THE ADVANCED FINANCIAL ACCOUNTING

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
Name of the Student
Name of the University
Author Note

ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction:..................................................................................................................1
Discussion:...................................................................................................................2
Description of reporting entity:......................................................................................2
Evaluating the criteria of reporting entity of AfterPay touch limited:.............................2
Describing the relevance and faithful representation in relation to the useful
information of the financial statements:........................................................................3
Conclusion:...................................................................................................................4
References list:.............................................................................................................5

ADVANCED FINANCIAL ACCOUNTING
Introduction:
The study is undertaken to provide a detailed discussion on the criteria and
the factors of reporting entity and evaluating the fact that the chosen company is a
reporting entity or not. The selected company for analysing its criteria of reporting
entity or not is AfterPay Touch group which is a payment company driven by
technology operating globally. It was in June, 2017, Afterpay Touch was established
after the merger of Touch group and Afterpay. The financial report published by the
company has been assessed for evaluating the faithful representation and relevance
in relation to the useful information.
Discussion:
Description of reporting entity:
The system of differential reporting by the entities in Australia is founded by
the concept of reporting entity. The issue pertaining to differential reporting was
addressed by IASB (International accounting standard board) and in this regard, the
concept of reporting entities and its principles was proposed in the exposure draft.
Reporting entities concept was introduced for ensuing that the financial reports
based on full GAAP is prepared by more economically, larger and politically
significant entities (Aasb.gov.au 2020).
Any organization can be categorized into a reporting entity if they can produce
the general purpose financial reports. Any organization or entity cannot be qualified
as reporting entity because of statutory authority, organizational structure and
creation of company. For an entity being classified as reporting entity so that it fulfils
all the criteria requires to make the judgment. All the entities of which the users gain
information from the general purpose financial reports that assist them in evaluation
and making of the decision regarding the allocation of the scarce resources
available. It is important and required by all the reporting entities to prepare general
purpose financial reports” (Birt et al. 2019). Preparation of such reports should be
done complying with the requirement of the accounting standards and accounting
concepts statement. Entities producing less complicated financial reports and special
purpose financial reports that does not complies with the accounting standards or
are based on lesser reporting standards are not classified as reporting entities.
Therefore, the classification of entities as reporting entities is primary dependent on
the fact of the dependency of the potential users of the financial statements of the
users on the financial reports issued for general report to base their investment
decisions. The principle guiding the classification of entity as reporting entity is the
separation of economic interest from the management and the entities more
financially, economically and politically significant, it is more likely that the users
would be dependent upon their financial statements to base their decisions (Adams
et al. 2017).
Evaluating the criteria of reporting entity of AfterPay touch limited:
The fulfilment of criteria to be classified as a reporting entity has been
evaluated by reviewing notes to the financial statements and the financial report
published by AfterPay Touch Group. AfterPay touch group was established as a
profit entity and the concept being tied to the objectives of general purpose financial

ADVANCED FINANCIAL ACCOUNTING
reporting. Financial report of the company is prepared by complying with the
requirements of the general purpose financial report” (Afterpaytouch.com 2020).
AfterPay prepares general purpose financial statements that complies with the
requirements and other authoritative pronouncements of AASB (Australian
accounting standard board). In addition to this, entity has used a going concern basis
of accounting using historical cost. Any necessary and comparative information has
been restated s that ant changes in the presentation of the information is conformed.
It can be inferred from the fact that the company prepares general purpose financial
statements is that the users base their economic decisions based on the information
provided in the financial report (Herath and Albarqi 2017).
The financial statements establishing the reporting entity concept is found to
be associated with the information requirements of the users of the statements of
AfterPay Touch group in evaluating and making the decision of resource allocation.
In addition to this, the reporting entity boundaries is determined for the information
provision for the purpose outlined in the criteria. Afterpay Touch group comprise of a
group of entities and all the other entities are controlled by one of the entities within
the group so that their objectives are consistent (Afterpaytouch.com 2020).
Another factor evaluating the dependency of users on the general purpose
financial statements for allocating the resources is the size of the firm and its
indebtedness. Greater the size of indebtedness and greater the size of the firm,
users are more likely to depend upon such financial statements to base their
investment decision. It is quite evident from the consolidated statement of financial
position of Afterpay Touch that the total level of indebtedness in the current reporting
year has increased considerably along with increase in the total size of the company.
This has the implication from one of the factors determining the reporting entity
concept that users or investors are reliable on the financial statements produced by
the entity to base their decision. The particular basis represents the financial
characteristics of establishing the decision using the general purpose financial
reports (Afterpaytouch.com 2020). From the overall analysis of the facts gathered
from the financial report, it is inferred that Afterpay Touch Group is classified as a
reporting entity.
Describing the relevance and faithful representation in relation to the useful
information of the financial statements:
The qualitative characteristics of the useful information is set out in the
conceptual framework. The two fundamental qualitative characteristics determining
the understandability, timeliness, comparability and verifiability of the financial
information provided by the reporting entities are faithful representation and
faithfulness. The decision making requirement of the users are supposed to be
relevant to the given financial information. The auditors and the accountants of the
organization need to be focused on the financial information which impacts the
user’s decision. The primary need of the organization is expected to have a fair and
faithful representation which in order words can be said to be free from any
misstatements. On other hand, faithful representation is the most primary feature
which requires the financial information to be honest and fair meaning it should be
free from all kinds of misstatements. A balance is stroke between faithful
representation and faithfulness so that the users are provided with the useful
financial information (Janowicz 2018). It is required by the reporting entity to replace