Advance Financial Accounting Report 2022

Running head: ADVANCE FINANCIAL ACCOUNTING
ADVANCE FINANCIAL ACCOUNTING
Name of the Student:
Name of the University:
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Requirement 1: -.........................................................................................................................2
Accounting concepts..............................................................................................................2
Requirement 2: -.........................................................................................................................5
Changes in new accounting standard for lease AASB 16......................................................5
Issues with example...............................................................................................................6
Requirement 3: -.........................................................................................................................6
Disclosures of the firm regarding its accounting for lease.....................................................6
Effect of transition..................................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................9

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Introduction
This report is prepared to analyse the disclosure made by the firm in their annual
report. For this report the chosen firm is Blackmores Limited. Blackmores Limited is an
Australian company which produces and sells health supplements foods and drinks across
Australia. The firm was founded by Maurice Blackmore in 1930 by opening its first retain
store in Queensland. Now it is an ASX 200 company having the market capitalization of $ 2
billion. The main business of Blackmores Limited is to produce and retail a range of health
supplements which contains high portion of minerals, vitamins and herbs. Currently, firm is
not limited only to the Australian market but also supply their products in more than 17
countries apart from Australia. The Blackmores Limited also an important employer of
Australia and current have more than 800 employees. This report analyses the annual report
of the firm for the year 2017 as well as 2018 with the objective of identifying and analysing
the accounting concepts used by firm in their financial calculation as well as in financial
reporting. Secondly, this report analyses the changes incorporated in the new accounting
standard for lease AASB 16. Further, report summarize the disclosers of the firm regarding
their transition procedure to AASB 16 from AASB 117.
Discussion
Requirement 1: -
Accounting concepts
As per the annual report of Blackmores Limited for the year 2018, the firm uses the
following accounting concepts in their financial reporting; -
 Business entity concept: - As per this concept firm and owner of the firm are two
separate entities. Thus, any obligation in firm cannot affect its owner’s wealth.
While, any obligation of owner can not affect the assets of the firm (Blackmores

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2019). The example of this accounting concept is that when owner invest money in
the business then it is recorded as the liability by the firm. Hence, this is used by the
firm to report their liability and other obligations. The example of using this concept
by the chosen company’s annual report is that the firm reported the equity capital in
the liability side of the balance sheet (Bayern 2016). In the basis of this statement
firm report each and every transaction between the firm and owner of the firm in their
financial report.
 Money Measurement Concept: - This concept ensures that all the financial
transaction of firm must be reported in terms of money only. This accounting concept
is also used by the firm in their financial reporting as all the financial related
transactions are reported by the firm in Australian Dollar in annual report (Korol
2015). If firm does not use this standard and not report their transactions in terms of
money then readers of financial statement will find difficulties in identifying the
importance of the transactions.
 Going Concern Concept: - This concept states that every firm needs to prepare and
report its financial transaction as well as financial information by assuming that the
firm will continue its operation for infinite period of time in future (Agostini 2018).
The chosen firm that is Blackmores Limited uses this accounting concept in their
capital management. This accounting concept is the main reason behind carry
forwarding the balances of several accounts to the next year (Omer, Sharp and Wang
2018). This accounting concept can be understand in better with the help of following
example: - if firm purchases a machinery which have a life of 10 years then firm
needs to charge an amount in their expenses as depreciation in the books of account
each year for next ten year and remaining balance in the asset side of the balance
sheet.

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 Accounting Period Concept: - This accounting concept states that the profit
reported by the firm in their financial report must be only for the certain period. This
ensures that the firm should report only those income or expenses in their annual
report of any year which is only related to those year (Blackmores 2019). The choose
firm uses this accounting concept while preparing the financial statement and
reported those expenses which is not related to the current year in the asset side of the
annual report not in the profit and loss account of the firm. According to this
standards, the life of the firm is divided in the several parts which is known as the
reporting periods of the firm. This reporting year may be a calendar year or a
financial year as per the regulation of the country in which the firm operates.
 Accounting Cost Concept: - The accounting cost concept of financial accounting
makes sure every firm must report all their assets at their annual report in their
acquisition cost including installation cost of assets and not in the market price of the
assets (Bekçioğlu et al 2016). Here, firm also uses this accounting concept while
preparing their financial statement for the year as all the assets of the firm is reported
in their purchase cost. Further, this standards clarifies that purchase cost is used by
the firm only in the case of the new asset while other assets are reported by the firm
in their purchase minus depreciation cost.
The above stated accounting standards are some important accounting standards used by
the firm in their financial reporting as per the annual report of the firm for the year 2018
(Barouch and Bey 2018). Further, all above stated accounting standards are most commonly
used accounting standards use by the reporting entity to report their financial information in
their annual report.

