1ADVANCED FINANCIAL ACCOUNTING Table of Contents Introduction...................................................................................................................2 Company’s Background............................................................................................2 Discussion.....................................................................................................................2 Reporting Entity.........................................................................................................2 Fundamental Qualitative Characteristics..................................................................3 Relevance..............................................................................................................4 Representational Faithfulness...............................................................................4 Conclusion....................................................................................................................5 Reference.....................................................................................................................6
2ADVANCED FINANCIAL ACCOUNTING Introduction Financial accounting is the specialized branch of the accounting, which keeps trackofthefinancialtransactionsofentity.Theaccountingtransactionsare summarized,recordedandpresentedwiththehelpofusingthestandardized guidelinesinfinancialstatements.Businessesemploysvariousstrategiesfor increasing their market share. The firms make those strategic decisions that helps in fosteringlongevityandgrowthofbusiness.Theinvolvementofcompanyin transactions of foreign currency sets stage for the international growth. All these strategies affect financial reporting for business organization (Grossi and Steccolini 2015). Hence, this report aims to discuss about reporting entity. Further, discussion will be on qualitative characteristics with respect to useful information of the financial statement. All the discussion will be in reference to Crown Resorts Limited. Company’s Background Crown Resorts Limited Crown Resorts Ltd. is largest Australian groups of entertainment. It manages and operates entertainment as well as gaming facilities, restaurants, bars, retail outlets, cinemas and nightclubs. It also develops conference centres facilities. This company operates in the consumer discretionary sector. It derives revenue from the investmentandbusinessesinentertainmentandgamingsector.Thetotal employment of people is approx. 18,000 and it operates in Australia, US, UK and it is administered by its head office at Victoria. Cross Resorts Limited is listed on ASX under code CWN (Crownresorts.com.au. 2020). Discussion Reporting Entity Entityisdefinedasanyadministrative,legalorfiduciaryarrangements, structure organization or the other party that is having capacity for scarce resources for achieving the objectives.Reporting entityis the entity in which it is reasonable for expectingthatsomeoftheusersaredependentontheGPFRforgaining understanding of the financial performance and position of company and making decisions based on the financial as well as other information.“General purpose financial report”is defined as the financial report that is intended for meeting needs of the information that is common to the users, who are basically not able for commanding preparation of the tailored reports so as for satisfying all the needs of the information (Carey, Potter and Tanewski 2014). These users can be creditors, lenders, potential investors, employees and shareholders. There is no dependency of “reporting entity” concept upon sector such as private or public, within which entity operates, purposes based on which entity is created, profit or for not profit or the manner in which company is established such as legal or other. Further, “reporting entity”concept and identification of the boundaries of “reporting entity”are linked with each other. For instance, if “reporting entity”concept adopted was based on the class of legal entity then this implies identification of the boundaries of company by legal considerations reference. This implies that only the companies of that particular class of legal could be combined for forming “reporting entity”(Aasb.gov.au. 2020). The “reporting entity”concept is linked with informational needs of users of the GPFR in evaluating and making the decisions of resource allocations. The informationalprovisionsfortheseparticularpurposesarecriteriausedfor
3ADVANCED FINANCIAL ACCOUNTING determining boundaries of particular “reporting entity”. This is significant for those who are charged up with the governance for documenting whether the entity has users who are dependent upon GPFR for enabling them for defining entity as reportingornon-reporting(Carinietal.2018).Thecompanyisknowntobe “reporting entity”, if it is preparing GPFR. In Australia, the accounting standards of Australia are required to be applied in order to prepare financial report of listed company. All the “reported entities”such as listed entities are required to prepare financial report, as these reports are accessed by the external shareholders and other users. Therearevarious risks and benefits associated with eachof the reporting framework (Flower 2015).The greatest key risk is for addressing that whether particular entity is reporting entity. In case, if definition of entity is incorrect then ASIC will do the investigation of those charged up with the governance for incorrectfinancialreportpreparationandhencebreachingrequirementsof “Australian Accounting Standards”and “Corporation Act 2001”.Further, some of listed entities uses GPFR as the marketing document for promoting their activities and demonstrating their social standing and responsibility with community (Cariniet al. 2017). In case of Crown Resorts Limited, its financial report is GPFR that has been prepared according to the “Australian Accounting Standards”, “Corporation Act 2001” and the other authoritative pronouncements of AASB. It is the for profit entity that is limited by the shares and whose shares are publically traded on “Australian Stock Exchange” (Kulikova and Gafieva 2014). In amounts shown in financial report of Crown Resorts Limited is shown in dollars and it is rounded off to the closest hundred thousand.This company is the entity to which this particular instrument applies (Crownresorts.com.au. 2020). For year ended June 30, 2019, Crown Resorts Ltd. and its controlled companies was authorized to issue according to the resolution ofdirectorsonSeptember11,2019subjecttosubcommittee’sfinalapproval. Moreover,financialreportofCrownResortsLimitedcomplieswithaccounting standards of the Australia as issued by AASB and IFRS as issued by IASB. The preparation of entity’s financial report is done according to costing technique of the historical cost. This is apart from consideration of contingent, investment as well as derivative financial instrument, as all these are measured according to fair value (Crownresorts.com.au. 2020). Fundamental Qualitative Characteristics The call for the accounting information by users such as creditors, lenders, investors and others create the “fundamental qualitative characteristics”, which are required in the information of accounting.All organizations are required to provide thefinancialinformation,whichshouldpossess“fundamentalqualitative characteristics”. The accounting information should be backed by 6 “fundamental qualitativecharacteristics”.However,twoofsix“qualitativecharacteristics”are considered to be fundamental, while remaining of the four “qualitative characteristics” are considered as enhancing (Grigoras-Ichim and Morosan-Danila 2016).
