Advanced Financial Accounting Concepts for Myer Holdings Limited

ADVANCED FINANCIAL ACCOUNTING 1
Myer holdings limited: advanced financial accounting concepts
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ADVANCED FINANCIAL ACCOUNTING 2
INTRODUCTION
This report is an analysis of the financial concepts that an entity is obliged to use while
preparing the different financial statements and reports. It is mainly focusing on the generally
accepted accounting principles or concepts that are internationally accepted by the various
accounting institutions or boards such as the Australian accounting standards board, the
international standards accounting board and so many others. In this particular paper, Myer
holdings limited will be the business entity that will be used as the point of reference. This
implies that the paper will lay emphasis and focus on the Myer financial records and reports to
provide a relevant discussion. Additionally, the paper will specifically take a look at the new
requirement of AASB 16: leases and its underlying impact on the business operations in the
forthcoming financial periods. Conclusions will, therefore, be made following the discussions
proved and the data collected.
Description of the accounting concepts used
By definition, accounting concepts or principles refer to internationally accepted
standards, rules and guidelines that must be applied by an entity especially when preparing
financial records and or statements. There are majorly four accounting principles or concepts that
are fundamental when preparing accounting reports and records. These four major concepts
include the principle of consistency, accrual concept, prudence and the going concern concepts.
However, besides the above fundamental accounting principles, there are other concepts such as
the matching concept, the accounting equation principle, and the principle of objectivity and full
disclosure among others. For purposes of understanding, explanations of such terms will be
provided throughout the discussion.

ADVANCED FINANCIAL ACCOUNTING 3
Because the Myer holdings limited uses the accrual basis of accounting, the four
fundamental concepts and or principles were identified from the annual financial statements of
the company. Some of the statements that were used for selecting these concepts include the
company consolidated balance sheet, the consolidated income statement the statement of changes
in equity and the consolidated statements of cash flows. It forms such statements that concepts
such as the prudence, accrual, consistency and going concern were identified for the discussion
of the paper. Further discussions of the principles are provided as below:
The concept of prudence
Also known as the conservation concept, the prudence principle of accounting requires
that an entity or financial accountant should recognize and record only those incomes and
expenses that are realized (HLB Mann Judd, 2019). In this principle, a company should not
overstate the revenues and at the same time, the company should not understate the expenditures
incurred. The same principle should as well be applied to the assets and liabilities. The objective
of using such an accounting principle is to promote conservatism within the business entity. The
other alternative that can be used under this concept is undertaking delayed revenue recognitions
and on the other hand expenses and liabilities should be recorded immediately once there is an
obligation to pay. Myer Company limited applies the prudence concept, especially with the
concessions sales revenues. It is a company policy not to recognize revenues and incomes arising
out of concession sales and yet the provisions for returns inwards are effectively put in place. By
such accounting policies on revenues and expenses or obligations, the prudence concept of
accounting becomes applicable within the company financial records.

ADVANCED FINANCIAL ACCOUNTING 4
The accrual concept of accounting
According to the accrual concept, an entity or company such as Myer Holdings Limited
should be recorded when transactions take place and not when cash is received or paid up. This
means that an income is recognized at the time of the transaction provided there is right of
receipt or duty to pay. Such expenses or incomes are mostly witnessed especially when there is
no document or written receipt or invoice to show the transaction event. Therefore a journal
entry is recorded to represent such a transaction in the book of accounts. Among such
transactions that can be recorded with such a principle includes the interest on loans, tax
liabilities, credit sales and purchases and so on. For Myer Holdings Limited such items include
the deferred income of $ 10,294 million in the year 2018.
Consistency concept
This is the type of accounting which requires that an organization should continuously
use a single accounting method through over the future accounting period (Michelle et al, 2019).
Changes can only be acceptable w.hen such changes will improve the quality of financial
records. From the 2018 annual report, Myer Holdings Limited effectively applies this concept of
accounting through the comparative system of presenting financial data. The company also
maintains a uniform method of precision for recording financial data and information. Looking at
.comparability it is required that current year financial reports are presented alongside the
previous years’ records. The company reflects comparability as the 2018 financial records are
presented alongside the 2017 financial statements. The Precision of reporting data and
information in million dollars as used by the company is one way of facilitating proper
communication of the company affairs. The presentation of the current year financial statements