Analysis of AASB Conceptual Framework for Financial Reporting in Speedcast International Limited

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student
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1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction...................................................................................................................2
Description of Accounting Concepts............................................................................2
Conceptual Framework and the Issue of Measurement..............................................3
Fundamental Qualitative Characteristics – Relevance and Faithful Representation...4
Conclusion....................................................................................................................9
References.................................................................................................................10

2ADVANCED FINANCIAL ACCOUNTING
Introduction
Accounting concepts have certain major implications on the business
organizations since it leads to effective financial reporting practice within the
companies (Weil, Schipper and Francis 2013). This is also applicable for the
companies in Australia because of the presence of the Australian Accounting
Standards Board (AASB) Conceptual Framework which provides the Australian
listed companies with the appropriate accounting policies and procedures for
effective continuation of the processes of financial reporting (Schaltegger and Burritt
2017). In addition, the companies can get help from this accounting conceptual
framework for resolving different kinds of accounting issues such as measurement
related issues, valuation and recognition of financial substances related issues and
others. It is needed for all the Australian listed companies to adhere to the AASB
conceptual framework for the purpose of financial reporting. The main objective of
this report is the analysis and evaluation of different crucial aspects of the AASB
conceptual framework for the purpose of financial reporting. This report considers
analyzing different types of accounting concepts in the selected company. After that,
it considers the analysis of the measurement related issues in the company through
the effective consideration of the measurement debate. Lastly, it sheds light in
financial information’s fundamental qualitative characteristics. The company selected
for this report is Speedcast International Limited.
Description of Accounting Concepts
The presence of certain accounting concepts can be seen in the AASB
Conceptual Framework which the companies must consider in financial reporting
(aasb.gov.au 2019). They are discussed below:
Financial Statement and Reporting Entities
As per this accounting concept, the main role of financial statements can be
found in delivering relevant information about the assets, liabilities, equity, income
and expenses of the companies and the companies are needed to use this
accounting concept for the same purpose (aasb.gov.au 2019). It is visible in the
latest annual report of Speedcast International Limited that the firm has provided the
relevant information about the above-discussed economic substances through
different financial statement and notes. In addition, according to this concept,
business organizations must maintain their going concern status which indicates
towards the ability to continue operation for foreseeable future. Speedcast
International Limited has prepared their financial statements on the going concern
basis. In addition, the firm has introduced as well as implemented effective capital
management strategies for securing their ability to continue their business operations
as a going concern (asx.com.au 2019).
Elements of Financial Statements
This is considered as another most important accounting concept as per the
AASB Conceptual Framework. Assets, liabilities, equity, income and expenses are
the main elements of financial statements and AASB Conceptual Framework has
provided the definition of these elements. As per the definitions, assets and liabilities
are the present resources and obligations of the firms respectively arising due to
past events or transactions. Equity is the asset’s residual interests after deducting
the company’s liabilities. Income is the decrease in liabilities or increase in assets
that contributes to increased equity. Lastly, expenses are the decrease in income or
increase in liabilities which contribute to decreased equity (Flower 2018). According

3ADVANCED FINANCIAL ACCOUNTING
to the latest annual report of Speedcast International Limited, the company has used
this accounting concept with the inclusion of all the details and information on their
assets, liabilities, equity, income and expenses. In addition, the company has
provided the recognition as well as measurement criteria of these substances in the
notes to the financial statements (asx.com.au 2019).
Recognition and Derecognition
These two are crucial accounting concept related to the above discussed
elements of financial statement. Recognition refers to the procedures to capture an
element so that it can be included in the financial statements where derecognition
refers to the elimination of a part or a whole element from the financial statements of
the companies, especially from the balance sheets (Ponomareva and Melnikova
2015). It is observable in the latest annual report of Speedcast International Limited
that all the processes as well as procedures of the recognition and derecognition of
the financial statement’s elements are provided by the management of Speedcast
International Limited which indicates towards the adoption of these accounting
concepts by the firm (asx.com.au 2019).
Measurement
According to AASB Conceptual Framework, measurement helps in reflecting
the most relevant value of an element of financial statement. The presence of two
measurement approach can be seen in the AASB conceptual framework; they are
historical cost measurement and current value measurement (Barth 2013). Fair
value measurement and value-in-use measurement are the two measurement bases
under the current value measurement. It is observable in the latest annual report of
the selected company that the management has undertaken the use of both
historical cost and fair value measurement of their assets and liabilities (asx.com.au
2019).
Presentation and Disclosure
This accounting concept is concerned with the proper communication of the
information about the financial elements thorough their effective presentation and
disclosure. As per AASB conceptual framework, the managements of the companies
must effectively present and disclose all the required financial information through
the financial statements (Kieso, Weygandt and Warfield 2016). According to the
latest annual report of Speedcast International Limited, the company has effectively
presented and disclosed the required information by complying with the standards of
Australian Accounting Standard, AASB, Corporations Act 2001 and IFRS
(asx.com.au 2019).
Conceptual Framework and the Issue of Measurement
Conceptual Framework – It is crucial for the companies to adopt the appropriate
measurement base for the financial elements. In the AASB conceptual framework,
two measurement approaches are mentioned that are historical cost measurement
and fair value measurement under the current value method (aasb.gov.au 2019).
AASB conceptual framework states that fair value is the price received a firm due to
the sale of an asset or any payment or trainer of any liability at the measurement
date between two parties. The present value of an asset or liability reflects when the
companies adopt the fair value measurement base (Palea 2014). On the other hand,
the cost of an asset or liability at the date of acquisition can be obtained under the
historical cost accounting (Ellul et al. 2015). It is fair enough to mention the fact that
there are some major differences between these two measurement bases.