Description of Accounting Concepts for Cleanaway Waste Limited

This report provides a description of the accounting concepts used by Cleanaway Waste Limited for financial reporting, including the preparation of financial statements, critical accounting estimates, and accounting policies. It also discusses the issue of measurement and the conceptual framework adopted by the organization. The report addresses the fundamental qualitative characteristics of financial information and their relevance to the company's financial statements.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
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ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Description of accounting concepts:..........................................................................................3
Conceptual framework and the issue of measurement:..............................................................6
Fundamental qualitative characteristics:....................................................................................9
Conclusion:..............................................................................................................................10

ADVANCED FINANCIAL ACCOUNTING
Introduction:
The report elucidates the description of the accounting concepts for one of the
companies listed on Australian stock exchange. Every organization has some accounting
concepts that forms the basis of preparation and the financial statements, judgment and
estimates. For the purpose of analysis and conducting an evaluating of the accounting
concepts, the chosen organization is Cleanaway Waste limited which is a leading waste
management, industrial services and recycling company of Australia (Cleanaway.com.au
2019). The company is engaged in delivering range of solutions that offers customers with
extraordinary benefits. In addition to this, the report also demonstrates the issue of
measurement and the conceptual framework that is adopted by the organization for the
presentation of the financial statements. The fundamental qualitative characteristics that
demonstrates the understanding of the representational faithfulness and relevance has also
been addressed in the report.
Discussion:
Description of accounting concepts:
This section outlines the concept of accountings that is used by the organization to
critically estimate the accounts and prepares the financial report. Accounting concepts are
basically the accounting rules that are followed by organization while preparing the financial
statements. The preparation of the financial report of Cleanaway waste limited requires the
use of certain critical accounting estimates for which the judgment is required to be exercise
by the management of organization in the process of applying the accounting policies. The
accounting policies that have been adopted by the company form the basis of preparation of
the financial report. At the time of preparation of the financial statement of the group, the

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initial accounting for the business combination was not complete and accordingly there has
not been the disclosure of the details of the financial effect of the business combination.
The consolidated financial report of Cleanaway waste limited is a general purpose
financial report which has been prepared on a basis of going concern in accordance with the
Corporation Act, 2001, requirements of AASB (Australian accounting standard board) and
IFRS (International financial reporting standard). In addition to this, the financial report has
been prepared on the basis of historical cost expect for the derivative financial instruments
and certain noncurrent assets. The treatment of several financial items presented in the
financial statements such as revenue, finance cost, maintenance and repairs, impairment of
assets, foreign currency, trade receivables, property, plant and equipment, inventories, cash
and cash equivalent (Yurisandi and Puspitasari 2015).
Impairment of assets- For determining the objective existence of the impairment of
assets, assessment of the same is done and the losses on impairment is directly written off to
the consolidated income statement. The intangible assets and goodwill are assessed having
indefinite life are tested for the impairment on an annual basis. However impairment of other
assets is done when there is indication that the recoverable amount of assets is less than the
carrying value. Assets are grouped at the lowest level which are largely independent from the
cash flow and have separately identified flow of cash (Disle et al. 2016).
Inventories- Valuation of inventories is done at cost and net realizable value and the
inventories cost is based on the method that is appropriate for particular inventory class.
Costing of work in progress and manufactured inventories are done using an appropriate
share of production overhead that is based on the normal operating capacity
(Cleanaway.com.au 2019).

ADVANCED FINANCIAL ACCOUNTING
Income tax- The income tax charge is calculated based on the enacted and
substantively enacted taxation laws at the end of reporting year in the countries of operations
of its subsidiaries and associates. The position taken in the tax return is evaluated by the
management on periodic basis which is applicable to the tax regulation and is subject to
interpretation. In addition to this, the liability method is used for providing deferred tax on
the basis of temporary differences arising between the carrying amount and tax bases of
liabilities and assets in the consolidated financial statements. Determination of deferred
income tax rate is done using the tax rate that is enacted at the reporting date (Gornik and
Choi 2018).
Foreign currency- Reporting and recognition of the foreign currency on the
consolidated financial statements are done on the net basis. The exchange rate of currency is
used for translating the non monetary liabilities and assets that are measured at the historical
cost.
Derivative financial instruments- Recognition of derivates are done initially at the fair
value on the date when the derivative contract is finalized or entered into and they are
remeasured at the fair value subsequently at each reporting date. All the fair value
movements of derivatives are recorded under the finance cost in the consolidated financial
statement (Iasplus.com 2013).
Trade and receivables- Trade receivables are classified as current as they are due for
settlement within 30 days and the collectability are reviewed on annual basis
(Cleanaway.com.au 2019). When the debtors are not collected then they are written off and
impairment provision is raised when the amounts can no longer be realized.
Property, equipment and plant- The plant and equipment are stated at the cost that is less
than the impairment and accumulated depreciation. Cost comprise of the expenditure which

