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Significance of Maintaining High Financial Reporting Quality in Entity Public Disclosure Statements

   

Added on  2019-11-26

15 Pages4262 Words168 Views
Accounting Theory

Executive SummaryThis report has been prepared for providing an understanding of the significance ofmaintaining high financial reporting quality in entity public disclosure statements. The publicdisclosure statements of Ansell Ltd Company are being analyzed in this context. The analysishas revealed that the company has effectively adopted the conceptual accounting frameworkprinciples for protection of stakeholder interests. The accounting strategies adopted haveflexibility but are developed as per the AASB standards. There is proper disclosure of thestandards adopted for measuring the value of company’s financial instruments such as assets,liabilities and equity. In addition to this, the report has presented an evaluation of theflexibility present in eth accounting framework of the company. The flexibility si required forintroducing new accounting policies and changes as per the external business environment.The quality of financial disclosure is evaluated through analyzing the presence of footnotes inthe financial statements, segment disclosure, and the description of key performancemeasures as per the accounting policies. The major area of concern for the company is alosidentified that requires more disclosure in the future context. These are corporate governancepolicies ad managers’ discretion power in earnings management.

ContentsIntroduction................................................................................................................................4Analysis of accounting policies and estimates of Ansell Ltd....................................................4Section 1: Identify Key Accounting Policies.........................................................................4Section 2: Assess Accounting Flexibility...............................................................................5Section 3: Evaluate Accounting Strategy...............................................................................6Section 4: Evaluate the Quality of Disclosure........................................................................8Section 5: Identify Potential Red Flags..................................................................................9Section 6: Complaint with the Conceptual Framework.........................................................9Conclusion................................................................................................................................10References................................................................................................................................12

IntroductionThe business corporations around the world are placing large emphasis on improvingon the quality of their financial reporting as per the IASB accounting standards. The IASB(International Accounting Standards Board) have directed the business entities to prepare andpublish their financial reports as per the conceptual accounting framework principles. Themajor principles of conceptual accounting framework are relevancy, reliability,understandability and comparability. The compliance of all these accounting principlesduring the development of financial reports will help in improving the quality of financialreports as per the IASB standards. The conceptual accounting framework is developed on thebasis of normative theories of accounting that helps in predicting the type of accountingapproach to be adopted for resolving a particular financial issue (Knight, 2004). In thiscontext, the present report aims to present an evaluation of the accounting quality of acompany listed on ASX through assessing the accounting policies and estimates adopted byit. The assessment of accounting policies of the selected firm is carried out by evaluatingits annual reports disclosures. The assessment is carried out for developing an adequateunderstanding of the various factors that impacts the development of financial statements of abusiness entity. The company selected for the purpose is Ansell Limited, a recognizedAustralian company that is involved in manufacturing of protective medical equipments. Assuch, the report presents an investigation on the accounting reporting strategies and choicesselected by the managers of the company for evaluation of their quality and usefulness topromote its long-term growth. Analysis of accounting policies and estimates of Ansell LtdSection 1: Identify Key Accounting Policies Ansell limited is a company which is situated in Australia, and the company alongwith its subsidiaries is specialized in protection solutions. In other words it can be said thatthe company is global leader in the protection solutions. The business organization is a profitentity and deals in developing and manufacturing a wide range of clothing and hand armprotection solutions (Ansell, 2017). The accounting policies of the firm are quite effective astheir accounting principles are based on historical cost basis except the assets and liabilitiesare accounted on the basis of derivative financial instruments. In addition to this, the financial

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