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
4ADVANCED FINANCIAL ACCOUNTING “Qualitative characteristics”of the accounting information needs to be present fortheinformationtobeimportanttotakedecisionsare“relevance”and “representational faithfulness”(Otubor et al. 2017). Relevance “Relevance”is referred to how much information is helpful for process of the financialdecision-making.Forhaving“relevant”information,itshouldpossess predictiveandconfirmatoryvalue.Theconfirmatoryvaluehelpsinproviding information regarding the past events. Further, predictive value helps in providing predictivepowerrelatingtopossibleeventsoffuture.Hence,informationis accounting is relevant if helps in providing helpful information regarding past events and it helps in the predicting events of future or in taking actions for dealing with the likely events of future. According to AASB, relevant financial information is having the capability for making differences in decisions made by the users (Pravat 2014). The information might be having capability to make differences in decisions even if some of the users chooses for not taking benefit or it or having aware already of it from the other sources. According to AASB, financial reports helps in representing economic phenomena in the numbers and words. For being useful, the financial information should not only represent relevant phenomenon, however, they should also represent faithfully the phenomena, which is purports to represent (Adrian- Cosmin 2015). In case of Crown Hotels Limited, financial information provided by company is relevant. It is relevant in the sense that company provide the financial information that is having both predictive and confirmative value. For example, the calculation of residual value is done by using formula of perpetuity growth that is based on forecast ofcashflowusingtheWACCandtheforecastofgrowthrates (Crownresorts.com.au. 2020). The forecast of growth rates is based on the past performances and the expectation of management of the future performance in each of the CGU as at June 30, 2019, which is based on product’s nature and industries under which each CGUs is operating. The growth rate of terminal beyond four-year period does not exceeds forecasted inflation rate of Australia that is 2.50%. The WACC between 8-12% was used by Group in the impairment testing and risk adjusted, wherever applicable (Zinchenko and Pervichko 2014). Representational Faithfulness “Representational faithfulness” or “reliability” is extent to which the information correctly reflects the entity’s resources, transactions, claims and others. For the information of accounting to have “representational faithfulness”, it should be neutral,
5ADVANCED FINANCIAL ACCOUNTING free from error and complete. The accounting information is complete when financial statements does not exclude any of transactions. The accounting information is neutral that means degree to which the information is free from any kind of bias. Further,thereareestimationandsubjectivitythatisconsistsinthefinancial statements. Hence, information cannot be neutral in true sense. Lastly, accounting information is free from the error that means degree to which the information is free from the errors (Aasb.gov.au. 2020). IncaseofCrownResortsLimited,thecompanyreportsitsfinancial information in words and numbers. The company is a profit entity. The consolidated financial statements of the Crown Resorts Limited is consist of company itself and its all subsidiaries of company. The company has eliminated in full all the inter-company transactions and balances including the unrealized profits that arises from the intra- grouptransactions. Theadoptedpolicies of accountinghavebeen consistently applied throughout two periods of reporting. The example of the representational faithfulness is the fact that the carrying amounts of some liabilities and assets are determined often based on the estimates, judgements and assumptions of the future events(Al-dmour,AbbodandAl-dmour2017).Further,thekeyjudgements, assumptionsandestimatesthatishavingsignificantrisktocausematerial adjustment to the carrying amounts of certain liabilities and assets within next annual reporting periods includes impairments of the non-financial assets, fair value of the financial instruments, taxes, debts that are doubtful and the other significant items. Moreover, whenever company adopts new accounting standard or whenever there is revision of standards then company discloses and represents the changes in the notes of financial statements for instance, the company discloses that upon adoption of new accounting standard “AASB 16 Leases”, there will be increase in the interest expenses and amount of depreciation, which will be partially offset by the increase in EBITDA (Crownresorts.com.au. 2020). Moreover, the company has disclosed that plant,propertyandequipmentisspecifiedatthecostlesstoaccumulated depreciationandanyimpairmentinvalue.Calculationofamortizationand depreciationisbasedonthestraightlineoverestimatedasset’susefullives (Kythreotis 2014). Conclusion Therefore, this report concludes that the entity is required for making sure that they are correctly described as reporting entity and for matching the framework of financial reporting. It has been defined that reporting entity is the concept that is tied to GPFR objectives and it is the concepts that requires all the organizations with the dependent users on GPFR for the information for preparing these reports. It has been analyzed that Crown Resorts Limited is the reporting entity. Moreover, this report has analyzed that for financial statements to be significant to stakeholders of company, they should embody certain qualitative characteristics that are “relevance and faithful representation”. These “qualitative characteristicsare qualities, which make the financial information useful to users. Lastly, it has been analyzed that Crown Resorts Limited is having the qualitative characteristics that makes their financial information significant for their users.
