Accounting Concepts, Measurement and Features

This report provides an overview of accounting concepts, measurement techniques, and features. It discusses the importance of concepts like going concern, business entity, realization, and accounting period. The report also explores different measurement methods and the relevance and faithful representation of financial information. It includes examples from the accounting practices of Domino's Pizza.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 1
UNIVERSITY NAME
STUDENT NAME
STUDENT ID
COURSE
DATE

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 2
EXECUTIVE SUMMARY.
The purpose of this report is to shed light on the generally accepted accounting concepts that has
been feature in the company's report and their significance in facilitating preparations of
financial statements. The concepts mentioned include the going concern concept, business entity
concept, realization concept accounting period concept and money measurement concept. The
report further ascertains the importance of relevance and faithful representation as the basic
accounting characteristics. Faithful representation states that financial statements should be
prepared honestly without biasness. Financial statements should be relevant to the users for them
to use them in making financial decisions. Business entity concept is well brought out as
DOMINO’S PIZZA company is formed under the Corporations Act of Australia. The entity also
exhibits a going concern as its financial plans are more than one year

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 3
Table of Contents
INTRODUCTION...........................................................................................................................................4
ACCOUNTING CONCEPTS.....................................................................................................................4
Going concern concept............................................................................................................................4
Importance of the going concern concept............................................................................................4
Business entity concept...........................................................................................................................5
importance of the business entity concept...........................................................................................5
Realization concept.................................................................................................................................5
importance of the realization concept..................................................................................................5
Accounting period concept......................................................................................................................6
importance of the accounting period concept......................................................................................6
MEASUREMENT.......................................................................................................................................6
HISTORICAL COSTS MEASUREMENT.................................................................................................7
CURRENT VALUE MEASUREMENT.....................................................................................................7
DOMINOS’S PIZZA ENTREPRISES MEASURMENT............................................................................7
FAIR VALUE MEASUREMENT..........................................................................................................7
DOMINO’S PIZZA ENTRE DEPRECIATION..........................................................................................8
REVENUE MEASUREMENT AND RECOGNITION..............................................................................8
RELEVANCE AND FAITHFUL REPRESENTATION............................................................................8
EXAMPLES OF HOW RELEVANCE IS BROUGHT OUT IN BOOKS OF DOMINO’S PIZZA
COMPANY...............................................................................................................................................10
HOW FAITHFUL REPRESENTATION IS BROUGHT OUT IN THE STATEMENTS OF DOMINO’S
PIZZA.......................................................................................................................................................10
CONCLUSION.........................................................................................................................................11
REFERENCES..............................................................................................................................................12
APPENDICES..............................................................................................................................................14
APPENDIX I: EARNING PER SHARE...............................................................................................14
APPENDIX II: CONTRACTUAL OBLIGATION...............................................................................14
APPENDIX III: FAIR VALUE.............................................................................................................14

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 4
INTRODUCTION
Accounting concepts refers to assumptions, rules and principles that underlie preparations of
financial statements whereas measurement implies the technique employed by entities in
determining book values of accounting items. Measurement of financial items are brought out in
this report and qualitative characteristics of good financial information.
ACCOUNTING CONCEPTS
Going concern concept
According to this concept, business is assumed to operate into the unforeseeable future (Dewy &
Dewi, 2017, pg. 120).
Importance of the going concern concept
 It ensures that investors get regular income on their investments.
 Provides a criterion for the computation of depreciation.
 Its absence may make the cost of a fixed asset be treated as an expense in the year of
purchase.
The Domino Pizza company has been in existence since 1960 to 2018 dealing with the sale of
food to the consumers in different branches of the world with the founders being two brothers
Thomas and James Monaghan(pg32). The company exhibits a going concern concept by leasing
270,000 square feet to World Resource Centre within Ann Arbor which is recently constructing a
new 33000 square feet buildings that the company would lease when it is completed and this is
expected to be 2019.The amended lease will expire on 2029 with a two five-year renewal options
.The interest rates increasing from 12.4 million US dollars to 122.5 million dollars in 2017 is a
clear indication that there has been increased borrowing by the company so as to finance its
activities during the 2017 Recapitalization .The long termed borrowings is the major source of
the Domino's Pizza liquidity(pg27).As at 30th December 2018 ,the company had 65.0 million
US dollars as an unpaid and 161.9 Million US dollars that can be borrowed under its 2017
variable Funding Notes. The company enters into a 15 year operating lease showing going
concern nature of the business. The lease is anticipated to start in 2019 and be completed by
2034 depicting a going concern (Goo, Chi &Shen, 2016, pg. 539).

