Accounting Aabs

Accounting Aabs

  • Submitted By: rhettgram
  • Date Submitted: 05/20/2013 4:28 PM
  • Category: Business
  • Words: 2143
  • Page: 9
  • Views: 158


Accounting for revenue in Australia is guided by the Australian Accounting Standards Board. The AASB 118 is designed with the objective “to prescribe the accounting treatment of revenue arising from certain types of transactions and events” (AASB 118 Objective, p7). The main issue that arises when accounting for revenue is when to recognise that revenue on the company’s books. Companies must refer to the AASB 118 for guidance on this area of accounting, including circumstances where revenue will be recognised, according to the criteria explained in the AASB 118. If an entity is required by law under the Corporations Act to prepare financial reports, then this standard applies to that entity. The Australian pharmaceutical company Australian Pharmaceutical Industries Ltd (API Ltd) is listed on the ASX, and prepares financial statements in its annual reports applying the AASB 118. By examining the entities 2011 annual report we can observe how the application of AASB 118 takes place regarding revenue. API Ltd earns revenue in the form of sales of goods, services provided, interest on overdue accounts, and loyalty card deferred revenue.

Accounting for Revenue in Australia

Australian companies face “a plethora of financial and regulatory standards” (SAP 2009, p5). Australian companies are governed by the Corporations Act (2001), which sets out accounting requirements stating that an entity “has to prepare financial statements and reports for half-years as well as full financial years” (Corporations Act 2001, SECT 111AO). Entities must record revenue in the income statement “as revenues, sales, net sales, or net revenue” (Wall Street Prep 2012, p3). These entities refer to the AASB Framework for the Preparation and Presentation of Financial Statements, and when accounting for revenue, they also refer to AASB 118 Revenue. It is important for the entity to apply definitions when accounting for revenue, specifically to classify what...

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