6ADVANCED FINANCIAL ACCOUNTING Reference Aasb.gov.au.2020.[online]Availableat: https://www.aasb.gov.au/admin/file/content102/c3/SAC1_8-90_2001V.pdf [Accessed 25 Jan. 2020]. Aasb.gov.au.2020.[online]Availableat: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf[Accessed 25 Jan. 2020]. Adrian-Cosmin, C., 2015. ACCOUNTING INFORMATION SYSTEM-QUALITATIVE CHARACTERISTICS AND THE IMPORTANCE OF ACCOUNTING INFORMATION ATTRADEENTITIES.Annalsof'ConstantinBrancusi'UniversityofTargu-Jiu. Economy Series,2(1). Al-dmour, A., Abbod, M.F. and Al-dmour, H.H., 2017. Qualitative Characteristics of financial reporting and non-financial business performance.International Journal of Corporate Finance and Accounting (IJCFA),4(2), pp.1-22. Carey, P., Potter, B. and Tanewski, G., 2014. Application of the Reporting Entity Concept in A ustralia.Abacus,50(4), pp.460-489. Carini, C., Rocca, L., Teodori, C. and Veneziani, M., 2017. The Reporting Entity in Private-PublicAccountingHarmonisation.IsControlEnoughfortheLocal Government Consolidated Financial Statements?.Financial Reporting. Carini, C., Rocca, L., Veneziani, M. and Teodori, C., 2018. The Reporting Entity Concept in the Public Consolidated Financial Statement.International Journal of Business and Social Science,9(1), pp.1-21. Crownresorts.com.au.2020.[online]Availableat: https://www.crownresorts.com.au/CrownResorts/files/09/09b9547d-9e41-4d83-962f- 09c0efbe7757.pdf [Accessed 25 Jan. 2020]. Evans, M.E., Houston, R.W., Peters, M.F. and Pratt, J.H., 2015. Reporting regulatory environments and earnings management: US and non-US firms using US GAAP or IFRS.The Accounting Review,90(5), pp.1969-1994. Ewelt-Knauer,C.,2014. Determiningreportingentityboundaries inthelightof neoinstitutionaltheoriesbeyondtheconceptualframeworkofIFRS.Journalof Business Economics,84(6), pp.827-864. Flower,J.,2015.Theinternationalintegratedreportingcouncil:astoryof failure.Critical Perspectives on Accounting,27, pp.1-17. Grigoras-Ichim,C.E.andMorosan-Danila,L.,2016.Hierarchyofaccounting informationqualitativecharacteristicsinfinancialreporting.TheUSVAnnalsof Economics and Public Administration,16(1 (23)), pp.183-191. Grossi, G. and Steccolini, I., 2015. Pursuing private or public accountability in the publicsector?ApplyingIPSASstodefinethereportingentityinmunicipal consolidation.International Journal of Public Administration,38(4), pp.325-334. Kulikova,L.I.andGafieva,G.M.,2014.Developmentoffinancialreporting principles.Mediterranean Journal of Social Sciences,5(24), pp.38-38.
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
7ADVANCED FINANCIAL ACCOUNTING Kythreotis, A., 2014. Measurement of financial reporting quality based on IFRS conceptual framework’s fundamental qualitative characteristics.European Journal of Accounting, Finance & Business,2(3), pp.4-29. Otubor, C.O., Gbande, R., Onumah, P., Yuguda, A.U. and Abubakar, S.I., 2017. AssessingtheQualitativeCharacteristicsofUsefulFinancialInformationfor Business Development. Pravat, I.C.B., 2014. Considerations on the treatment of qualitative characteristics of accounting information at the international level and in various national accounting systems.Studies and Scientific Researches. Economics Edition, (19). Zinchenko, Y.P. and Pervichko, E.I., 2014. Qualitative Characteristics of Emotion Regulation Process in Adolescents with Mitral Valve Prolapse.Procedia-Social and Behavioral Sciences,146, pp.76-82.