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 5
Business entity concept
The concept States that a business is treated as an independent and distinct from the owners who
supplied capital for its formation (Horvat, 2015).
importance of the business entity concept
 Assists in ascertaining the business expense and revenues are recorded ignoring private
and personal expenses.
 Facilitates recording and reporting of business transactions from the commercial point of
view.
The company is operated in 3 business branches is the US stores, International Franchise and the
Supply Chain. The company maintains an amicable relationship with its independent franchise
owners via the regional franchise groups. The international franchise segment is made up of a
network of franchise stores in more than 85 international markets(pg10). As at 30th December
2018 the company had 10,038 international franchise stores. The company states that none of
their employees is under the CBA because the franchisee are independent business owners, the
franchisee and their workers are not encompassed in the worker count. This involves worker’s
compensation, general liability, automobile and franchise claims(pg15). The company in 2011
was a defendant in a law suit that involved Fischer Enterprises of C. F and the plaintiff. The
annual reports of the Domino’s Pizza Inc. and its branches are subjected to independent audit
with the exemption of store counts and stores sales growths showing a business entity concept.
Realization concept
The concept States revenue from any business transaction should be included in the accounting
records only after when they become payable. Revenue is realised at the time of the sale
irrespective of whether or not payment is made (Weil, Schipper & Francis, 2013)).
importance of the realization concept
 Makes the accounting information more objective.
The retail sales from the company owned stores and royalty revenues arising from the retail sales
from the franchised stores are recognised as revenues when the items are delivered or taken by
the customers. The sale of food from the company's supply chain centres are recognized as
revenue after the delivery of food to the franchisee whereas the equipment and the supplies are