ADVANCED FINANCIAL ACCOUNTING
is attributable directly to bring the assets to location. Determination of gain and loss from the
disposal of property, equipment and plant is done by comparing the carrying amount of the
same with the proceeds generated from the disposal and the value is recognized as net within
the other income in the consolidated financial statement. On other hand, the buildings and
non landfill are measured at the fair value that is based on the periodic valuation. In the event
of revaluation of the land and building, the decrease in the carrying amount is charged as
expense in the financial statement (Gaynor et al. 2016).
Conceptual framework and the issue of measurement:
The objective of the conceptual framework is to assist the preparers in developing
consistent accounting policies and to understand and interpret the standards. The conceptual
framework as mentioned in the annual report of Clearaway waste limited refers to the set of
comprehensive concepts for the standard setting, financial reporting and guidance to the
preparers in developing the accounting policies. Some new concepts, clarification of some of
the important concepts, recognition criteria for liabilities and assets along with providing
updated definitions (Mala and Chand 2015). The application of the Australian accounting
standard might be affected due to the changes in the conceptual work in the situation when
the standard is not applicable to any particular event or transactions. The current annual
report that is for the year ending 2018, the impact of adopting the new conceptual framework
has not been determined by the group.
The measurement principles as stated in the conceptual framework refer to the process
for determining the numbers to be disclosed and presented in the financial statement. It was
agreed by the members of the standard board that there is no single measure that would help
the users in providing relevant information for all liabilities and assets in all the
circumstances. There are three fundamental principles of measurement that was derived from

ADVANCED FINANCIAL ACCOUNTING
the qualitative characteristics of the financial reporting and the objectives of financial
reporting. The information relevance which is provided by the particular method of
measurement depends upon the manner in which the financial statements are impacted. There
are three categories of measurements that have been identified by the method of measurement
and these include cost, fair value and measures of cash flow (Mbobo and Ekpo 2016).
However, the revised conceptual framework takes into account the fact that the basis of
single measurement should be mandated. Accordingly, the standards identified two categories
of measurement which comprise of current value measurement basis and historical
measurement cost basis. The basis of historical cash measurement helps in providing
information about elements that is derived from the historical price transactions. The cost
incurred by organization in acquiring the assets would be considered as the basis of
measurement (Sutton et al. 2015). On other hand, for liability, the consideration value taken
on the liability would forms the basis of measurement.
The monetary information about the elements under the current measurement basis is
provided using the information reflecting the conditions of the items at the date of
measurement. The fair value description in the revised conceptual framework is consistent
with the fair value measurement of IFRS 13 (Edgley et al. 2015). It is required by the entity
to consider the nature of information when selecting the basis of measurement and whether
such information will be presented in the statement of financial position or not.
It has been found from the annual report that the fair value of property using a
summation method is estimated based on the comparable transactions for the land based on
the price per square meter basis. In addition to this, the fair value of property is estimated
using income capitalization method based on the income generated by the property and
normalized net operating leases (Cleanaway.com.au 2019).

ADVANCED FINANCIAL ACCOUNTING
There would be significantly higher and lower fair value measurement under the
direct comparison and capitalization method when there is significant decrease or increase in
any observable inputs. The measurement of the fair value of all the liabilities and assets are
done within the fair value hierarchy on the basis of risk, characteristics and nature based on
the lower level of input which is considered significant for the fair value measurement as a
whole.
Hierarchy of fair value measurement for derivative instruments:
(Source: Cleanaway.com.au 2019)
The financial of the group such as non financial assets and derivatives is done at the
fair value at each reporting date. Fair value is the price that is paid for transferring the
liability or for selling the assets between the market participants at the date of measurement.
There is the presumption on which the measurement of fair value is based that the
transactions for transferring the liability or selling the assets occurs when there is absence of
principle market for liability or asset in the most advantageous market or when there is the
principle market for liabilities and assets (Azevedo 2015). Such measurement is also done on
the assumption that the participants of the market acts in the best of their economic interest.
In addition to this, the fair value measurement for non financial assets accounts for the ability
of the market participants in their economic best interest. Cleanaway waste limited uses the
valuation technique for which sufficient data is available for measuring the fair value. The

