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Accounting and Financial Reporting Assignment

   

Added on  2020-04-07

21 Pages1568 Words46 Views
Running head: ACCOUNTING AND FINANCIAL REPORTINGAccounting and Financial ReportingName of the StudentName of UniversityAuthor’s Note

1ACCOUNTING AND FINANCIAL REPORTINGTable of ContentsAnswer to Question 1......................................................................................................................2Answer to Question 2......................................................................................................................6Answer to Question 3......................................................................................................................9Requirement I..............................................................................................................................9Requirement II...........................................................................................................................11Requirement III..........................................................................................................................12Answer to Question 4....................................................................................................................15Answer to Question 5....................................................................................................................17References......................................................................................................................................19

2ACCOUNTING AND FINANCIAL REPORTINGAnswer to Question 1To, The ChairpersonInternational Accounting Standard Board30 Cannon Street, London- EC4M 6XH, United KingdomDate: 20 August 2017Subject: Guiding and Recommendations on the Formatting and Principles of Financial ReportRespected Sir,The new proposition of International Accounting Standard Board (IASB) isconcerned with the effective communication of financial information of the companies (Burcă &Cotleţ, 2014). Regarding this, I have decided to make a submission on this matter. For thisreason, I have taken into consideration investing in two of the renowned banks; they are ANZWestpac. The preparation of accounting and financial statements of the companies is a complexprocess as this information helps the inventors to depict the financial position of the companies.Many times poor presentation affects the organization of financial data. Poor presentation andorganization of financial data affects the financial position of the companies. Thus, the investorssuffer in taking effective investment decisions. From the observation of the annual report of boththe banks, I have realized it is essential to increase the effectiveness of the communication offinancial statements. There is a need of more standardized system for financial disclosure.

3ACCOUNTING AND FINANCIAL REPORTING After going through the set of principles of effective communication, I have seen thatthere are crucial factors in this. They are to be simple and clear; to be entity specific; to providethe relevant information; to highlight the important matters; no presence of any duplication; topresent information in the appropriate format so that they become comparable and others. Afterthe analysis of the 2016 annual reports of ANZ and Westpac, I have seen that both the companieslack in complying with communication principles while both of them have complied with someof the principles. It is the responsibility of the reputed banks to provide their investors withcorrect financial information so that it can be helpful in their investment decision-makingprocess. In addition, banks are required provide segment analysis along with analysis of creditand liquidity risks (Craig & Michaela, 2014).The analysis of both the banks has made me aware the fact that both the banks have notmade the necessary financial and accounting disclosures. Westpac has conducted the segmentanalysis separately along with each segment definition (westpac.com.au, 2017). On the contrary,ANZ has not conducted any separate segment analysis as per the segmentation approach(iguana2.com, 2017). They have mentioned some of these facts in financial notes rather thanshowing them separately. The regulations of Basel are related with the banking industryregulations. The analysis of ANZ annual report has also shown the fact that ANZ has notdisclose any information regarding Basel requirements separately (iguana2.com, 2017). Theseparate disclosure of liquidity and credit risk was also missing. These facts have beenmentioned in financial notes. On the other hand, Westpac has all the necessary disclosuresregarding the Basel requirements along with the analysis of credit and liquidity risks of the bank(westpac.com.au, 2017). However, there was not anything mentioned regarding Tier I and Tier II

4ACCOUNTING AND FINANCIAL REPORTINGin the annual report of Westpac. Moreover, Westpac has measured their divisional performancethat is missing in the annual reports of ANZ (iguana2.com, 2017).In addition, it has been seen that both the banks have not use graphical presentation.Graphical presentation helps the investors to compare and analyze the performance of thecompanies (iasplus.com, 2017). Thus, in spite of the presence of narrative disclosure, theimportance of graphical presentation cannot be ignored. Apart from the above, there is also aneed for effective communication of financial information. Thus, there is a need for theimprovements in the process of financial combination. In this situation, I would like torecommend some of effective communication related principles of IASB for making thefinancial statements comparable (Deegan, 2013). Companies need to follow the principle ofentry specific. Financial information needs to be relevant with the financial situation of thecompanies rather than just to be generic. There is nothing special in generic information as theycan be obtained from annual reports of the companies. Thus, entry specific information needs tobe there in the financial statements. Furthermore, financial information need to be mentioned insuch a way so that they can become comparable based on several financial years. This can bedone with the help of graphical presentation of financial information.The draft disclosure of IASB also includes the principles and guidelines related toformatting of financial information (iasplus.com, 2017). The stakeholders and investors of thecompanies believe that communication effusiveness can be increased with the help of properformatting. The main reason is that proper formatting helps to compare the financial informationof companies for several financial years. Thus, I would like to recommended the board ofdirector of companies for adopting the strategies of proper formatting. It can be seen that thereare many banks that publish the guidelines to use graphs and tables in the annual reports of the

5ACCOUNTING AND FINANCIAL REPORTINGcompanies. In the financial reports of the companies, uncertainty regarding formats of thepresentation of financial reports can be seen. Communication with the company stakeholders canbe improved with the help of proper formatting. Based on the above discussion, I have realizedthe fact that both ANZ and Westpac needs to implement the strategy of formatting of financialreport in order to improve the communication of financial information with the stakeholders(iguana2.com, 2017). I strongly feel that the use of appropriate formatting for the presentation offinancial information will lead to effective decision-making of the investors.In addition, the development of formatting is highly related with the concept of entryspecific as some situations demand the disclosure of financials information of the companies inthe tabular form. Thus, there is a need for necessary guidance for the formatting process offinancial statements (ey.com, 2017). Thus, the disclosure of financial information with the helpof notes can be improved with the help of formatting. Different methods of formatting need to beapplied based on the nature of business of the entities so that it become entry specific. Thesetypes of formatting needs to be developed based on specific circumstances. These types ofdisclosures need to have connection with the inventors and the preparation of financialstatements. Apart from this, there is a need to develop the non-monetary guidelines also(aasb.gov.au, 2017).As an investor, I would like to make the recommendation to IASB for the inclusion of theabove-discussed principles related to the effective communication of financial information. Inthis case, companies need to consider the concept of entry specific as assists the investors tocompare the financial performance of the companies for many financial years. In addition,companies need to consider the principles of graphical presentation and formation for thecommunication of financial information.

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