← Accounting concepts for a New Zealand reporting entity
Concepts, measurement and the reporting framework
Going concern, accrual basis, historical cost, monetary measurement — plus the New Zealand accounting framework the reporting entity itself sits within, and is expected to apply consistently. Exam-style Accrued wages and salaries as a current liability Explain the accrual basis, the liability definition, and the reliable measure. ACCRUAL BASIS: the work was performed before balance date, so the expense belongs to THIS year's Statement of Comprehensive Income even though the cash goes out next year. LIABILITY: a present obligation (the employees have earned it), from a past event (the work done), settled by an outflow of cash. CURRENT: it will be settled within 12 months of balance date, in the next pay run. RELIABLE MEASURE: hours worked × contracted pay rates, taken from payroll records. ✓ Accrual + definition + 12-month test + measurement. Four separate ideas, one for each bullet the paper gives you. ℹNon-financial information is examinable
The ESG / sustainability pages of the annual report appear in every recent paper ("Better, Safer Food", "Our People and Responsibility"). Treat them as RELEVANT information with predictive value: reputation, regulatory risk and staff retention all feed future profitability, so they change the user's decision even though they carry no dollar figure.The four measurement/reporting concepts, in one line each
- Accounting entity: the business is reported separately from its owner.
- Monetary measurement: only items measurable in dollars are reported.
- Reporting period: activity is divided into defined periods for comparison.
- Going concern: the entity is assumed to keep operating for the foreseeable future.
A fast check when applying one of these concepts
- Have I named the SPECIFIC concept by its actual name, not just described a general accounting idea?
- Have I attached the company's OWN fact to the concept, rather than stating the concept in the abstract?