1. Introduction
The purpose of this part is to analyse the major components and features of Trade and Other Receivables and the usefulness based on the Amendments to the Australian Conceptual Framework (AASB). Premier Investments Limited (PMV) and RCG Corporation Limited (RCG) are main participators in Australia’s garment and dress industry, which own and operate a number of cloth and footwear businesses respectively.
2. Components and features
Trade and Other Receivables, categorized as loans and receivables, are recognized originally at fair value and play an important role in judging the value of asset. They have two parts, current and non-current. In current part, Trade receivables, other receivables and provision for doubtful debts are major components. As for non-current part, long-term loans for outside shareholders are common.
In PMV’s annual report (2014, p. 80), receivables are non-interest-bearing and generally on 30 to 60 day terms. When objective evidence showing an individual receivable balance is impaired, a provision for impairment loss is recognized as bad debt expense, and subsequently measured at amortized cost. In PMV (2014, p. 67), no impairment loss has been recognized since 2013, so the bad debt expense is $nil.
Managing the account requires considering a variety of financial risks. For foreign exchange risk, the effect of movement of exchange rate would lead to the variation of value. For credit risk, RCG (2014, p.49) prefers to trade with bank with a rating of ‘AA’. Approved receivables are based on the continuing relationship. For liquidity risk, it requires constantly checking forecast cash flows and matching the maturity profiles of financial assets and liabilities.
3. The usefulness
According to AASB (2013, p. 18-21), the usefulness of financial information have two fundamental qualitative
