Importance of Accounting Concepts and Principles for Financial Reports by ASX Listed Entities

Advanced Financial Accounting
1

Executive Summary
This report has been undertaken in the context of discussing the importance of using
accounting concepts and principles provided by the conceptual framework of accounting for
developing financial reports by ASX listed entities. As such, the examples from a selected ASX
listed company, Ramsay Health Care limited, has been used to examine the accounting concepts
used by the company in development of its financial report. The issue of measurement in
accounting and importance of fundamental qualitative principles of accounting framework has
also been analyzed in the context of the selected company.
2

Contents
Introduction......................................................................................................................................3
Part 1: Descriptions of Accounting Concepts..................................................................................3
Part 2: Conceptual framework, and the Issue of Measurement.......................................................5
Part 3: Relevance and Faithful Representation of Information as per Fundamental Qualitative
Characteristics and Examining their Importance over each other in reference to the Selected
Company..........................................................................................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
3

Introduction
The businesses are required to develop and disclose the financial information by adhering
to certain fundamental accounting concepts and principles for ensuring their accuracy and
relevancy and protecting the stakeholder interests. In this context, IASB (International
Accounting Standards Board) has developed and provided the conceptual framework of
accounting in order to provide guidance to the businesses for preparing and disclose the financial
information. This report is meant for conducting an analysis of the various types of concepts and
principles used by an ASX listed entity. The AASB (Australian Accounting Standards Board)
has also directed its ASX listed entities to comply with the IASB accounting concepts and with
the conceptual accounting framework principles. The selected ASX listed for conducting the
overall analysis is Ramsay Health Care Limited, a private health care company that is specialized
in proving mainly surgery, rehabilitation and psychiatric care services across the UK, Australia,
France, Indonesia and Malaysia. The company is headquartered within Australia and has the
presence of approximately 200 hospitals within the country. This report provides an analysis of
the accounting concepts used and compliance with the conceptual accounting framework
measurement principles and with its fundamental qualitative characteristics. The overall analysis
is carried with the use of information provided within the annual report of the selected company.
Part 1: Descriptions of Accounting Concepts
Ramsay Health Care Limited is a profit company operating within Australia traded on the
ASX (Australian Securities Exchange). The financial reports of the company are developed in
accordance with AASB standards and the Corporations Act 2001. The Group has developed its
consolidated financial statements to depict the financial results of its subsidiaries as per the basis
of consolidation.
Accounting concepts are the standards and guidelines that requires to the followed while
recording the accounting transactions and preparing the financial reports. There are many g
concepts of accounting that company needs to follow while performing the accounting process
and preparing their annual report. Accounting concepts used by Ramsey Health Care Limited
while preparing its annual report are as under:
4