Financial Accounting

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Introduction
It is a requirement that, if an entity is defined as a reporting entity, it is required to release financial reports that comply with the Australian Accounting Standards Board (AASB) (Deegan 2008:83).

Two companies have been chosen to analyse their reports, in particular the disclosures made in their respective reports. The two companies chosen to analyse are Commonwealth Bank of Australia (CBA) and Macquarie Bank Limited (MBL).

CBA
The Commonwealth Bank is one of Australia’s leading providers of integrated financial services including retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. It is one of the largest listed companies on the Australian Stock Exchange (ASX:CBA).

MBL
On 13 November 2007, Macquarie Bank Limited was restructured to form the newly created Macquarie Group Limited. It businesses comprise a range of investment, commercial and selected retail financial services. It is a global provider of banking, financial, advisory, investment and funds management services. Macquarie Group Limited is listed in Australia (ASX:MQG) Both companies have subsidiaries and associated entities.

The three disclosures that will be discussed and compared are 1) Foreign Currency transactions – AASB 121
2) Joint Ventures AASB 131
3) Segment Reporting AASB 114

Foreign Currency transactions
AASB 121 governs foreign currency transactions. The disclosure requirements are: 1) Method used in translating the accounts of foreign operations, 2) Net foreign exchange gain or loss taken to the profit and loss account, 3) Details of movement of each transaction including nature and amount in the foreign currency translation reserve. (Farooque 2008: 8:6)

CBA
1) CBA have chosen to value the domestic operations in Australian Dollars (AUD), and have chosen to value all overseas operations in their own currency. 2) CBA record all unrealised foreign exchange transactions in the profit and loss. 3) Note 32 details the change in equity that is required under the standard

MBL
1) MBL also value transactions from their domestic operations in Australian Dollars (AUD), and have chosen to value all overseas operations on their own currency. 2) MBL record all unrealised foreign exchange transactions in the profit and loss. 3) Notes 32/33 details the change in equity that is required under the standard

Both CBA and MBL have disclosed the adequate information required under AASB121.

Joint Ventures
AASB 131 is the standard that companies are required to follow relating join ventures. Both CBA and MBL have followed the guidelines within AASB131, in particular paragraphs 21 and in particular paragraph 56 that states that

“A venturer shall disclose a listing and description of interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities. A venturer that recognises its interests in jointly controlled entities using the line-by-line reporting format for proportionate consolidation or the equity method shall disclose the aggregate amounts of each of current assets, long-term assets, current liabilities, long-term liabilities, income and expenses related to its interests in joint ventures”.

CBA
Note 46 of the consolidated financial statements list the interest in investments in associates and joint ventures. CBA have a table which itemises the ownership of each venture. The report also itemises the dollar amount for each category (asset, liabilities etc).

MBL
The equity method of accounting has been applied for joint ventures. Note 18 of the consolidated financial statements list the interest in investments in associates and joint ventures. They accounted for these transactions in the statements using the equity method of accounting, and value these transactions at cost by the parent entity. Note 18 (b) lists a summary of ownership interest (in %)...
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