ADVANCE MANAGEMENT ACCOUNTING.

Running Head: ADVANCE MANAGEMENT ACCOUNTING
ADVANCE MANAGEMENT ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Accounting Concepts.............................................................................................................2
Conceptual Framework and Issues of Measurements............................................................5
Fundamental Qualitative Characteristics- Relevance and Representational Faithfulness.....8
Conclusions..............................................................................................................................10
Reference..................................................................................................................................11

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Introduction
The aim of this assignment is to discuss on the advance financial accounting. For this,
analysis will be done based on CSL Limited. This company is based in Australia, which is the
manufacturer of the global biotechnology engaged in research, developing as well as
marketing of the products for treating and preventing the serious human disease that is rare
and serious. Hence, under this study, discussion will be based on identification of the
accounting concept of the company. Further, discussion will be based on conceptual
framework and measurement in the accounting of the company. Lastly, discussion will be on
qualitative characteristics that includes relevance and representational faithfulness in relation
to the useful information of the financial statements (Anon 2019).
Discussion
Accounting Concepts
Accounting concept is defined as rules, principles as well as basic assumptions that works as
the way of recording the transactions of business as well as preparations of the accounts.
These concepts are used as the base of accounting purposes. It assumes that the owners of
business and the business organizations are two different independent entities (Schaltegger
and Burritt 2017).
The main accounting concepts are as follows:
Accruals Concept
It defines that the revenues as well as expenses are recorded in case of their
occurrence and not at the time of receiving or paying out the cash.
Consistency Concepts

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The accounting method once chosen, then that method should be used consistently
until and unless there is any sound reason for the change.
Going Concern Concepts
The business organization, for which accounts are prepared, should be in good
condition and it should continue its business even in foreseeable future.
Prudence Concepts
This concept is also known as conservation concept. The revenues as well as profits
are included in balance sheet only at the time when it is realized or if there is certainty of
realizing it, however, the liabilities are included in case if there is reasonable possibility of its
occurrence (Kaplan and Atkinson 2015).
Accounting Concepts used by the Company
In case of CSL limited, the preparation of general purpose accounting is used is on the
basis of accounting standard of Australia, Corporation Acts 2001, and International Financial
Reporting Standards. The company presents their information on the basis of historical cost
that is except for some financial instruments that is measured at the fair value (Anon 2019).
The company recognizes as well as measures the revenue at the fair value of that
consideration that has been received or wills be received. The revenue of the company is
recognized when the amount of the revenue can be measured reliably and if there probability
that there will be flow of future economic benefits to the company. It is the example of
accrual concept used by the company (Ganda, Ngwakwe and Ambe 2014). The company
uses the concept of the of concern concept, it is because in the calculation of depreciation of
the plant, property, land, buildings and the buildings are calculated on the basis of straight-
line that is over the assets estimated useful life. The company’s consolidated financial

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statements consist of the financial statements of the company as well as their subsidiaries
(Edgley 2014). The company has the control, over their subsidiaries at the time of its
exposure and it has having the rights for the variable returns from the involvements with
those of the organizations when it has the ability for affecting the returns. The financial
results of company’s subsidiaries are prepared by using the consistent policies of accounting
as well as for the same reporting period as that of the parent company. Therefore, the
company uses the accounting concept of the consistency. The significant policies of
accounting, summarizes the used measurements basis that are relevant to the financial
statements understanding is provided by the company throughout the financial statements
notes (Bedford and Ziegler 2016). Lastly, the company is using the conservatism or prudence
concept of the accounting by recognizing the revenue and expenses as well as making
provisions. The company recognizes the provisions under the conditions that the present as
well as the constructive obligations is arising out of the event or the past transactions, if there
is the probability that there is the requirements of the resource outflow for settling down the
obligations and the reliable estimate can be made out of the obligations. The company does
not recognize the provisions for the future operating losses (Kimmel et al. 2016). The
recognized provisions reflect the best estimate of the management for the required
expenditure for settle down the present obligations at the date of reporting. In case of the
effect of the time value of the money is considered to be material then the determination of
the provisions is done by discounting the future cash flows that are discounted for settle down
the obligations at pre-tax discount rate which reflects the current market assessments of time
value of money as well as the specified risks to the obligations (Kieso, Weygandt and
Warfield 2016).
In case of key judgments and estimates used by the company for tax, the company
regularly accesses the position of uncertain tax risk and recoverability and recognition of

