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AASB Standards and Economic Decision-Making: A Case Study of Wesfarmers

   

Added on  2022-11-22

12 Pages1984 Words308 Views
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Financial Reporting

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Introduction
The AASB standards 101 have been developed to provide guidance to the business
entities for preparing and disclosing their financial position to the user. In this context, the essay
has been developed for presenting a discussion in relation to the AASB standard 101 and the
other relevant AASB standards that helps in providing assistance to end-users in making
economic decisions. The overall discussion has been carried by stating the various decisions that
different users of the statement make on the basis of the financial reports developed by business
entities. The business entity selected for the purpose is Wesfarmers, a leading supermarket chain
in Australia conducting diverse operations such as retail, chemical, fertilizers, coal mining and
industrial and safety products (Wesfarmers Limited, 2018).
Use of AASB Standards in Wesfarmers for Assisting Economic Decision-Making of Users
AASB Standard 101: Presentation of financial statements
The standard has been incorporated for presenting and disclosing the financial reports
developed by business entities. It intends to provide guidance to businesses for providing
information about the financial condition and cash flow position of an entity to the end-users.
The standard mainly assists in disclosing the financial information about the assets, liability,
equity, income and expenses and other relevant changes in equity position of a company. The
standard has directed the business entities to develop and present the complete set of financial
statements to the end-users. The includes development and presentation of the statement of
financial position, income and equity statement, cash flow statements and a relevant summary
including accounting policies on an annual basis (AASB Standard 101, 2015).
The development of financial reports within Wesfarmers is done in accordance with the
AASB 101 standard. The standards has assisted in providing relevant information to the
investors, creditors, analysts, management, competitors, customers, employees, governments and
lenders for assisting in their economic decision-making. The three financial reports, that are, the
balance sheet, income statement and cash flow statement directed by the AASB 101 leads in
development and disclosure of adequate financial information to the end-users. The balance
sheet of the company provides an overall depiction of the financial assets, liabilities and equity

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of a company at any given period of time. Thus, the economic users through analysis of the
balance sheet can gain an assessment of the effectiveness of a company in managing its revenue
position (Wesfarmers annual report 2018, 2018).
For example, the creditors and investors can gain overview regarding the cash
management cycle, assets position and net profits realized by an entity. The income statement
provides a depiction of the revenue and expenses that an entity gain during a specific period of
time. The profit and loss statement helps in determining the economic position of a company to
its end-users in an adequate manner. The cash flow statement has depicted the relative inflows
and outflows of cash occurred during a specific period of time. Thus, the net cash position of a
firm helps in taking economic decisions by the management through development of business
strategies, shareholders of investing money or creditors can ascertain the meeting of their debt
obligations (Henderson, Peirson and Herbohn, 2015). The different financial statements prepared
by Wesfarmers as per the 101 accounting standard can be depicted as follows:

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(Source: Wesfarmers Annual Report 2018)
The information regarding different accounting policies and standards that have been
adopted for carrying out various accounting transactions within the financial statements of
Wesfarmers is provided within the notes section as follows:

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