Advanced Corporate Reporting: Conceptual Framework and Qualitative Characteristics

This report analyzes the conceptual framework and qualitative characteristics of advanced corporate reporting, including an evaluation of MTR Corporation's annual report. It emphasizes the importance of comparability in financial information for stakeholders to make informed decisions.

Running Head: Advanced corporate reporting
1
Project report: Advanced corporate reporting

Advanced corporate reporting
2
Contents
Introduction.......................................................................................................................3
Conceptual framework relevance in corporate reporting.................................................3
MTR conceptual framework analysis...............................................................................4
Qualitative characteristics of financial information.........................................................7
Conclusion........................................................................................................................7
References.........................................................................................................................9

Advanced corporate reporting
3
Introduction:
Conceptual framework represents about the assumptions, principles and rules in order
to prepare and present the annual report of an organization that is following the IASB
guidelines. The conceptual framework explains that only items which fall under the definition
of assets, equity and liability are recognized in the financial position statement and the items
which fall under the definition of income and expenses are recognized in the financial
performance statement (Schroeder, Clark & Cathey, 2011). In this report, the main focus has
been done on the conceptual framework. The Conceptual framework relevance in corporate
reporting, conceptual framework relevance in the MTR annual report and the main qualitative
characteristics of annual report has been studied in the report in order to improve the
knowledge about the conceptual framework.
Conceptual framework relevance in corporate reporting:
Corporate reporting defines about the annual report in which all the financial and non
financial activities of the business related to a particular time period is stated by the business
to offer the information to the stakeholders of the business. The IASB has announced the
conceptual framework in order to set the high quality corporate reporting and offer the better
information to the stakeholders about the business so that a better conclusion could be made
(Lee, 2006). The IASB has set the understandable and enforceable corporate accounting
standards and policies so that all the organization could follow it and the stakeholders could
also compare it easily with other organization to identify the industry performance of the
business. The IASB conceptual framework co-operates with national accounting standards in
order to set the similarity in the accounting standards all around the world.
the conduct committee has been set by IASB differently in order to advise and
conduct the high quality corporate reporting of the business which also include the
monitoring, investigation, oversight and disciplinary functions so that the resemblance could
be set among the corporate reporting and it becomes easier for the internal and external
stakeholders of the business to identify the performance of the business and decide about the
organisational performance (Laux & Leuz, 2009). In order to improve the corporate
reporting, the IFRS has done investigation in the UK market and reach over a conclusion that
because of the corporate governance, the transparency level has been improved in the

Advanced corporate reporting
4
business and it has helped the corporate reporting to become better and offer relevant
information to the stakeholders of the business.
The conceptual framework focuses on both quantitative and qualitative factors of the
business to measure that whether the accounting treatment of each of the transaction has been
done in proper way or not. It explains that the organization is required to follow the accrual
accounting and materiality concept so that the proper performance of a particular time period
could be found and evaluated by the business (Glasson, Therivel & Chadwick, 2013). the
conceptual framework has mainly set u on the basis of the investors point of view so that they
could evaluated the annual report of the business and make better reports about the
performance of the business.
MTR conceptual framework analysis:
MTR Corporation limited is a Hong Kong company which operates its activities and
services at global level. The main services of the business include railways, property
development etc. The annual report, 2017 of the company has been studied in order to
identify the corporate reporting level of the organization and the main qualitative
characteristics of the business. The evaluation on the qualitative characteristics of the
business is as follows:
Relevance:
Relevance financial information is enough capable to manipulate the decisions made
by the users. There are two types of values, predictive values and confirmatory values in the
financial information of a business. Predictive values define about the input which is used by
the investors to predict the future of the business and the confirmatory values define about the
feedback of previous information of the business (Daly & Farley, 2011).
In order to evaluate the annual report of MTR, 2007, it has been found that the
business is following the conceptual framework and the proper relevance principle has been
followed by the business while preparing the annual report of the business. Some of the
relevance example of the business is as follows:
 The business has predictive as well as confirmatory values both. It offers the base to
forecast the future as well as it offers the basis to give a feedback about the current
performance of the business as the growth rate of the business has been given along
with the comparison with the previous year data (Annual report p. no. 99, 2017).