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deferred tax assets. In application of the accounting policy by the company to the trade and
other receivables with the related entities and the government, the key judgments and
estimates includes accessing whether there is impairments or not and then after the level and
extent of impairment is considered (Simkin, Norman and Rose 2014).
Conceptual Framework and Issues of Measurements
The conceptual framework is defined as the system of the objectives as well as
system, which leads in creating the consistency set of the standards and the rules. The rules
and the standards that is used in the accounting, sets the function, nature as well as limits of
the financial statements as well as the financial accounting. It is the set of the objectives as
well as the fundamentals of the accounting that are developed by International Accounting
Standards Board for ensuring uniformity in the interpretations across the various
methodologies of the accounting (Macve 2015).
Measurement in the accounting is defined as the computations of the financial or the
economic activities in terms of the hours, money or the other units. It is the unit of the some
element of measurement, which is used as the basis of the evaluation and the comparison of
the accounting data. It is measured in terms of the money. The different accounting
measurement is useful in providing the different views in relation to the overall positions of
the company. It is with the help of various accounting measurements, their will be gain of
more comprehensive view of the operations of the company as well as it will be helpful in
easily compare them with the other companies (Linsmeier 2016). Measurement provides the
link between the formal number system and some of the property of the events or the objects
by semantic rules that are represented in the form of transactions. The measurement of the
profit in accounting is done by first assigning the value to the capital and then calculating the
profit as a change in the capital over period (Kieso, Weygandt and Warfield 2016).
Measurement in accounting runs on the certain principles that are as follows:

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 Objectivity: This is the principle, which is one of most pervasive as well as most
important principle in the measurement of accounting. It means that the information
of the financial accounting must be reliable and verifiable. This requires the
objectively determination of the transactions values as well as the assets and liabilities
that are backed by the documented evidences. However, it helps in ensuring that the
disclosed amount in the financial statements is reliable reasonably. The objectivity
principles also help in precluding much of the relevancy as well as useful information
from appearing ever on the financial statements (Beattie 2014).
 Matching: This principle refers to the efforts of given period that match against the
benefits, which results from the principles of matching. Whenever the cost is incurred
by the company for generating the benefits, then normally it is in the form of the
revenues that are initiated by it. In case of immediately generation of the revenue,
cost is then considered as an asset, or it is capitalized and it is appeared on the balance
sheet (Glover 2014).
 Revenue Recognitions: The determination of the revenue recognition helps in
ordered, produced, transferring to the buyers and then paying for the business.
 Consistency: Under these principles, even though there are various choices among
the methods of accounting, the company generally chooses the specific method of and
it is used from one period to other. This consistency helps the creditors, investors as
well as the interested parties for comparing the performance measures as well as the
financial position over the given period of time (Aletkin 2014).
Some of the measurements of the accounting include current cost accounting, historical
cost accounting as well as exit price accounting. In the current cost accounting, the valuations
of the assets are based on the current replacement costs and it increases their value that is the
results of the inflations are excluded from the profit calculations (Annarelli, Battistella and

