Advanced Financial Accounting - Assignment

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student
Name of the University
Author’s Note

ADVANCED FINANCIAL ACCOUNTING1
Table of Contents
1. Introduction...............................................................................................................2
2. Reporting Entity Concept..........................................................................................2
2.1 Definition.............................................................................................................2
2.2 Necessary Facets Associated with the Identification of Reporting Entity...........2
2.3 Identification of API as a Reporting Entity..........................................................3
3. Fundamental Qualitative Characteristics..................................................................4
3.1 Relevance and Representational Faithfulness...................................................4
3.2 Importance of Fundamental Qualitative Characteristics.....................................4
3.3 Examples from API.............................................................................................5
4. Conclusion................................................................................................................5
5. References...............................................................................................................6

ADVANCED FINANCIAL ACCOUNTING2
1. Introduction
Financial reporting is considered as an important facet for the business
organizations where the required financial statements are published with the aim to
disclose the information on the firm’s performance and position (Gomariz and
Ballesta 2014). This requires the companies undertake the concept of ‘reporting
entity’ that ensures that adequate information on financial performance and position
is disclosed in order to ease the process to make decisions by the investors and
other users of financial reports. Correct preparation and presentation of financial
reports is another major facet of financial reporting that requires the companies to
disclose all the necessary information. Managements of the companies are required
to ensure the presence of fundamental qualitative characteristics in the disclosed
financial information in order to make them more useful to the investors and other
users. There are two parts of the report. Discussion on the concept of reporting entity
along with the identification of Australian Pharmaceutical Industries (API) as the
reporting entity is the first aim of the report. Discussion on the necessary aspects
associated with fundamental qualitative characteristics in respect of the chosen
company along with example is the second aim of this particular report.
2. Reporting Entity Concept
2.1 Definition
The presence of the definition of reporting entity can be seen in Statement of
Accounting Concept (SAC) 1. According to SAC 1, reporting entities are considered
as all the entities in respect of which there is a reasonableness in the expectation
that there is the presence of users having large dependency on the general purpose
financial reports of those entities for the extraction of required information that will be
of crucial use of their decision making process associated (aasb.gov.au 2020).
It is required for the reporting entities to prepare the general purpose financial
reports by complying with the rules and regulations of Statements of Accounting
Concepts and Accounting Standards (aasb.gov.au 2020).
2.2 Necessary Facets Associated with the Identification of Reporting Entity
The process to identify whether a firm is a reporting entity or not is associated
with the information need of the users of the general purpose financial statements.
There are many business organizations where it can easily be understood that
whether there is the presence of dependent users on their general purpose financial
reports or not. At the same time, there are many companies where it is not possible
to readily ascertain whether there is the presence of independent users on their
general purpose financial statements. For these companies, the Australian
Accounting Standards Board (AASB) has provided three criteria for the identification
of reliant users on their general purpose financial statements. These are outlined
below:
1. The first requirement is the separation of management from the economic
interest. Greater ownership spread along with the greater parting between the
management and owners indicates towards the greater likelihood of the
presence of needy users on the general purpose financial reports of the
companies for making the relevant decisions (Potter, Ravlic and Wright 2013).
2. The second requirement is the economic or political effect of the companies
which can be considered as a business’s capability for majorly impacting
wellbeing of different outside stakeholders. High the economic or political
significance of the firms, higher the possibility of the presence of reliant users