a.cichy@unsw.edu.au
Weekly Consultation:
Wednesdays Weeks 1-10
4.00pm to 6.00pm
Content
• Unit Overview and Expectations
• Introduction to Financial Literacy: Fundamental Concepts and Elements
• Groupwork (Part 1)
• Class discussion and solutions (Part 1)
• Introduction to Financial Literacy: Fundamental Concepts and Elements (Part 2)
• Groupwork (Part 2)
• Class discussion and solutions (Part 2)
• Summation
Mute your
microphone when
not speaking
1B Live Stream – Lectures Netiquette
Say Hi when you
arrive in the chat-
box
Hello
Turn your webcam on
when speaking
Use the raise hand
button when you have
a question or wish to
talk
Use the chat-box
feature to ask or
answer a question
Be on
Time, be prepared!
Use earphones with a
microphone to reduce
background noise
Wear what you
would for class.
Remove or silence
distractions
Sit in a well-lit space
and mindful of your
background.
Make room for
everyone to have a
chance to speak
Use the same
professional language
you would in a F2F
class
Remember some
classes are being
video recorded
Be patient, be kind,
be respectful
All students must
adhere to UNSW’s
Student Code
AI Policy
You are reminded of the UNSW rules regarding Academic Integrity and
Plagiarism. For the assessment in this course, you may use standard editing
and referencing software, but not generative AI. It is prohibited to use any
software or service, i.e. ChatGPT to search for or generate information or
answers. If its use is detected, it will be regarded as serious academic
misconduct and subject to the standard penalties, which may include 00FL,
suspension and exclusion.
AI Policy
• More specifically, because of the focus in this course on communication:
• You are permitted to use a language dictionary but NOT a translator.
• Translators include but are not limited to DeepL, Google Translate etc.
• The easiest way to think about this is:
• If I were studying in Spain, I am (inherently) demonstrating my ability to study and communicate in Spanish – thus I cannot write my
assignment in English and translate it in Spanish for a pass. However, I can use a thesaurus or dictionary (as I might in an exam). In this manner,
I have still written the work.
• Grammarly and Word (and Google Docs) can make suggestions to correct the work that are of the nature of general assistance. Or it can rewrite it for
you.
• You are NOT ALLOWED to use Grammarly or any other software or AI (e.g. ChatGPT, Bard) to rewrite your work. This is effectively outsourcing the
writing of your assignments.
Expectations
1.Responsibility
2.Preparation
3.Interaction, Discussion and Communication
4.Teamwork
5.Consolidation
Assessment
Seminar Participation and Interaction 10%
Recorded Video Submission 30%
Quiz 30%
Group Case Study and Presentation 30%
Where to find out more? Moodle Assessment Hub
Interaction Marking guideline:
Mark
• Attends class but with limited or no interaction
• Fails to follow netiquette as specified in the course outline and Welcome video
• Does not contribute to or support class discussions
• Does not reply when specifically called upon by the lecturer or another student
• Fails to use microphone to interact with class and lecturer when appropriate
• Only copies/pastes solutions or phrases into chat box without any discussion
0
• Actively engages in the class discussions
• Demonstrates critical engagement with the course content
• Volunteers to present answers to the Textbook Questions
• Supports peers by volunteering answers or asking appropriate questions
• Ask questions relevant to the topic and tutorial
• Answers questions by using microphone and providing knowledgeable and relevant answers, either
when requested or voluntarily
1
Note:
1. Passive participation will automatically attract a mark of zero
2. Behaviour that is disruptive or does not comply with the netiquette specified previously will result in
cancellation of interaction marks for the tutorial (and therefore attract a mark of zero).
Any questions?
Introduction to Financial
Literacy: Fundamental
Concepts and Elements
Tutorial 1
Learning Objectives
 Describe how financial literacy informs decision-making in business for diverse stakeholders with diverse
information requirements.
 Explain the Conceptual Framework's significance in accounting standard-setting and its broader applicability.
 Define key accounting elements: Asset, Liability, Revenue, Expense, and Equity.
 Explain the differences between current and non-current assets and liabilities and the importance of these
classifications.
 Differentiate Cash Accounting from Accrual Accounting and explain where the use of either is appropriate.
 Differentiate Financial Accounting from Management Accounting
What is Literacy?