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Nonino 2016). Moreover, historical cost accounting is one of the most straight-forward
systems of measurement (Morioka and de Carvalho 2016). It simply records the assets actual
cost, the cost that are incurred are only recorded. Further, at the time of the acquiring of the
items, the calculations are done on the original value. The exit price accounting is the price
that is recorded at the time when the investments or the merchandise is sold by the investors
or the firm while leaving market. It equalizes exit prices meaning as the selling prices and the
fair market value. Lastly, the fair value accounting is most relevant in the market place. It is
most reliable than that of the historical cost. It is based on the observable market prices
(Kalkhouran et al. 2015).
Issues of Measurements
Following are the issues in the measurement:
Historical Cost Accounting Issues
 It is not adequate for the accounting as the business profits are measured with the help
of comparison of revenue from sales with that of the previously sold assets.
 The accelerated rate of the inflation in the year 1970 around the globe has proved the
low efficiency level of the historical cost accounting (Kanodia and Sapra 2016).
Current Cost Accounting Issues
 It is highly subjective as the cost is generally not based on the actual transactions.
 This system of measurement is not suitable for the decisions of short-term.
Exit Price Accounting Issues
 It provides less reliable information.
 The significant fluctuations of fair values over the short-time may constitute the major
swings in the reported results.

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 The challenge comes from the different levels of the fair values. First level is based
the quotations of market. Second level is based on the dependency on the inputs that
are observable in case of no active market. Lastly, the values of the assets and the
liabilities are relied on estimated present values (Ettredge, Xu and Yi 2014).
Fair value accounting Issues
 It is having inherent subjectivity.
 The complexity of fair value measurement could lead to the audit risk.
In case of CSL limited, the company uses historical cost accounting for presenting the
information. However, for the certain financial instrument company uses the system of fair
value accounting that is generally one of the most reliable than others. Historical cost used by
the company takes into the accounting only the original costs of the assets. However, fair
value accounting used by the company takes into the account only the assets current market
value (Watson 2015).
Fundamental Qualitative Characteristics- Relevance and Representational Faithfulness
There are three important categories of the characteristics that make the information
of the accounting more useful for the decision making that are fundamental qualitative
characteristics, enhancement of the qualitative characteristics and the cost constraint.
However, there are two main fundamental qualitative characteristics of the useful financial
statements are as follows:
Relevance: The relevant information is that information, which makes the differences
in the decision making of the users. In order to be relevant the two most important qualities
that are very much important are predictive value and confirmatory value. The information is
given predictive value when it will be used in the process of predictive. Moreover, the
information is given the confirmatory value when it helps in providing the feedback on the

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prior evaluations either by the confirmation or by the correction. However, the information
that are misstated or omitted will be affecting the user for their decision making. Therefore,
the relevancy of the accounting information helps in providing the information about the past
events and predicting the future events by taking the actions for dealing with the possible
future events (Henderson et al. 2015).
In case of CSL Limited, they provide relevance of the financial information by
providing the additional information as well as respective notes wherever it is considered to
be useful for understanding of the performance of the company as a whole.
Representational Faithfulness: The information is considered to be represented
faithfully when it is being free from error as well as neutral. However, being free from the
error does not always mean that it is perfect. It is also referred as reliability. It is the extent to
which the information accurately helps in reflecting the resources of the company,
transactions, obligatory claims and so on. Therefore, for possessing the representational
faithfulness of the accounting information, it must be complete, neutral and free from error.
Complete means that the financial statements must not exclude any of the transactions.
Moreover, neutrality is defined as degree to which the information is free from the bias.
Lastly, free from bias is referred as the degree to which the information is free from the errors
(BarHava and Rozen 2015).
In case of the CSL Limited, the company is very much conscious about the faithful
representation of the accounting information. The company provides the financial
information that is free from any type of error; the transactions are complete and neutral. The
details of the transactions, adjustments as well as the methods used are shown in the notes.
The company has also control over economic benefits that is derived from the usefulness of
its assets.

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Relevance and representational faithfulness, both are considered to be the important
for the company to provide the financial information to the users of the decisions makers
(BarHava and Rozen 2015).
Conclusions
Therefore, it is concluded from the analysis that the accounting concept is the
principles, standards, rules and the assumptions used by the company in recording of the
business transactions such as accrual, going concern, consistency and conservatism concept.
Moreover, conceptual framework is the objective system that leads in creating the
consistency of the rules and standard which enhances uniformity of the accounting standards.
Further, there are certain challenges and the issues of measurement in accounting of different
methods. Lastly, the relevance and representational faithfulness are the most important
aspects of the company for providing reliable, neutral, free from bias and complete
information to the users of the financial statements.

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