Advanced Financial Accounting - Sample Assignment

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

1ADVANCED FINANCIAL ACCOUNTING
Part A
The qualitative characteristics of financial reporting have to be there in the financial
statements of the business entities for increasing their usefulness. Relevance and Faithful
Representation are the fundamental qualitative characteristics where Comparability,
Verifiability, Timeliness and Understandability are the enhancing qualitative characteristics
(Choudhary, Merkley and Schipper 2017)
The statement of former AXA Head, Roberts Geoff indicates towards the dependency of
the investors and other users on the financial information so that they can gain insight about the
financial position of the entities. The investors do this in order to gain understandability about
the financial position that is a major qualitative characteristic. The quality of financial reporting
can be enhanced in the presence of understanding characteristic. The presence of ‘understanding’
qualitative characteristic helps the investors in classifying, characterizing and presenting the
financial reports that leads to the correct ascertainment of the financial standing of the business
entities. It can be seen that the adoption of the standards of IFRS has brought complexity in
financial reporting that contributes to less understanding of financial situation. According to the
opinion of Geoff Roberts, ineffectiveness is there in the adoption of IFRS that fails in providing
greater understandability to the investors regarding the financial position and performance of the
entities from the investors report and management brief (Verriest, Gaeremynck and Thornton
2013).
The financial analysts can end up in the misinterpretation of the financial statements of
the companies when trying to get necessary explanation from the notes to the financial
statements that are prepared with accordance to the principles of IFRS and Terry Brown, the

2ADVANCED FINANCIAL ACCOUNTING
finance director of Wesfarmers, has mentioned this fact. This statement indicates towards the
lack of understandably and comparability that are two qualitative characteristic of financial
reporting. The investors and other users can identify the similarities and difference in the
financial aspects in the presence of ‘comparability’ qualitative characteristic. It implies that the
users of the financial statements are required to have technical financial knowledge in order to
understand and compare the facts from the notes to the financial statements prepared as per
IFRS. The absence of adequate technical knowledge will lead to the misinterpretation of notes of
the financial statements (Barth and Israeli 2013). Hence, it can be said that IFRS adopted
financial statements requires adequate technical knowledge to be understood.
In the recent years, it can be observed that the investors are not paying attention to the
financial statements that are developed as per the standards of IFRS due to their inability to
express the correct financial position of the business entities and this fact can be found in the
statement of David Craig, the chief financial officer of Commonwealth Bank. As per this
particular viewpoint, the absence of faithful representation can be seen that is a fundamental
qualitative characteristic of financial reporting. It needs to be mentioned that the absence of
faithful representation leads to the failure to provide the required information and description of
the financial elements to the investors and other users. Thus, this particular aspects indicates
towards the failure of the financial statements developed as per IFRS provide the numerical
description of the financial elements (Firth and Gounopoulos 2017). The absence of faithful
representation of the financial statements increases the scope of manipulation and fraud in the
financial accounting.
The main objective of financial reporting involves in providing required true financial
information to the investors and other users so that they can know the financial performance and