Advanced corporate reporting
5
 The financial reports of the business are enough capable to make the difference and
manipulate the decisions made by the stakeholders and the capital providers of the
business. The net profit level of the business has been improved along with the
dividend payout ratio which has manipulated the investor’s decisions about the
business (Annual report p. no. 100-101, 2017).
 The annual report of the business is enough capable to make the difference among the
decisions of the investors whether they use the annual reports or not because the
impact of annual report could directly be seen on the stock price of the business. In
case of statement of financial information of the business, it has been found that the
EPS level of the business has been improved and along with the improvement in the
EPS, the stock price of the business has also been improved (Annual report p. no. 103,
2017).
Faithful representation:
In order to offer the proper information about the business, it is not enough for the
corporate reporting to be relevant, the financial statement of the business are also required to
be faithful. Faithful representation explains that an organization is required to maximize the
underlying characteristics of neutrality, freedom and completeness from any kind of error in
the financial information (Dye & Sunder, 2011).
In order to evaluate the annual report of MTR, 2007, it has been found that the
business is following the conceptual framework and the proper faithful representation
principle has been followed by the business while preparing the annual report of the business.
Some of the faithful representation example of the business is as follows:
 All the information provided by the company is complete in the annual report. The
business has included the financial notes along with each financial statement to make
it easier for the business to reach over better conclusion (Annual report p. no. 206,
2017).
 Neutral depiction has been followed by MTR Corporation without any kind of bias in
order to select and present the financial information of the business (Annual report p.
no. 202-205, 2017).
 Further, the annual report (2017) explains that the financial reports of the business are
free from any kind of error. A proper process has been followed while preparing the

Advanced corporate reporting
6
annual report so that no error could take place in the business and the annual report
(Annual report p. no. 200, 2017).
Comparability:
The conceptual framework explains that the information must be reported in the
annual reports in such a way that it becomes easier for the stakeholders of the business to
compare it with similar entity or from previous year data of the business. It makes it easy for
the investors and other stakeholders of the business to find the similarities and difference
among the annual reports and financial items of the business (Evangelinos, Nikolaou & Leal
Filho, 2015).
In order to evaluate the annual report of MTR, 2007, it has been found that the
business is following the conceptual framework and the proper comparability principle has
been followed by the business while preparing the annual report of the business. Some of the
comparability example of the business is as follows:
 Each of the financial items of the annual report (2017) has been evaluated and it has
been found that the business has reported the items in such a way that it could be
compare with similar entity easily (Annual report p. no. 100, 2017).
 The business has reported the 2016 and 2017 financial information together to
measure the changes and compare the financial information of the business (Annual
report p. no. 202, 2017).
 It enables the stakeholder of the business to understand the differences and similarities
in the financial performance of the business with other company (Annual report p. no.
202-206, 2017).
Understandability:
Classification, characterise and presentation of information in clear and concise way
makes it easier for the stakeholders to understand the financial information of the business.
Though, few of the items of annual report and inherently complex and it could not be
understand by everyone and it makes the corporate reporting of an organization incomplete
and misleading (Brinkerhoff, 2005). Mainly, the financial reports are prepared by those
stakeholders only who have reasonable knowledge about the business; economical activities
etc and would can easily analyze and review the information with diligence (Arewa, 2006).

