Assignment Accounting Theory and Issues
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Added on 2020-04-07
Assignment Accounting Theory and Issues
Added on 2020-04-07
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Accounting Theory and Issues
Executive SummaryThe present report has been prepared for demonstrating the importance of accounting strategy andpolicies adopted affirm in meeting its corporate goals and objectives. This is an investigative report basedon the manager’s accounting strategy and the reporting strategy choices adopted by an ASX listed firm in Australia. In this context, the report addresses the key accounting policies, accounting flexibility, quality of accounting disclosure, accounting strategy evaluation and the potential red flags in the public financial disclosure of AGL Energy Ltd., an energy company in Australia. The compliance of the financial reports of the company as per the conceptual accounting framework is also discussed in the report.
Introduction The report has examined and evaluated the accounting strategy of AGL Energy Ltd, an ASXlisted renowned energy company of Australia. AGL is a leading integrated renewable energy companieswhich is based in Australia. The company is acting responsibly by reducing the greenhouse gas emissionscaused by it and is also providing safe, secure and affordable energy to its customers. AGL is meeting theenergy requirements of its customers around the whole part of eastern Australia which includes gas,electricity, solar PV and other related products and services (ASX and Media Releases, 2016). Thecompany has a diverse product base which includes peaking and intermediate generation plants andrenewable sources which comprises of hydro, wind landfill gases, solar energies and biomass (AGLAnnual Report, 2016). The report here deals with strategic evaluation of the accounting choices andpolicies adopted by the company for meeting its goals and objectives. The accounting standards and theaccounting strategies being followed by the company provide an in-depth understanding about theoperations and functions of the company. Section 1: Identify Key Accounting PoliciesThe company is following all the regulations and norms in accordance with the Corporations Act2001 and Accounting Standard AASB Concise Financial Reports. AGL has implemented various kinds ofaccounting principles and standards in their business operations. These standards were changed andamended due to change in the accounting policies on international level. As the company is dealing inreducing its greenhouse effect it become quite essential for the firm to follow the accounting standardsthat has been adopted unanimously by the world, so that homogeneity can be maintained. AGL hasbrought the required amendments in its accounting policies and standards that are relevant to itsoperations and effective for the current reporting period (AGL Annual Report, 2016). Theimplementation of amendments in the company has not laid any bad impact on the financial statements ofthe company (AGL Annual Report, 2015). AGL reporting is as same as the internal management reporting structure. The company isfollowing the accounting standards based on the guidelines of the AASB and is also working incompliance with the normative accounting theory. This means that the accounting approach of AASB isquite new and instead of events it focuses on the framing strategies through which the company can workin accordance to the demands and desires of the customers throughout the world. Apart from this in orderto remain competitive in the crucial and dynamic market the company has also started to follow theguidelines prescribed by the IFRS (AGL Annual Report, 2016). The implementation of IFRS in theaccounting standards has proved quite beneficial for the firm as the firm has become capable of
presenting their data in the financial report in a quite effective manner (Horngren et al., 2012). This hasalso helped the firm in becoming more transparent in their operations so that their customers andinvestors got to know about the firm in an effective manner. The implementation of IFRS has also aid thebusiness organization to comply with the international standards of the accounting which has indirectlyincreased goodwill of the firm (Wolk, Dodd and Rozycki, 2012). In addition to this, the application ofIFRS has also made the firm more competitive. All the standards and procedures adopted by the firm arebased on normative accounting theory (AGL Annual Report, 2015). Section 2: Assess Accounting Flexibility Management of a business organization is responsible for the implementation of accountingstandards in the firm. In AGL this task is also performed by the top level management and theirassociates. The top level management analyses a huge spectrum of information about the accountingstandards that are prevailing in the international businesses (AGL Annual Report, 2016). In addition tothis, it is quite important for a business organization to select an accounting standard because accountingis a major part of organization and is also crucial at the same time. Apart from this, if a businessorganization is busy in conducting international business then accounting become utmost significant. Thisis because it is important for the firm to maintain a common standard so that less difference in the amountand quantity can be maintained (Hussey and Ong, 2005). The organization AGL has also adopted various types of accounting standards whichever isprevailing in the market in order to remain competitive in the global business market. The company isworking on the guidelines of AASB and in addition to this it has also adopted the guidelines prescribedby the IFRS (AGL Annual Report, 2016). AASB has made it mandatory for organizations that areworking in Australia to follow its guidelines and procedures. The company has adopted the samehowever; sometimes there is flexibility on the account of top level management. The top managementsometimes amends the way in which guidelines through AASB and IFRS are prescribed. However, theway through which they do the same is ethical and in compliance with the guidelines prescribed by theASSB and IFRS (Hussey and Ong, 2017). The guidelines are followed flexibly so that they canmaintain their competitive edge in the market. AGL has a wide customer base and it is important for themto take care of their needs and desires, in doing this, they sometimes become flexible (AGL AnnualReport, 2015).Section 3: Evaluating the Accounting Strategy
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