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 6
recognized as revenue only after shipping of the related products to franchisee (pg. 33 of 2018
annual report). The deferred assets and liabilities are recognized based on the differences
between the financial statements carrying amounts and the tax basis of assets and liabilities
shown pg. 35 of 2018 annual report (Horton, Macve & Serafeim, 2011, pg. 492).
Accounting period concept
The concept states that the continuous lifetime of an entity is divided into small periods to ease
the burden of reporting. The divisions are the financial years (Gluzová, 2017, pg. 436).
importance of the accounting period concept
 Aids in computing the actual expenses and incomes during a certain time frame.
 Helps in computing the net profit for the business.
For the Domino’s Pizza company, the financial year ends at 30th December of each year. The
company reports that it had more than 85 international markets and 10,038 International
Franchise Stores .The company furthermore reports to have had 14500 employees in the
company owned stores ,supply chain centres ,World Resource Centre and regional offices
(pg14).the annual reports depicts the accounting period concept by showing their financial
statements as at a given date which is consistent in 2016,2017 and 2018.The company discloses
that as at 30th December 2018 the company had 6.5 million outstanding borrowings and 161.9
million of available borrowing capacity under its 2017 variable Funding Notes
MEASUREMENT
Measurement refers to the way of establishing the value of items that are to be recorded in the
financial and how they can be recognized and recorded in the statement of financial position and
income statement (Salas, Prince, Baker &Shrestha, 2017, pg. 67).
In the development of the conceptual framework,2010, the sitting board make some
consideration over measurement of various elements in the financial statements. They also
debated over the issue of measurement in depth and whether a single measurement method
should be adopted as a basis for measuring various elements in the financial statements. They
later on made a conclusion that using different basis of measurement will give a very useful
information to various users of the financial information. They therefore identified some basic
basis of measurement of accounting elements.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 7
HISTORICAL COSTS MEASUREMENT
This basis gives an information on the items obtained from their historical costs value of their
original transaction (Boss et al (2010). Based on the historical costs measurement, the value of
the assets or liability in question is reviewed say on yearly basis to in order to determine its
depreciation value or the impairment costs.
According to the historical cost, it is expected that the value of the asset that is recorded in the
books of account must not be higher than the value anticipated to be recovered from use or the
sale of that asset. It is therefore historical costs that can be recovered.
Historical costs basis is advantageous in that it is simple to use and also certain for instance
every entity knows that they have made certain payment amount for a certain asset when they
acquired them and also they know that they have certain amount of their liabilities based on their
various obligations.
The historical costs tend not to consider various changes in prices of non-monetary assets and
therefore current cost is sometimes preferred by some entities. For example, various carrying
amounts or book values of assets are outdated costs which have been affected by factors like
inflation.
CURRENT VALUE MEASUREMENT
This basis of measurement gives an information concerning the item by use of information that
gives a picture about the conditions during the period of measurement. Measurement base
comprise of the current costs, fulfillment value, value in use and the fair value (Barker &Schulte,
2017, pg. 56).
DOMINOS’S PIZZA ENTREPRISES MEASURMENT.
FAIR VALUE MEASUREMENT
This will assist the user of the financial statement to assess inputs employed in the development
of those measurement through ranking the quality and the reliability of the information utilized
in the determination of the fair value.in pg. 65, it has been disclosed therefore that assets and
liabilities are taken at their market values.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 8
Under the same pg. 65, fair values of cash equivalents and the investments in the security market
are based upon the quoted prices for the same assets as shown in appendix III.
DOMINO’S PIZZA ENTRE DEPRECIATION.
It is further disclosed under pg. 34 that depreciation and amortization of long term assets are
established using historical experience and the impairment determined and asset written down to
its estimated fair value.
In pg. 57, depreciation is done through straight line method spread over the useful life of that
assets estimated.
Estimated useful lives. Pg. 57;
REVENUE MEASUREMENT AND RECOGNITION.
DOMINO’S pizza has disclosed that revenues and other elements will be estimated using
historical experiences taking into account various changes in accounting policies and
estmates.2018 annual reports pg. 34.
They have said that revenues are recognized when items have been delivered or carried by the
customer. (Horton, Macve& Serafeim, 2011, pg. 493).
RELEVANCE AND FAITHFUL REPRESENTATION.
Relevance of the financial information implies that the information contained in the financial
statements must be relevant to the final user to assist him in the decision of investment choices
(Karğın, 2013, pg.73). It must influence the decision made by the user by helping him/her make
relevant judgement of the past activities of the company, determine on the current and predict on
future. For example, the information of a particular asset concerning present conditions will be of
benefit to the user in predicting about the future ability of the entity to adapt to various economic
conditions (Song, Thomas & Yi, 2010, pg. 1373). This role of the information has a key function
of determining the future set up of the entity in terms of budgets and various programmes.the

