Conceptual Framework and Integrated Reporting

ACCT20074
Contemporary Accounting Theory
Term 1 Assessment 3
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Executive Summary
This report has been developed into two separate sections. The first section has explained
the usefulness, history, benefits and limitations of conceptual accounting framework. This
applicability of CF in developing the financial reports has been explained in reference to the
ASX listed entity of Wesfarmers. It has been identified through analysis of the annual report of
Wesfarmers that it has complied with all the qualitative principle provided by the conceptual
accounting framework in development of its annual reports. The next section has discussed the
difference between GRI and integrated reporting systems and the different theories used in
developing the contents of sustainable reports. The different criterion of integrated reporting
system and its difference with the sustainability reports has been explained by presenting the
comparison between a selected South African, that is, RCL Foods Limited and ASX listed entity,
that is Wesfarmers limited. It has been identified that RCL Food Limited has applied integrated
reporting framework to disclose both financial and non-financial data. On the other hand,
Wesfarmers has also complied with the essential criterion of integrated reporting framework in
providing information about its financial as well as sustainability matters.
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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Part A: Conceptual Framework.......................................................................................................4
(a): History of Conceptual Framework (CF) Adoption in the USA, UK and Australia..............4
(b): Australian Accounting Profession Concerns Regarding the Application of the IASB/IFRS
CF for Financial Reporting..........................................................................................................5
(c): Potential Benefits and Limitations of conceptual framework for financial reporting...........5
(d): Evaluation of Annual report of Wesfarmers using Conceptual Framework.........................6
Subpart (i): Number of financial statements and their components............................................6
Subpart (ii): Principles of recognition and measurement basis used for asset, revenue and
liabilities.......................................................................................................................................7
Subpart (iii): Qualitative characteristics of Wesfarmers’s financial information presented in
financial information:...................................................................................................................7
Part B: Integrated Reporting..........................................................................................................11
(a): Comparison of Global Reporting Initiative (GRI) and International Integrated Reporting
Framework for Social Responsibility Reporting.......................................................................11
(b): Rigor of Conventional Accounting Approaches for Explaining the Contents of
Sustainability..............................................................................................................................11
(c): Usefulness and Limitations of Theories for Explaining the Contents of Sustainability
Reports.......................................................................................................................................12
(d): Evaluation of application of integrated reporting components by selected South African
Company (RCL Foods Limited)................................................................................................12
(e): Comparison table showing the difference in reporting practice of the selected Australian
Company with the index of components of IIRC as used by South African Company............15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17
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Introduction
This report has been developed for providing an analysis of the framework and policies
that are used by businesses all over the world to develop and present their financial as well as
non-financial information. In this context, there has been discussion in relation to the
applicability of the conceptual framework provided by the IASB to develop the financial reports.
This is carried out by stating the history, strengths, limitations and its application in developing
the financial statements in reference to an ASX listed entity. The next section of the report
relates to explaining the manner in which businesses are disclosing their sustainability reports.
This has been conducted by explaining the sustainability frameworks such as Global Reporting
Initiative (GRI) and integrated reporting systems. The limitations of conventional accounting
approaches, relevant theories for developing the content of sustainability reports and criteria used
in developing integrated reports are discussed in this section with comparing it to the
sustainability reports criterion used by ASX listed entity.
Part A: Conceptual Framework
(a): History of Conceptual Framework (CF) Adoption in the USA, UK and Australia
The conceptual framework (CF) is regarded as a theory of accounting that provides a
reference frame to be used for developing the financial reports on the basis of certain qualified
qualitative principles. The IASB (International Accounting Standards Board) has provided the
CF for improving quality in the financial reporting process. It has been followed and
implemented by different countries to enhance the quality of financial reports and attaining the
goal of converging accounting standards of IASB (Dean and Clarke, 2003). The developed
countries such as the UK, Australia and the US are adopting and implementing the CF to
improve the international comparability of their financial reports. The Accounting Principles
Board (APB) in the US has been developed in the year 1965 for stating the accounting principles
and policies to be followed for developing and producing the financial reports (Macías and
Muiño, 2011). This has lead to the development of a Trueblood Committee in the year 1971 that
has provided the objectives and principles to be used for disclosing the financial information to
the users. These objectives and principles were criticized on the basis of providing limited
information to the users. As such, there has been replacement of APB by FASB and this lead to
the adoption of the CF project. The FASB is working in co-ordination with IASB for developing
a revised CF (Seng, 2014). The development of the CF in the UK can be linked with the presence
of issues related with inconsistencies in the financial reporting system related with recognition
and measurement of different financial items (Barth, 2008). The ASB has adopted the IASC
framework in the year 1991 for improving consistency within the financial reporting system. The
issues related with measurement inconsistencies in Australia has lead to the adoption of the CF
after the decisions taken by the Financial Reporting Council in the year 2005 (Chua, Chee and
Cheong, 2012).
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