Advanced corporate reporting
7
In order to evaluate the annual report of MTR, 2007, it has been found that the
business is following the conceptual framework and the proper understand-ability principle
has been followed by the business while preparing the annual report of the business. Some of
the understand-ability example of the business is as follows:
 The annual report has represented little complexity in the accounting information as
well on the basis of the conceptual framework and offers the better information to the
stakeholders assuming that the users have reasonable knowledge of economy and
accounting (Annual report p. no. 246, 2017).
 The business has represented all the material information ignoring the fact of
understand-ability and assumes that the user could understand it (Annual report p. no.
206-266, 2017).
 Few items such as deferred tax assets, deferred tax liabilities, impairment assets etc
have been represented in the annual report despite the fact that numerous readers and
users don’t know about these items (Annual report p. no. 206-266, 2017).
Qualitative characteristics of financial information:
On the basis of the above studied qualitative characteristics of a business, it has been
measured that all of the above studied qualitative characteristics of the business is important
in their way. But the most important characteristic is comparability. Comparability is among
the essential part of the financial information because it makes to simple for the investors,
shareholders and other stakeholders of the business to differentiate analyze and improve the
financial decision of the business in order to make important decisions (Allen & Carletti,
2008).
comparability characteristic improves the intra-firm comparison, inter-firm
comparison and market sector comparisons, It makes to easier for the users and stakeholders
to measure, identify and compare the financial performance of the business from the last year,
from the similar entity in the industry and in the market so that the better decision could be
made and the investment and divestment could be done by the investors accordingly (Hák,
Moldan & Dahl, 2012).
It evaluates the similarities and differences among the financial items to make it easier
for the users to reach over a conclusion. Such as, in case of MTR, because of comparability
concept, it has became quite easier to identify the performance of the business from the last

Advanced corporate reporting
8
year and evaluate that the company has been grown up by a great rate. The characteristic of
comparability in the financial statement is crucial because it helps the internal and external
stakeholders of the business to compare the set of financial statement (income statement,
balance sheet and cash flow statement) with the previous years to make better decision about
the current performance and forecast the future performance of the business (Whittington,
2008).
Conclusion:
On the basis of the above report, it has been concluded that the conceptual framework
is quite essential for each of the business to prepare and present the accounting transaction
and the annual report to the stakeholders of the business so that they could evaluate the
financial information of the business and make better decision about the performance of the
business. Conceptual framework has evaluated global accounting standards and represented
them in better manner so that it becomes easier for the investors, stakeholder and the users in
the market to measure the financial information of different companies and make decision
about the performance of the business. It concludes that the conceptual framework is essential
for each of the business to follow in order to improve the presentation of the annual report.

Advanced corporate reporting
9
References:
Allen, F. & Carletti, E., (2008). Mark-to-market accounting &liquidity pricing. Journal of
accounting &economics, 45(2), pp.358-378.
Arewa, O.B., (2006). Measuring &representing the knowledge economy: accounting for
economic reality under the intangibles paradigm. Buff. L. Rev., 54, p.1.
Annual Report. (2017). MTR Corporation limited. (online). Retrieved from:
https://www.mtr.com.hk/en/corporate/investor/2017frpt.html
Brinkerhoff, D.W., (2005). Rebuilding governance in failed states &post‐conflict societies:
core concepts &cross‐cutting themes. Public administration &development, 25(1),
pp.3-14.
Daly, H. E., &Farley, J., (2011). Ecological economics: principles &applications. Isl&press.
Dye, R.A. &Sunder, S.,(2011). Why not allow FASB &IASB standards to compete in the
US?. Accounting horizons, 15(3), pp.257-271.
Evangelinos, K., Nikolaou, I., &Leal Filho, W., (2015). The Effects of Climate Change
Policy on the Business Community: A Corporate Environmental Accounting
Perspective. Corporate Social Responsibility &Environmental Management, 22(5),
257-270.
Glasson, J., Therivel, R., &Chadwick, A., (2013). Introduction to environmental impact
assessment. Routledge.
Hák, T., Moldan, B., &Dahl, A. L. (Eds.)., (2012). Sustainability indicators: a scientific
assessment (Vol. 67). Isl&Press.
Laux, C. &Leuz, C., (2009). The crisis of fair-value accounting: Making sense of the recent
debate. Accounting, organizations &society, 34(6), pp.826-834.
Lee, T.A., (2006). The FASB &accounting for economic reality. Accounting &the Public
Interest, 6(1), pp.1-21.
Schroeder, R.G., Clark, M.W. &Cathey, J.M., (2011). Accounting theory &analysis. Chapel
Hill: University of North Carolina.

Advanced corporate reporting
10
Whittington, G., (2008). Fair value &the IASB/FASB conceptual framework project: an
alternative view. Abacus, 44(2), pp.139-168.