Literacy is the ability to read, write, speak and
listen in a way that lets us communicate
effectively and make sense of the world.
National Literacy Trust (UK)
What is Literacy?
Beyond its conventional concept as a set of reading, writing and
counting skills, literacy is now understood as a means of
identification, understanding, interpretation, creation, and
communication in an increasingly digital, text-mediated,
information-rich and fast-changing world.
UNESCO
Why is Literacy important?
Individuals with low levels of literacy are m ore likely to experience poorer
em ploym ent opportunities and outcom esand lower incom e. As a result,
they often face welfare dependency, low self-esteem , and higher levels of
crim e. M oreover, people with a low level of literacy have lim ited ability to
m ake im portant inform ed decisions in everyday life as they struggle with
tasks such as filling out form s and applications, understanding governm ent
policies, reading m edicine or nutritionallabels, and m ore.
World Literacy Foundation, 2018.
What is Financial Literacy?
…[A] set of skills that allow people to manage their money wisely. As a minimum, these
skills include the attainment of basic numeracy so that rates of return on savings and
borrowings can be readily calculated and compared. They also extend to some
understanding of essential financial concepts, not least an appreciation of the trade-
off between risk and return. And not to be overlooked is the capacity to understand
when the time may have come to seek professional financial advice and where you
need to go to find it. Broader concepts of financial literacy also assume that people will
make better judgments about their financial affairs if they understand the relationship
between their own finances and the wider economy.
Keith Hall (Assistant Governor, RBA), 2008.
Concerns about Financial Literacy
https://www.abc.net.au/news/2022-12-06/report-finds-concerning-decline-in-financial/101737148
What is a stakeholder?
Stakeholders
By Grochim - Commons, CC BY-SA 3.0,
https://commons.wikimedia.org/w/index.php?curid=44754443
Activity: Mentalising
For your allocated stakeholder:
• Think about their role and their interests in general.
• Think about how the company intersects with their interests.
• What decisions they may need to make about a company?
• What information will support their decision-making?
Stakeholder:
Information needed.
Role and Interests in general.
Stakeholder and Company intersection.
Decisions to be made.
Conceptual Fram ework for Financial Reporting
• The logic underpinning our financial reporting standards
• Defines all elements in financial statements
• Articulates the objectives of financial reporting
• Gives the qualitative characteristics of useful financial
information
Key Accounting Elements
• These elements are the basic building blocks of all financial information.
• They are like the letters of the alphabet for financial information.
• They are: Assets, Liabilities, Equity, Revenue and Expenses.
Cash Accounting v. Accrual Accounting
• Accrual accounting records revenue and expenses when
relevant transactions occur (ie. expenses incurred or income
earned) – regardless of when cash is received or disbursed.
• Cash basis accounting records revenue and expenses ONLY
when cash is exchanged.
Financial Accounting v. Management Accounting
• Management accounting is the organization, analysis and
interpretation of financial information for the internal
stakeholders of a business to support their decision-making.
• Financial accounting is the communication of financial
information to external stakeholders (e.g. investors, regulators)
to support their decision-making.
What is an Asset?
An asset is a present economic resource controlled by the entity as a result of
past events. An economic resource is a right that has the potential to produce
economic benefits.
AASB Framework 4.3 - 4.4
3 essential elements:
1. Economic resource with the potential to produce future economic benefits,
2. Controlled by the entity, and
3. Result of past events.
What is an Asset?
1. Future Economic Benefits: The potential to contribute to cash flow (or cash equivalents) through its use and
exchange:
• Does the item form part of operating activities?
• Can we sell the item for Cash (Or convert it into cash)?
• Does it help us save costs?
2. Control: An entity controls the asset if it controls the benefits expected to flow to the entity
• Not limited to legal ownership
• An item may satisfy the definition of an asset even when there is no legal ownership.
• e.g. A property held on a lease is an asset if the entity controls the benefits that are
expected to flow from the property.
3. Past event: Must result from past transactions or other past events.
• Normally obtain by purchasing or "producing" assets, but other events or transactions could also occur e.g.
government grants, donation, discovery of mineral deposits
• Transactions or events expected to occur in the future do NOT, in themselves, give rise to assets. e.g. an intention
to purchase inventory does not, of itself, meet the definition of
an asset.
