Contemporary Issues in Accounting

The report analyzes and evaluates the compliance of Conceptual Framework for Financial Reporting of Amcor Limited. It covers adherence to objectives, recognition criteria, qualitative enhancing characteristics, and more.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student
Name of the University
Author’s Note

1CONTEMPORARY ISSUES IN ACCOUNTING
Abstract
The study aims to analyze the compliance of Conceptual Framework for Financial Reporting of
one of the Australian companies, Amcor Limited. The first part of the report shows that Amcor
develop their financial statements by complying with the objectives of AASB conceptual
framework. After that, second part shows the basis of recognition of the major financial elements
of Amcor. The last part shows the compliance of the qualitative characteristics of AASB
conceptual framework by Amcor Limited.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Adhere to the Objectives of Conceptual Framework......................................................................3
Adhere to the Recognition Criteria..................................................................................................6
Assets...........................................................................................................................................7
Liabilities.....................................................................................................................................8
Equity...........................................................................................................................................8
Revenues......................................................................................................................................9
Expenses......................................................................................................................................9
Adhere to the Qualitative Enhancing Characteristics......................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................13

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
Conceptual Framework for Financial Reporting is considered as a major element for the
business organizations. More precisely, Conceptual Framework for Financial Reporting deals
with different kinds of fundaments accounting issues like various objectives of financial
statements, characteristics of financial information, basis of preparation of financial statements
and many others (Barth, 2013). For this reason, it is necessary for the business organizations to
develop their financial statements by taking into consideration all these aspects. The main aim of
this report is to analyze and evaluate the fact that the financial statement of one of the Australian
companies is prepared based on the standards and principles of Conceptual Framework for
Financial Reporting (Horngren et al., 2012). For the preparation of this report, Amcor Limited is
selected. The company was founded in the year of 1860 and got the name ‘Amcor’ in 1986. The
company is headquartered at Melbourne, Victoria, Australia (amcor.com, 2017). In this context,
it needs to be mentioned that Amcor Limited is listed among top hundred companies in
Australian Stock Exchange (ASX) and the code of the company in ASX is ‘AMC’ (asx.com.au,
2017). This particular report analyzes and evaluates various aspects of its financial statements
according to Conceptual Framework for Financial Reporting.
Adhere to the Objectives of Conceptual Framework
The above discussion shows that the conceptual framework for financial reporting is an
important aspect for the Australian companies in the preparation of financial statements. In
Australia, it can be seen that all the Australia companies follow the standards and framework of
the conceptual framework of Australian Accounting standards Board (AASB) that helps in the
preparation of financial statements of both private and public companies. According to 2017

4CONTEMPORARY ISSUES IN ACCOUNTING
annual report of Amcor Limited, the company has developed their financial statements by
complying with the standards and principles of AASB (aasb.gov.au, 2017). Now the fact is that
whether Amcor have met the objectives of the accounting conceptual framework of AASB. It
can be seen that there are three major objectives of conceptual framework for financial reporting.
The first objective of conceptual framework is to provide the investors and creditors of the
companies with useful and correct information for making investment, credit and other decisions.
According to 2017 annual report of Amcor, it can be observed that the company has provided
their investors and creditors with all the required financial information in the form of various
financial statements (aasb.gov.au, 2017). They are statement of profit and loss, statement of
comprehensive income, statement of financial position or balance sheet, statement of change of
equity, statement of cash flows and others. All these statements provide useful and necessary
information to the investors and creditors of Amcor.
The second objective of conceptual framework is to provide useful information for
assessing cash flow prospects of the company. It implies that the companies should provide
information so that the investors and creditors can assess the amount, timing and uncertainty
regarding future cash inflows and outflows. In case of Amcor, it can be observed that the
company has provided all this necessary information with the help of their statement of cash
flows along with the end noted related to cash flows (aasb.gov.au, 2017).

5CONTEMPORARY ISSUES IN ACCOUNTING

6CONTEMPORARY ISSUES IN ACCOUNTING
The third objective of conceptual framework is to provide the investors and creditors with
necessary information regarding various resources of the companies. In this regard, the economic
resources are assets, liabilities and equities of the companies. From 2017 annual report of
Amcor, it can be seen that the company has provided the investors and creditors with all the
necessary information about organizational resources with the help of statement of financial
position (aasb.gov.au, 2017). Thus, based on the above discussion, it can be seen that Amcor
Limited has well met the objectives of conceptual framework.
Adhere to the Recognition Criteria
According to the Conceptual Framework for Financial Reporting, some basic recognition
criteria are required to be met in order to recognize them in their financial statements. First, they
are needed to meet the definition as per the conceptual framework. Second, it is probable that

7CONTEMPORARY ISSUES IN ACCOUNTING
future economic benefit of them will flow to or from the entity. Third, their cost values can be
measured with reliability. In case of Amcor, it can be seen that the company has been following
the rules and regulations of conceptual framework for recognition.
Assets
Amcor follows the principle of International Financial Regulatory Standard (IFRS) for
asset recognition. Amcor recognizes their trade and other receivables based on their invoice
value and then they are adjusted with the recoverable value from the customers. In case of
inventories, the recognition is done based on the lower cost (amcor.com, 2017).
Property, plant and equipments are recognized by deducting accumulated depreciation
and impairment costs from the cost of assets. Amcor recognizes their intangible assets including
goodwill by cost less accumulated amortization and impairment losses (amcor.com, 2017).

