Accounting Standards and Theory Australia Research Paper 2022

Accounting Standards 1
Accounting Standards and Theory
Subject name and number
Student name and number
Word count: 1551

Accounting Standards 2
Executive summary
Transurban Holdings Ltd (TCL) operates a toll road operator in Australia. The Australian toll
operator has experienced profitability problems recently. TLC is taking over the Sydney
Cross City Tunnel that was previously operated by the Sydney Morning Herald and the Cross
City Tunnel. The previous operators did not realise profit from the project. Transurban
Holdings Ltd (TCL) is taking over the project with the hopes of making profits from it.
However, the company’s risk management committee is concerned about the viability of the
Sydney Cross City Tunnel project. As an accounting graduate I am tasked with evaluating the
operations of TLC based on its 2018 financial report. The evaluation seeks to; a) establish the
company’s adherence to accounting standards and policies when preparing its financial
statements; b) examine the accounting policies used by the TLC management to value assets;
c) assess the risk factors that impact the operations in the toll business; and d) examine of an
increase in the price of fuel would affect financial elements of the company.

Accounting Standards 3
Introduction
Accounting regulations and risk exposures have a significant impact on the operations of
concession services. Transurban Holdings Ltd (TCL) is a toll road operator in Australia
which has invested in several road concession services. The company’s risk management
committee is concerned about the viability of the Sydney Cross City Tunnel project. The
committee has maintained that the project is surrounded by uncertainties. Previous operators
of the project did not earn profit from the project. This paper addresses the risk and exposures
surrounding the project and how it would impact the general financial performance of TCL.
The paper is divided into four parts which address the accounting regulations and policies
that govern concession services as well as the possible risks associated with the project.
Accounting policies relating to the toll road concessions as used by TLC
Construction of roads is based on a public-private partnership (PPP). The government is a
representative of the public and act as the guarantor. On the other hand, companies represent
the private sector hence known as the operators. Operators lease properties and equipment
from the public to facilitate their operations. There two accounting regulation and standards
that are commonly used by the toll road operates to account for the elements of financial
reports are AASB 16-Lease and AASB 13- Fair Value Measurement. AASB 16-Lease seeks
to establish ownership of the infrastructure assets used by toll road operators (AASB, 2015,
p. 65).
AASB 16 maintains that operators should account for their operating leases as an on-balance
sheet. Accounting for property and equipment leases as either lease liability or right to use
assets enhance transparency in financial reporting. The amendment of AASB 16 from off-
balance-sheet to on-balance sheet have changes financial metrics such as asset turnover,
EBITDA, and gearing ratios (AASB, 2019). AASB 13 addresses fair value measurement of
assets and liabilities. AASB 13 helps to measure the initial value of infrastructure assets as
recognised by the guarantor when the right-to-use is transferred to an operator. AASB 13
enhance consistency in measuring and recognising the infrastructure assets at their fair value
(Australian Accounting Standards Board, 2014).
TLC applies several accounting policies in an attempt to adhere to both AASB 13 and AASB
16 accounting standards and regulations. TLC uses three accounting procedures to recognise
its policies. First, toll revenue is recognised when the company has determined it as a