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 9
data regarding the situation of the entity at some time and its past achievement is utilized to
predict the next situation of the entity and various interested parties needs such as dividends
distributed to shareholders, earnings of employees and wages, stock values and the entity’s
liquidity. To be capable to utilize accounting data to project on the coming and previous events,
various information must be properly disclosed such as abnormal incomes generated or expenses
incurred by the company. All these items must be explained so as to aid in predicting on the
future adequately (Nobes &Stadler, 2015, Pg. 591).
Faithful representation of the financial information implies that accounting data must present
transaction and activities of the company in a faithful and transparent manner. For example, the
financial statements such as the balance sheet of the company must portray items such as assets,
liabilities and equity of the entity as at the date of the balance sheet in a trues and reliable
manner. This is achieved by employing the correct measurement methods and recognition of
revenues and liabilities using the correct technique. Most of the accounting information normal
portray data and information that is not stated faithfully due to the problems in the methods of
measurement and recognition of key financial items like the determination of the goodwill could
be hard to establish in a very reliable manner leading to its misstatement in the books of
accounts.to ensure that financial information is presented in a very faithful manner, it is always
good for the company to provide supporting notes that usually accompany financial statements to
disclose various assumption used in measurement and recognition of various items in the
financial statements and the risks associated thereof. For information to be faithful therefore, it
must be complete in presentation, error free and must portray the neutrality (Macintosh, 2009,
pg. 265).
Relevance and faithful representation therefore are both important if financial information is to
present true and useful information to various users. Information that is free from errors will be
relevant to the user in that it will give an information that will be utilized to the benefit of the
user such as true position on the company based on book values of assets and liabilities.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 10
EXAMPLES OF HOW RELEVANCE IS BROUGHT OUT IN BOOKS OF DOMINO’S PIZZA
COMPANY.
 In pg. 65 of the 2018 annual report, it is disclosed that the earnings per share distributed
to the shareholders were $ 4.1, $ 6.05 and $8.65 in 2016,2017 and 2018 respectively.
This particular information is very relevant to the needs of the investors (appendix I).
 Under item 1A in pg. 17 of the 2018 annual report, it is mentioned that competition is
very stiff and therefore the company faces a lot of risks. This information is very useful
and relevant to investors for their decision.
 They highlighted various risk that they face like litigation and investigations from various
groups. This will adversely effect on the performance of the business (pg. 20), this
information is very relevant to various users.
 In pg. 34 of the annual report, it is stated that fair values of the assets and liabilities of
franchise operations are physically inspected. This is relevant information to the users.
 Under the same pg. 34, depreciation and amortization of assets is done using straight line
basis with estimated useful lives of the assets. This disclosure helps users make relevant
decisions (Fusy, 2009, pg. 1871).
 In pg. 25 of 2018 annual report, domino’s pizza highlighted various factors that can affect
their stock prices will be of great importance to the investor. These are;
 Change in capital/debt structure
 Change in performance
HOW FAITHFUL REPRESENTATION IS BROUGHT OUT IN THE STATEMENTS OF
DOMINO’S PIZZA
 In pg. 34, they disclosed some assumptions used in estimation of useful lives of long term
assets based on historical experiences and and their impairments through projecting
undiscounted cash flow.
 In pg. 35 of the annual reports, they stated that they use various methods like previous
trends and actuarial valuation in determination of claims reported but not yet paid.
 In pg. 34, it is disclosed that financial statements have been prepared in accordance with
accounting principles applicable in the USA.this requires management to estimate and
make judgement regarding amounts of some assets and liabilities. this ensures that
statements are presented in the most faithful manner.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 11
 The company disclosed various issues relating to the contractual obligations like long
term outstanding secured notes, interest payments and leases as shown in appendix II
 Under note 1 of the accompanying notes, it is disclosed that the company adopted ASC
606 in preparation of its financial statements as a new accounting pronouncement. This is
faithful representation.
 In pg. 58, goodwill is disclosed not to have been amortized and that its impairment has
not been recognized in 2018,2017 and 2016.this is faithful representation.
CONCLUSION
In conclusion, DOMINO’S PIZZA limited has portrayed various accounting concepts in the
preparations of their financial statements and complied with issues of good measurements and
shows good qualitative characteristics of relevance and faithful representation.

ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 12
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drawings. Discrete Mathematics, 309(7), pp.1870-1894.
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ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 13
Karğın, S., 2013. The impact of IFRS on the value relevance of accounting information:
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ACCOUNTING CONCEPTS,MEASUREMENT AND FEATURES 14
APPENDICES.
APPENDIX I: EARNING PER SHARE
APPENDIX II: CONTRACTUAL OBLIGATION
APPENDIX III: FAIR VALUE