What is a Liability?
A liability is a present obligation of the entity arising from past events, the settlement of which
is expected to result in an outflow from the entity of resources embodying economic
benefits." (AASB Framework, paragraph 49)
Essential characteristics:
1.The existence of a present obligation arising from a past event
• Cannot have a present obligation without an obligating event. For example, the
obligation to pay suppliers only occurs because a company purchases goods in the
past. The obligation to rectify goods under warranty only occurts because of sales in the
past. The obligation to pay a bank loan only arises because the company has received
a bank loan in the past.
2.Potential to result in an outflow of economic benefits
Present Obligation
An obligation is a duty or responsibility to act or perform in a certain way. An
obligation might arise in two ways:
legally enforceable obligations as a consequence of a binding contract or
statutory requirement.
• e.g. amounts payable for goods and services received.
constructive obligations arising from normal business practice, custom and a
desire to maintain good business relations or act in an equitable manner.
• e.g. a company policy to rectify a product even after the warranty period has
expired.
Present Obligation
A distinction needs to be drawn between a present obligation and a future
commitment.
Example: a decision by the management of an entity to acquire assets in the future
does not, of itself, give rise to a present obligation. An obligation normally arises
only when the asset is delivered or the entity enters into an irrevocable agreement
to acquire the asset.
• irrevocable nature of an agreement means that the economic
consequences of failing to honour the obligation, leave the entity with little, if
any, discretion to avoid the outflow of resources.
Outflow of economic benefits
The settlement of a present obligation usually involves the entity giving up resources
embodying economic benefits.
For example:
• transfer of other assets;
• payment of cash;
• transfer of other assets;
• provision of services;
• replacement of that obligation with another obligation;
• conversion of the obligation to equity.
The Current / Non-Current Distinction
AASB 101. para. 57:
An asset shall be classified as current when it satisfy any of the following criteria:
a) It is expected to be realised in, or is intended for sale or consumption in, the
entity's normal operating cycle;
b) It is held primarily for the purposes of being traded;
c) It is expected to be realised within twelve months after the reporting date; or
d) It is cash or cash equivalent (as defined in AASB 107 unless it is restricted
from being exchanged or used to settle a liability for at least twelve months.
All other assets shall be classified as non-current
Equity
The residual interest in the assets of the entity after deducting
all its liabilities.
AASB Conceptual Framework
THE EQUATION: A = L + OE
rearranged is:
OE = A - L
Equity
Assets = Liabilities + Owners’ Equity
ASSETS
=
CURRENT
ASSETS
+
NON-CURRENT
ASSETS
LIABILITIES
=
CURRENT
LIABILITES
+
NON-CURRENT
LIABILITIES
OWNERS’ EQUITY
=
SHARE CAPITAL
+
RETAINED PROFITS
+
RESERVES
Income: Definition
“increases in economic benefits during the accounting period… that
results in increases inequity, other than those relating to contributions
from owners (AASB Framework, paragraph 70)… and encompasses
both revenue and gains (AASB Framework, paragraph74)”
Essential characteristics:
• Increases in economic benefit
• results in increases in equity
• other than contributions from owners
Income: Recognition
Recognition (AASB Framework, para 92): Increase in future economic
benefits, whether increase in asset or decrease in liability
Can be measured with reliability
Income = Revenue(ordinary course of business)
+ Gain(not ordinary course of business)
Expenses: Definition
“[D]ecreases in economic benefits during the accounting period… other than
the owners’ distributions” (AASB Framework, Paragraph 70)”
Essential characteristics:
• Decreases in economic benefits
• other than distributions from owners
• results in decreases in equity
Expenses: Recognition
Recognition (AASB Framework, para 94): Decrease in future economic
benefits, whether decrease in asset or increase in liability
Can be measured with reliability
Assets v. Expenses: Capitalisation v. Expense
Process of elimination:
Definition Criteria
• Future economic benefit
• Control
• Past event or transaction
Recognition Criteria
• Probable
• Reliable Measurement
+ = ASSET
If not = EXPENSE
Activity: Textbook Questions
Activity: Textbook Questions
Activity: Textbook Questions
Activity: Textbook Questions
Activity: Textbook Questions