Accounting Theory and Contemporary Issues

This report focuses on the requirements of the conceptual framework and identifies the issues faced by Sun Corp Ltd. It analyzes the qualitative aspects of reporting and presents a comparative analysis of the company's financial reports.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting Theory and Contemporary Issues
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1ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Executive Summary:
The present report would be placing emphasis on the requirements relating to the conceptual
framework in order to identify the issues that is faced by the company. The company that is
selected for the assignment is Sun Corp Ltd, one of the Australia’s largest insurance
company. The report would also take into the account the enhancement qualitative aspects of
reporting based on the elements of comparability, simplicity, timeliness and
understandability. A conclusive analysis would also be presented for Sun Corp Ltd based on
the findings gained from the comparative analysis of financial report of 2015/16 and 2016/17.

2ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Introduction:...............................................................................................................................2
Discussion of Issues and Major Findings:.................................................................................2
Conclusion:................................................................................................................................6
References..................................................................................................................................7

3ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Introduction:
The IASB has issued the conceptual framework for preparing and presenting the
financial statements. The conceptual framework is better understood as the system of ideas
and objectives which results in the creation of constant set of standards and rules. Particularly
in the areas of accounting, the rule and standards sets the nature, function and limitations of
financial accounting and financial statements (Baker and Burlaud 2015). The information
presented in the financial statement should be of qualitative characteristics having both the
relevant and faithful representation to be useful. The study here is based on identifying the
issues or problems that is faced by Sun Corp Ltd for the period of 2015/16 and 2016/17.
Reference to the financial statement would be made based on the grounds of Accounting
Framework such as reliability, relevance, comparability and understandability.
The report would identify the economic phenomenon that has the potential to the
users of reporting company’s financial information. Suncorp is regarded as Australia’s one of
the largest financial service brands that offers home and motor insurance, life insurance,
banking and superannuation. The purpose of the company is to create a better today for all of
its stakeholders together with its customers, shareholders, people and communities. The
company is a diversified, simplified with low risk financial services which provides high
yield and beyond the system growth. The organic growth strategies are exclusively based in
Australia and New Zealand (Suncorp Group 2018). Ever since the 1902 the company has
created value for its stakeholders by being responsible and resilient business.
Discussion of Issues and Major Findings:
Comparability, timeliness, verifiability and understandability are considered as the
qualitative characteristics which improves the usefulness of the information that are relevant
and represented faithfully (Deegan 2013). The enhancing qualitative characteristics might

4ACCOUNTING THEORY AND CONTEMPORARY ISSUES
also help in determining the ways to be used in depicting the phenomenon if the
characteristics are considered is equally relevant and faithfully represented.
As evident from the annual report of Sun Corp Ltd there are certain issues or
problems that is faced by the company. The three main issues that has been identified is listed
below
Wearisome Strategic Planning: With greater than 15,000 employee’s strength, 650
buildings and extensive use of traditional system namely the paper plans and excel
spreadsheets, Sun Corp Ltd faced major problems in administering their property portfolio.
Their issues included the inadequate single, exact view of occupancy that is caused by the
isolated storage tower of data and handbook procedure (Suncorp Group 2018). Referring to
the financial statement of Sun Corp Ltd it is found that there was the lack of tedious strategic
planning. The manual spreadsheets lacked relations between the people, vacancies and
workstations.
The planning procedure of Sun Corp Ltd was slow and reworking on them had
unpredicted effect on the other sets of data. Furthermore, Sun Corp Ltd faces limited
executive buy in with no automated tools was available to facilitate the proactive strategy
leading to difficulties in accurately representing the strategy to management. As a result of
this, Sun Corp Ltd overall investment income declined. The income on insurance funds stood
$254 million while in 2015 it stood $399 million with losses originating from the widening
credits that spreads across relatively on the underperforming inflation linked bonds (Suncorp
Group 2018). Furthermore, the tedious strategic planning was effected by the broadening of
credit spread yields and lower than anticipated yield from the equities.
The investment securities decreased of Sun Corp Ltd also declined by $2,746 million
primarily because of the application of simplified superannuation holdings structure and

