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ACC566 - Accounting Theory & Contemporary Issues

   

Added on  2020-03-01

11 Pages1577 Words76 Views
Accounting Theory & Contemporary Issues
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IntroductionThe IASB (International Accounting Standards Board) has developed and implementedconceptual accounting framework for improving the consistency and reliability of financialaccounting (Edwards and Walker, 2009). This report has been taken in regard to demonstrate theimportance of business firms to comply with conceptual accounting framework. The report isaimed for presented a critical analysis of the general purpose financial reports of an AustralianASX top 100 listed corporation for evaluating its compliance with the obligations of theconceptual accounting framework. The company selected for the purpose is ZARA brand, aclothing retailer Analysis of General Purpose Financial Statements of ZARA as per Conceptual AccountingFrameworkThe conceptual accounting framework has been developed by the IASB for improvingthe quality of the financial reports developed by business corporations. The conceptualaccounting framework analyses the quality of financial statements developed by businesscorporations on the basis of qualitative characteristics, that are, relevant, reliable, comparableand understandable (Hoffman, 2016). The general purpose financial reports of businesscorporations operating in Australia need to comply effectively with all these qualitativecharacteristics as per the AASB standards. Zara, a brand of Inditex Group is a recognizedfashion retailer having its retail stores around the world including Australia. The compliance offinancial report of Zara with conceptual accounting framework is conducted through examiningthe consolidated financial statements of Inditex Group. The director’s report and notes tofinancial statements section of the annual report of Inditex Group are critically analyzed in orderto evaluate whether the corporation meet the conceptual accounting framework obligationseffectively (Inditex: Annual Report 2016, 2016). The notes to the financial statement section of Inditex have provided a disclosureregarding the effective compliance of the Group with the IFRS (International FinancialReporting Standards) (Inditex: Annual Report 2016, 2016). The financial statements areprepared in accordance with the going concern basis and the financial instruments are measuredat fair value as depicted from the attached screenshot:
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The analysis of depreciation, assets and liabilities, income statement, derivatives andleases account of the Group as per the conceptual accounting framework is carried out asfollows:DepreciationThe AASB have developed AAS 4 accounting standard that provides guidance tobusinesses operating within Australia for depreciation recognition and measurement. The AASB4 standard states that fixed assets should be depreciated over their useful life’s with specificdescription of the method by which it has been done. As depicted in the annual report of thegroup, the depreciation is calculated through the use of straight-line basis method over the usefullives of its fixed assets. The useful lives of the fixed assets are reviewed annually for accountingthe changes identified (Inditex: Annual Report 2016, 2016). The Group as per the conceptualaccounting framework principles has also provided all detailed information about itsamortization and depreciation accounts as evident from the attached screenshot:
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Assets and LiabilitiesAs depicted from the balance sheet of the Group, it possesses both non-current andcurrent assets and liabilities, as depicted from the attached screenshot:
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