Accounting Concepts, Measurement Issues and Qualitative Criteria of Conceptual Framework: Analysis of an ASX Listed Entity

1
HA3011
Advanced Financial Accounting

2
Contents
Introduction......................................................................................................................................3
Part 1: Description on accounting concepts and application of same by the selected company.....3
Part 2: Discussion of Measurement Issues in Accounting in reference to Conceptual Framework
and by Using Examples from Selected Company...........................................................................6
Part 3: Analysis of Significance of Relevance and Faithful Representation Qualitative Principles
of Conceptual Framework with Reference to Examples from selected company...........................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

3
Introduction
The conceptual framework is being developed by the IASB for enhancing the quality of
financial reports and ensuring that it is able to meet the varying interests of end-users in an
effective manner. As such, the framework has emphasized on using the measurement basis for
reporting the value of assets and liabilities that is able to improve the qualitative characteristics
of relevancy and reliability of financial reporting. The impact on relevance and reliability that are
the two fundamental qualitative characteristics of financial reporting provided by conceptual
framework must be considered before the selection of a measurement basis for valuing the assets
and liabilities. In this context, the report has examined the accounting concepts, measurement
issues and qualitative criteria of conceptual framework by analysis of the annual report of a
selected ASX listed entity of CHTR H LWR FP Units Stapled Securities.
Part 1: Description on accounting concepts and application of same by the selected
company
Accounting concepts is most important concepts that act as the basic assumptions,
accounting principles and rules while performing the recording of business transactions and
drafting the financial statements of the company. The complete accounting process is based on
the accounting concepts and it is also mandatory for the business entities to follow the
accounting concepts. All the major accounting concepts have been discussed below and their
practical applications by Charter Hall Long WALE REIT have also been provided.
Business Entity Concept
The main objective of including this accounting concept is to make the business process
separate from the individual (Owner) so that it helps to perform proper accounting and allow
entity to have separate name, identity and presence. In simple words, this accounting concept
provides that business entity and business owners are two distinct persons and have distinct
identities. For example, if there is contract made with business entity than it implies that such
contract is binding on entity not on the business owner (Damodaran, 2011).

4
Charter Hall Long WALE REIT has properly followed the business entity concept and
same has been reflected through the treatment of owner’s contribution in the book of accounts.
Charter Hall Long WALE REIT has shown share capital (Contribution by the owners of the
company) under the liability section and in form of equity capital that clearly states that Charter
Hall Long WALE REIT is required to remit back the investment to the owner at any future date
or upon liquidation (Annual Report, 2018). Same can be seen in the below extract from the
financial statements of the selected business entity:
Consolidated balance sheet (Source: Annual Report, 2018, pp. 25)
Going Concern concept
This accounting concept provides the base for many accounting principles, standards and
guidelines. The going concern accounting concept clearly states that business organization will
continue to carry on its activities for indefinite period. The identity of business entity comes to
an end only when it gets dissolved, liquidated and merged with any other company. It means
business entity has continuity of life and is based on phenomenon that entity will not get
dissolved in near future. This accounting concept act as the base for the valuation of many assets
and liabilities of entity and allow to defer incomes, expenses and other claim that has possibility