8CONTEMPORARY ISSUES IN ACCOUNTING
Liabilities
In case of liabilities, Amcor also follows some specific criteria. Amcor follows the
principle of IFRS for liability recognition. Provisions are recognized when Amcor has legal or
constructive obligation due to past events. They are measured based on present value
(amcor.com, 2017).
In case of net debt or interest bearing liabilities, they are recognized on fair value basis.
For interest bearing and foreign currency liabilities, they are measured at amortization cost
(amcor.com, 2017).
Equity
Amcor classifies their ordinary shares as equity that is fully paid with no par value.
Incremental costs related to the equities are recognized as a deduction from equity (amcor.com,
2017).

9CONTEMPORARY ISSUES IN ACCOUNTING
Revenues
Amcor recognizes the revenues when the significant risks and rewards related to
ownership are transferred to the customers. In that case, the amount of revenue will be easily
measurable. In case of uncertainty of the recovery of dues, no revenue is recognized (amcor.com,
2017).
Expenses
The major components of financial expenses of Amcor are borrowing expenses, cost of
interests, amortization costs and others. Revenues are recognized in the income statement at the
time of their occurrence (amcor.com, 2017).
Thus, from the above discussion, it can be see that Amcor has complied with all the
recognition criteria of conceptual framework for financial reporting under AASB and IFRS.
Adhere to the Qualitative Enhancing Characteristics
According to the conceptual framework of financial reporting under AASB, every
business organization is required to satisfy the fundamental qualitative enhancing characteristic

10CONTEMPORARY ISSUES IN ACCOUNTING
for their financial reporting. The same concept is also applicable for Amcor Limited. They are
discussed below:
Relevance: The first characteristic is Relevance. This characteristic states that financial
information is required to be relevant in order to be useful in different decision-making processes
like investment, credit decisions and others. Relevant financial information helps the users in the
evaluation of the effects of various past, present and future transactions on the future cash flows
(aasb.gov.au, 2017). In case of Amcor, the company takes the values of assets and liabilities
based on fair value. It implies that all the values ate relevant to the current market position.
Faithful Representation: The next characteristic of conceptual framework is Faithful
Representation. In order to be a faithful representation, three major characteristics need to be
met; they are complete, neutral and free from errors. According to 2017 auditor’s report of
Amcor, the company has prepared all of their financial statement by complying with all required
accounting standards of AASB, IFRS, Corporation Act 2001 and others. It implies that Amcor
have faithfully represented their financial statements.
Comparability: The next major characteristic of conceptual framework is Comparability. The
principle of comparability states that the users of financial statements are able to identify and
understand the similarities and differences among the financial information (fasb.org, 2017). It
can be observed that Amcor has presented their financial information based on two years that is
2017 and 2016. This aspect enables the users to compare the financial information of the
company across years. In addition, Amcor has presented their financial results in graph forms
that are helpful in comparing them with the financial results of other companies.

11CONTEMPORARY ISSUES IN ACCOUNTING
Verifiability: The next major characteristic is Verifiability. It is not fully possible for the users
of financial statements to verify the information in financial statements. However, in order to
assist them, Amcor uses to disclose all the underlying assumptions, the methods of compiling
information and others.
Timeliness: Another major characteristic of conceptual framework is Timeliness (ey.com,
2017). It implies that the financial statements need to contain recent financial information as old
information is less effective. In this context, it needs to be mentioned that the financial
statements of Amcor consists of most recent financial information as the financial statements are
based on the information of 2017 and 2016.
Understandability: The last major characteristic of conceptual framework is Understandability
(aasb.gov.au, 2017). It implies that the financial information is needed to be classified and they
need to be presented in the clearest way. From the annual report of Amcor, it can be seen that the
company has provided the classification and justification of the major items in financial
statements. It helps the users clearly understand every aspect of financial statements.
Conclusion
The above discussions show the Amcor Limited follows the standards and principles of
the conceptual framework of AASB for the preparation of their financial statements. In addition,
the company also follows the principle and standards of IFRS and Corporation Act 2001 for the
preparation of various financial accounts. According to the above discussion, it can be observed
that Amcor has been able to meet the four major objectives of AASB conceptual framework for
financial reporting. In addition, for the recognition of various financial aspects like assets,
liabilities, revenues, expenses and equities, Amcor follows the principles and standards of AASB

12CONTEMPORARY ISSUES IN ACCOUNTING
and IFRS; and they all are recorded in the financial statements based on their fair values. Apart
from this, the company has well satisfied the major qualitative characteristics of AASB
conceptual framework.

13CONTEMPORARY ISSUES IN ACCOUNTING
References
Amcor - About us. (2017). Amcor.com. Retrieved 7 December 2017, from
https://www.amcor.com/about_us/about_us
Annual Report 2017. (2017). Amcor.com. Retrieved 7 December 2017, from
https://www.amcor.com/CorporateSite/media/Annual-reports/Amcor_Annual_Report_20
17.pdf?ext=
Barth, M. E. (2013). Measurement in financial reporting: The need for concepts. Accounting
Horizons, 28(2), 331-352.
Company details - AMC - ASX - Australian Securities Exchange. (2017). Australian Securities
Exchange - www.asx.com.au. Retrieved 7 December 2017, from
http://m.asx.com.au/m/company-info.xhtml?issuerCode=AMC
Conceptual Framework for Financial Reporting. (2017). Aasb.gov.au. Retrieved 2 December
2017, from http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf
Conceptual Framework for Financial Reporting: Objective of Financial Reporting and
Qualitative Characteristics of Decision-Useful Financial Reporting Information.
(2017). Fasb.org. Retrieved 2 December 2017, from
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?
cid=1218220340119&acceptedDisclaimer=true
Conceptual Framework: Objectives and Qualitative Characteristics. (2017). Ey.com. Retrieved
2 December 2017, from

14CONTEMPORARY ISSUES IN ACCOUNTING
http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/
Supplement_86_GL_IFRS.pdf
Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., & Tan, R. (2012). Financial
accounting. Pearson Higher Education AU.