Advanced Financial Accounting Sample Assignment (doc)

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

1ADVANCED FINANCIAL ACCOUNTING
Part A
According to the Conceptual Framework of Australian Accounting Standard Board
(AASB), relevance and faithful representation are the fundamental qualitative characteristics;
and understandability, comparability, timeliness and verifiability are the enhancing qualitative
characteristic (Scott 2015). The presence of all of these qualitative characteristic makes the
financial statements more useful for the users of financial statements like investors, creditors,
lenders and others. The following discussion shows the qualitative characteristic missing in the
financial reporting framework as per IFRS.
It is essential for the financial statements to possess the qualitative characteristic of
‘understandability’ as the presence of this characteristic helps to increase the quality of the
financial statements; at the same time, the presence of this qualitative characteristic makes the
users of the financial statements to classify, characterize and present the financial statements so
that they can obtain information of the entities to understand their financial performance and
standings (Scott 2015). According to the statements of AXA head of finance, Geoff Roberts, the
users of the financial statements like investors largely depend on the report for investors and the
management brief in order to obtain sufficient underatsding about the financial performance as
well as financial standings of them. Thus, as per his opinion, the ‘understandability’
characteristic is missing in the IFRS financial statements of the companies. The main reason is
the complexity in the financial statements that the adoption of IFRS standards has brought and
this aspect fails in providing the required understandability about the financial statements. This
situation implies that as most of the business entities have adopted the standards of IFRS for the
development of financial statements, the investors are not able to gain proper understanding

2ADVANCED FINANCIAL ACCOUNTING
about the financial performance and situation from investors report and management brief (Scott
2015).
Apart from understandability, it is essential for the financial statements to possess the
qualitative characteristic of comparability that is one of the enhancing qualitative characteristic.
The users of the financial statements of the companies can identify the similarities and
differences in the major financial substances of the entities in the presence of this qualitative
characteristic (Hoyle, Schaefer and Doupnik 2015). Terry Brown, the finance director of
Wesfarmers, talks about the difficulty for the analysts to analyse the notes to the financial
statements of IFRS as they can misinterpret if there is lack of technical knowledge. This situation
implies that the users of the financial statements need to have effective technical knowledge in
accounting in order to correctly interpret the notes to the financial statements as pet IFRS. Thus,
the IFRS financial statements and notes lack both understandability and comparability.
One of the most important qualitative characteristic of financial statements is faithful
representation of the financial information. This is a major fundamental qualitative characteristic
that ensures the compliance of the financial statements with the required accounting standards
and principles (Hoyle, Schaefer and Doupnik 2015). According to the statement of chief
financial officer of Commonwealth Bank, David Craig, the financial statements developed as per
the standards of IFRS fails to provide the true picture of the financial position of the companies
and this is one reason why the investors do not pay attention to these statements for gaining
financial information. It shows the absence of the qualitative characteristic of faithful
representation as the absence of compliances fails to provide information about the financial
position of the companies. Apart from this, the absence of this characteristic indicates towards