ADVANCED FINANCIAL ACCOUNTING
introduction of new accounting standard that is AASB 9 is a model for measurement and
classification and it is expected that the accounting for derivative financial instrument and
determination of the doubtful debts would not be significantly impacted. Furthermore, the
accounting for acquisition is done according to the AASB 3 business combination
(Cleanaway.com.au 2019).
Fundamental qualitative characteristics:
The two fundamental characteristics of representational faithfulness and
understanding the relevance is pointed out in the revised conceptual framework of
International financial reporting standard. The usefulness of the financial information
presented in the financial statements of the reporting entity is determined by the relevance of
information and it’s faithfully representation. Relevance is about the importance of the
financial information in the decision making process of the investors. Representational
faithfulness on other hand refers to the agreement or correspondence between the resources,
events and accounting numbers that purports to be represented. The reliability of the
information presented in the financial statements is determined by the representative
faithfulness which must be neutral and verifiable. According to the representational
characteristics, the phenomenons that are to be presented are the obligations and resources
which are changed due to the occurrence of some transactions. Reporting of the information
in the financial statements is done by adhering to the accounting standards that are relevant to
specific accounts and its treatment (Marek et al. 2016).
Relevance accounting information assists the users in predicting the past, future and
present events and thereby contributing to the difference in the decisions taken by them. One
of the entities specific aspects of the relevance is materiality that is based on the magnitude
and nature of items ton which the information is related to the context of the financial report

ADVANCED FINANCIAL ACCOUNTING
of the entity (Glover and Levine 2019). It has been found from the analysis of the annual
report of Cleanaway waste limited that financial statements prepared provides a true and fair
view about the financial position of the group. Moreover, the company has presented
reasonable ground that would assist users in believing that the company will be able to clear
off all its due and debts when they become payable. There are several reasonable grounds
presented by the company in their financial report that the group would be able to meet any
liabilities or obligations to which they become subject to or by the virtue of cross guarantee
deeds. It can also be inferred from the opinion of the auditors on the financial statement of
Clearaway that the financial information presented in the financial report are true and fair and
has been accounted for in accordance with the requirements of the Australian accounting
standard and other regulatory bodies such as IFRS and IASB (Nobes and Stadler 2015).
Moreover, the factors that have been incorporated in the measurement basis align with the
qualitative characteristics such as faith representation and the relevance. However, the
contribution to the cash flow and the characteristics of liabilities and assets influence the
relevance of information that is provided by the measurement basis.
Any uncertainty or inconsistency in the measurement affects the faithful presentation
of the information which is provided by the measurement basis. The annual report does not
identify any inconsistency and uncertainty in the basis of measurements that impacts the
faithfulness of representation of financial information. Therefore, it can be inferred from the
analysis of the financial information and the facts presented in the annual report that the
organization complies with the fundamental qualitative characteristics. The information
presented has representational faithfulness as the sufficient reasonable grounds impacting
several accounts are identified and listed in the annual report which makes the information
relevant to the users of the financial report such as investors and creditors (Unerman et al.

ADVANCED FINANCIAL ACCOUNTING
2018). Information in the report is regarded as desirable because of increased reliability and
relevance and thereby providing great assistance in decision making.
Conclusion:
The report prepared above addresses the accounting concepts and the accounting
policies that are employed by the Clearaway Waste limited. It has been found from the
information presented in the article that the company while treating different accounts
complies with the relevant Australian accounting standards and its requirements. Different
items of the financial statements have been measured using the relevant accounting policies.
Furthermore, the conceptual framework adopted by the organizations complies with the
recommendation of the standard. However, the impact of the adoption of the revised
conceptual framework has not been determined by the group in the financial year 2018. In
addition to this, it can also be inferred that the company has presented all the financial
information faithfully and they are of relevance to the users of financial statement by
providing assistance in their decision making process.

ADVANCED FINANCIAL ACCOUNTING
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