5ACCOUNTING THEORY AND CONTEMPORARY ISSUES
balance sheet optimization of the bank. Because of the slow planning by Sun Corp Ltd the
reinsurance and other recoveries of the business declined by $513 million in 2015-16 because
of the current settlements from the natural hazards claims in the previous year.
Volatile Markets: The company in the year 2016 and 2017 reported a volatile business
environment that demands increasing enterprise agility. Importantly the recent volatility in
the financial markets have affected the financials. Even though the profit and loss, value of
one year sales and embedded value has been benefitted from the lower rate of interest that has
negatively created an impact on the capital for the year 2015-16. The market volatility has
created an impact on the derivatives which increased by $92 million due to the volatility in
the Australian dollar effecting the holdings of the foreign exchange contracts and cross
swapping of currency (Suncorp Group 2018). The reserves of the company also increased by
$31 million for the year 2016/17 due to the volatility in the Australian dollar which to a
certain extent offset by the reduction in the reserves held for the credit losses.
The problems of market volatility have also given rise to the risk of asset or liability’s
value that might change unfavourable because of the change in the rate of currency exchange.
The volatility in the market have bought forward the issues relating to the loss from the
current and future earnings (Zhang and Andrew 2014). This is due to the unfavourable
movement in the value of investments from the changes in the credit spread which is
determined by the sentiments of capital market or any other factors that would impact all the
issuers in the market and not any other factors that is specific to the individual issuers.
Issues related to Material Risks: The Sun Corp Ltd faces strategic issues that might impact
the business strategies and financial prospects. This includes the prospect of shift in the
competitor dynamics and markets, together with the new sources of competition originating
from the non-traditional sources, advancement in the related technologies and disruptive

6ACCOUNTING THEORY AND CONTEMPORARY ISSUES
business models. Furthermore, there are issues related to the extensive data because of the
failure in maintaining and securing the technological environment. During the year 2016-17,
Sun Corp Ltd faces the challenges of attracting and retaining the right capability for meeting
the current requirements of Sun Corp Ltd in the international market of talent (Suncorp
Group 2018). There also prevails the ongoing issue of economic instability and continuous
lower yield from environment.
To enhance the qualitative characteristics of Sun Corp Ltd the following qualitative
characteristics is considered;
Comparability: Comparability is regarded as the qualitative characteristics which enables
the users to recognize and understand the similarities as well as differences in the items.
Apart from all the other qualitative characteristics, comparability is not related to any single
item and requires a minimum of two items (Aasb.gov.au 2018). As evident from the financial
statements of Sun Corp Ltd the results of annual report are comparable with the results of
previous years that is in compliance with this principle. Sun Corp Ltd has also used the trend
analysis and has graphically demonstrated the outcome from the earlier years to benefit the
users by effectively comparing the performance of the previous years.
Verifiability: The principles of Verifiability provides assistance in making sure that the
information faithfully represents the economic phenomena that it purports to represents
(Macve 2015). Verifiability represents that different independent and well-informed
observers can reach the consensus which may not be a complete agreement of faithful
representation. As evident from the financial statements of Sun Corp Ltd, the company has
provided adequate notes to accounts where independent observers could reach a consensus of
faithful representation.

7ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Timeliness: The principles of timeliness represents that having the information available to
the users of decision makers on time should be capable of influencing their decision (Díaz et
al. 2015). Generally, the older the information the lesser it is useful. But there is some
information that might be in time even after the reporting period where some users may
identify and assess the trends. Sun Corp Ltd here issues the financial information on time
where the company issues the annual report showcasing the performance of the company at
the end of the financial year.
Understandability: Classifying, describing and offering the evidence evidently and briefly
makes it comprehensible. There are certain phenomena in the financial statements that are
complex and cannot be easily understood (Handel, Valerio and Sánchez Puerta 2016).
Comparatively excluding the information regarding those complex phenomena from the
financial statements may result the information in that financial report easy to understand.
The financial statement issued by Sun Corp Ltd is easy to understand for the users. For the
purpose of simplicity Sun Corp Ltd has presented the information in the form of graphs
which makes the users to easily understand the information conveyed. Sun Corp Ltd also
follows the generally accepted financial reporting framework in order to promote the
simplicity and understandability for the users.
Conclusion:
Sun Corp Ltd backs the competitive and contestable industry of general insurance and
believes in the basics of competition for conveying improved outcomes for the customers and
for the wider economy. Sun Corp Ltd continuous to make investment in the industry
partnership with business to business relationship that helps in fostering the innovation and
best practices all through its supply chain. The current review of Sun Corp Ltd provides a
suitable opportunity of reviewing the state owned monopolies and Sun Corp Ltd provides
recommendations that all the jurisdictions privatise their functions of personal injury.

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9ACCOUNTING THEORY AND CONTEMPORARY ISSUES
References
Aasb.gov.au. (2018). Aasb.gov.au. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-
14.pdf [Accessed 18 Dec. 2018].
Baker, C.R. and Burlaud, A., 2015. The historical evolution from accounting theory to
conceptual framework in financial standards setting. The CPA Journal, 85(8), p.54.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Díaz, S., Demissew, S., Carabias, J., Joly, C., Lonsdale, M., Ash, N., Larigauderie, A.,
Adhikari, J.R., Arico, S., Báldi, A. and Bartuska, A., 2015. The IPBES Conceptual
Framework—connecting nature and people. Current Opinion in Environmental
Sustainability, 14, pp.1-16.
Handel, M.J., Valerio, A. and Sánchez Puerta, M.L., 2016. Conceptual Framework.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Suncorp Group. (2018). Who we are. [online] Available at:
https://www.suncorpgroup.com.au/about [Accessed 18 Dec. 2018].
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.