant report (Chapter 6).
Requirements in accounting standards
The disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies should be disclosed separately in the financial reports. Not only the nature of estimates should be disclosed but also the sensitivity analysis to these estimates should be included. Judgments in terms of whether the nature and the amounts are relevant to the company 's operation are critical in applying the respective accounting policies.
Company 's accounting practices Estimations disclosed are impairments for intangible goods, provision for restoration and rehabilitation, employee benefits, estimation of useful lives of assets and ore reserve and revaluation estimates. judgments in applying accounting polices are disclosed in two areas which are depreciation of non-financial tangible goods and taxations.
Identifying the gaps
Our company prepared the financial statements in compliance to Australian Accounting Standard. However
Disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies are two important requirements in financial reporting, although these are the most subjective and complex areas, they are of significance in making business decisions to users of financial statements.
This paper compares our company 's current accounting practice with the requirements in respective accounting standards in relation to disclosure of sources of estimation uncertainty and judgments in applying accounting policies with the aim the identify any gaps between these two which may trigger ASIC ' reviewers attention. It takes a look first at the requirements in respective accounting standards (Chapter 2). It then examine the current accounting practices in our company (Chapter 3 and 4) and identify the gaps between company 's practice and accounting standard (Chapter 5). At the end recommendations are made for a better-compliant report (Chapter 6).
Requirements in accounting standards
The disclosure of significant sources of estimation uncertainty and judgments in applying accounting policies should be disclosed separately in the financial reports. Not only the nature of estimates should be disclosed but also the sensitivity analysis to these estimates should be included. Judgments in terms of whether the nature and the amounts are relevant to the company 's operation are critical in applying the respective accounting policies.
Company 's accounting practices Estimations disclosed are impairments for intangible goods, provision for restoration and rehabilitation, employee benefits, estimation of useful lives of assets and ore reserve and revaluation estimates. judgments in applying accounting polices are disclosed in two areas which are depreciation of non-financial tangible goods and taxations.
Identifying the gaps
Our company prepared the financial statements in compliance to Australian Accounting Standard. However
References: Arrium Limited, Notes to financial statement, Note 2 Significant accounting estimates and judgments, Annual Report 2012 P76, accessed 21/04/2013. Australian Securities & Investments Commission, Attachment to 12-140MR: ASIC 's area of focus for 30 June 2012 financial reports, http://www.asic.gov.au/asic/asic.nsf/byheadline/Attachment+to+12-140MR%3A+ASIC%E2%80%99s+areas+of+focus+for+30+June+2012++financial+reports?openDocument accessed 20/04/2013. Compiled AASB Standard AASB 101, Presentation of Financial Statements, paragraph 112-133, accessed 23/04/2013. Deloitte Model 2012, 30 June 2012 Section D (Reporting Obligations), accessed 23/04/2013.