Evaluation of Abilene Oil and Gas Ltd Annual Report for Compliance with Conceptual Framework of Accounting

Contemporary Issues in Accounting
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Introduction
The present report is developed for conducting an analysis of the conceptual framework
of accounting and meeting of its different criteria by a selected company. The company selected
for the purpose is Abilene Oil and Gas Ltd, a company operating within the energy sector listed
in the ASX and is involved in exploration, development and production of oil. In this context,
this report presents an evaluation of the annual report of the company to ascertain whether it
follows measurement, fundamental and enhancing qualitative characteristics. In addition to this,
it also evaluates the decision-usefulness of the report for the investors.
Analysis of compliance with the measurement requirement of conceptual framework
As per the notes to accounts to financial statement of Abilene oil and gas limited it can be
said that company has prepared its financial statements through using Australian Accounting
Standards and has also make use of interpretations issued by AASB. Financial statements of
Abilene oil and gas limited has been prepared using the historical cost convention except
revaluation of available for sale financial assets, financial assets and liabilities at fair value and
certain other items (Annual Report, 2017). Revenue has been measured using the accounting
standard AASB 15: Revenue from contracts with customers. This is the new accounting standard
that has replaced the old accounting standard and company has successfully applies this
accounting standard to measure the value of revenue. As per AASB revenue must be measured at
fair value of consideration received or receivable for all the contracts satisfied and same
measurement has been applied by Abilene oil and gas limited (IFRS Conceptual Framework
Project Summary, 2018). It can be confirmed by below image:
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Figure 1: Measurement of Revenue
The major item of non-current assets ‘Investments accounted for using the equity
method’ has been initially measured at fair value and after it recognised at equity value at the
balance sheet date. This method is provided in AASB 139 that says value of such investment
should be recognized at fair value initially and equity cost method during its subsequent
recognition. So overall it can be said that company has complied with all the measurement
criteria that has been mentioned in conceptual framework (IFRS, 2018).
Compliance with the Fundamental Qualitative Characteristics
The conceptual framework of accounting has stated that business entities adopting IFRS
(International Financial Reporting Standards) need to develop their financial reports as per
relevance and faithful presentation of information. The relevance characteristics of financial
information states that business entities need to disclose the information in a way so that it is
capable of making a difference in the decision-making process of end-users. For this, it is
essential that financial information disclosed should have both predictive and confirmatory
value. Predictive value means that the financial information disclosed can be used as an input by
the users for predicting future outcomes. On the other hand, confirmatory value indicates that the
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