Where to find defined terms asterisked in this paper
|Asset||Subsection 6-15(1) of the RBT draft legislation|
|Cost||Subdivision 6-E and section 45-70 of the RBT draft legislation|
|Depreciating asset||Section 40-15 of the RBT draft legislation|
|Due and payable||Subsection 995-1(1) of the RBT draft legislation|
|Financial asset||Section 45-10 of the RBT draft legislation (definition to be developed)|
|Hold (an asset)||Subsection 6-15(3) of the RBT draft legislation, as proposed to be modified by Table 3.3 in this paper (paragraph 3.31)|
|Instalment Income||Section 45-120 A New Tax System (Pay As You Go) Bill|
|Listed zero tax value asset||Paragraphs 3.18 and 3.19 of this paper|
|Membership interest||Section 960-120 of the RBT draft legislation|
|Non-routine right||Subdivision 96-B of the RBT draft legislation (definition to be developed)|
|Notional Tax||Section 45-325 A New Tax System (Pay As You Go) Bill|
|Private asset||Subsection 12-20(1) of the RBT draft legislation|
|Private liability||Subsection 12-20(2) of the RBT draft legislation|
|Proceeds of a realisation event||Subsection 995-1(1) of the RBT draft legislation (definition to be developed)|
|Right||Paragraph 3.20 of this paper|
|Routine obligation||Table 4.2 of this paper (paragraph 4.19)|
|Routine right||Table 4.1 of this paper (paragraph 4.16)|
|Tax imposed by an Australian law||Subsection 995-1(1) of the RBT draft legislation|
|Taxpayer||Section 960-100 of the RBT draft legislation|
|Trading stock||Section 38-10 of the RBT draft legislation|
|Written down cost (of a prepaid right)||Paragraphs 5.8 to 5.9 of this paper|
Building blocks of the conceptual framework for financial reporting
Reproduced with permission of the Australian Accounting Research Foundation
Annotation of Conceptual Framework for Financial Reporting
1. Financial Reporting
This part of the Framework is concerned with defining the discipline of financial reporting and is relevant for determining the borders of the domain to which accounting requirements apply.
2. Reporting Entity
The reporting entity is the entity (for example, economic entity, legal entity etc.) that is to be subject to financial reporting requirements. Its borders also need to be defined and this definition will then help determine the characteristics of the elements (see below) used to compile financial statements.
3. Objective of Financial Reporting
This building block is concerned with specifying the basic reason for financial reporting to occur (eg usefulness for the allocation of scarce economic resources) and for whose benefit it is intended (eg external users) and the types of information that they will need. This block again shapes the definition of the elements of financial reports and indeed the measurement and display aspects of the Framework.
4. Qualitative Characteristics of Financial Information
This part of the framework establishes that hierarchy of characteristics that financial information should have to be able to serve the objective of financial reporting. The Framework specifies that relevance and reliability are the primary characteristics for inclusion of financial information in financial reports. These characteristics are supported by those relating to the preparation and presentation of financial information: comparability, understandability, timeliness, and cost versus benefit.
Materiality is used as a filter of relevant and reliable information so that only information which could alter the decision-making of users in the context of a particular reporting entity is required to be reported.
Relevance and reliability are fundamental drivers for when the elements of financial reports need to be recognised. Materiality also limits the applicability of requirements.
This is a critical part of the Framework. It is concerned with defining the economic phenomena to be reported; equity, assets, liabilities, revenues and expenses. An economic objective (see above) demands an economic definition (eg assets are future economic benefits controlled by the entity). The border of the reporting entity likewise must relate to net assets controlled (as opposed to owned).
6. Basis of Recognition
Having decided what to include in financial statements, this part of the Framework is concerned with when to recognise those elements. The recognition criteria established revolve around probability of existence of the elements (eg probability of enjoyment of future economic benefits in the case of an asset) and the ability to reliably measure their stock or flow.
7-8. Basis of Measurement/Techniques of Measurement
Having decided what to include in financial reports (elements) and when (basis of recognition), it remains to specify the basis and techniques of measurement. An economic objective, for example, may suggest a current value based measurement system. This part of the Framework is not complete.
In the presentation of financial statements categories of information are needed to serve the objective of financial reporting. The structure of financial statements and the type and level of disclosure flow from that objective.
13-17. Standard-setting Policy
These are the guiding rules/policies for the development of financial reporting requirements.
18-19. Standards Monitoring/Regulation
Application of standards need to be monitored both for the sake of future development of requirements and to facilitate compliance activity.
Building blocks of the conceptual framework under the tax value method
Examples of how SAPs might be adjusted to facilitate implementation of the Tax Value Method and other business tax reforms commencing from 1 July 2001
Example 1. August balancing taxpayer
Example 2. December balancing taxpayer
Example 3. April balancing taxpayer
Non-residents international aspects of the tax value method
Non-residents international aspects of the tax value method (continued)
Residents international aspects of the tax value method
Residents international aspects of the tax value method (continued)