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Requirement 2: -
Changes in new accounting standard for lease AASB 16
Australian Accounting Standard Board recently changed their standards for the
financial leases and renamed it AASB 16 from AASB 117. The main reason of adopting this
change in the accounting standards for the leases is that the Security Exchange Commission
of United States raised the various concern along with the stakeholders and other users in
respect of the IASB as well as FASB for the initiative of lease projects (Joubert, Garvie and
Parle 2017). As per them, the existing standards for the financial leases accounting fails to
provide the faithful information of the financial transaction of the firm as the users are not
able to get the clear picture of the financial position of the firm. Hence, the Australian
Accounting Standards changes the standard for the reporting the financial lease and develop
new accounting standard for the financial lease AASB 117. The followings are the some
major change made in the AASB 117 compare to AASB 16: -
 AASB 117, classifies the leases as either financial lease or operational lease while
the new AASB 16 removes the classification the AASB 117 and treat all the lease
as the financial lease for the lessee. Though this have assumption related to term
of the lease either short term or long term lease.
 As per the new standards, firm needs to present their financial obligation for
making the future lease payments. This covers the financial liability of lease
payments which is made over the time period (Xu, Davidson and Cheong 2017).
 The procedure regarding the treatment of the residual value of grantees is the
major of the new standard.
 Lastly, the new accounting standard for lease AASB 16 does not permits
leveraged lease model unlike the AASB 117.

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There is no important changes is made for the lessor in the new accounting standard
for lease though this enhance the disclosure of the information by the lessors.
Issues with example
As per the disclosure of the firm in their annual report 2019, firm faces the issues
related with the non – cancellable undiscounted leases commitment of $ 16.6 million. This
leases commitment of the firm is related with the rents of the premises, support office,
distribution centres as well as warehouses (Blackmores 2019). The firm needs right – of - use
to recognise the payment for this assets related with the lease liabilities. Hence, this affect the
financial statement of the firm as well as key financial ratio of the firms.
Requirement 3: -
Disclosures of the firm regarding its accounting for lease
Firm discourses its accounting policy regarding the lease in the financial report for the
year 2018 as that AASB 16 standard for lease will replace the existing accounting standard
for lease of the firm which is AASB 117. Firm classifies its lease as per the requirement of
the new standards AASB 16 either as the financial lease which is reported by the firm in their
financial report or as the operating lease with cannot be recorded by the firm in its financial
report as per the requirement of the new lease standards (Blackmores 2019). Firm also
reported that the operating lease requires right – of – use to report their lease liability in the
financial report. While, lease liability present by the firm is reported by the firm in their
present value for the future payment excluding the short term lease. The interest expenses of
the firm related with the lease in recognised by the firm under the lease liability while the
depreciation is changed by the firm only for the right – to – use assets. Firm also reported that
there will be additional disclosure required by the new accounting standard for lease and firm
accordingly fulfils that requirements in their financial reporting (Blackmores 2019). Lastly,

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firm disclosed that the new accounting standard for lease will be applicable from the
beginning of the annual reporting period 1 of January 2019 and Blackmores Limited will
apply this new standard in their reporting for the financial year beginning from 1st of July,
2019.
Effect of transition
As chosen firm not yet adopted the new accounting standard for lease. Hence, the
transitional provisions of the firm cannot determined by the financial report for the latest year
that is 2018. Though this transition mainly affect the operating lease of the firm. While,
financial lease also will affected by this transitions. Lastly, the effect of this transition is very
minor over the lessor (Brumm and Liu 2019). Firm will need right – to – use to recognise the
operating lease and report them in the annual report along with the associated lease liability.
While, all other lease of the firm will be treated as the financial lease and firm can report this
leases in their financial report along with their associated lease liability. While, this new
standard of lease only enhance the disclosure of the lease for the lessor and does not change
any other procedure of the reporting the lease.
Conclusion
This report concludes that Blackmores Limited uses all the common accounting
concept which is used by the every reporting company. This accounting standards includes
Going concern concept, Business entity concept, Money measurement concept, Accounting
period concept as well as Accounting cost concept. Further, in respect of the new accounting
for lease that is AASB 16 it is determined that the all the major changes adopted by the new
standard are related with the lessee and requirements for the lessor for the lease is remained
same. There are mainly four changes reported by the board in relation to the accounting for
lease. The major one is that the new standards treats all the lease as financial lease while the
AASB 117 used to classify the financial leases into two type one is operating lease and

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another is financial lease. The firm discloses about the adaptation of the new standard and
some about the requirements of the new standard in its annual report for the year 2018 and
stated that this new standard for lease will be adopted by the firm for the reporting period
beginning from 1st of July 2019. Lastly, this report highlights that transition of the firm from
AASB 117 to AASB 16 will mainly affect the operational lease operating of leases and
mannerly affect the lessor.

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References
AASB, C.A.S., 2015. Investment property.
Agostini, M., 2018. The International Accounting Convergence Promoted by IASB and
FASB Regarding Going Concern Status. In Corporate Financial Distress (pp. 99-118).
Palgrave Pivot, Cham.
Barouch, G. and Bey, C., 2018. Cost of quality and process model: Improving accounting
tools for attaining higher environmental efficiency. Journal of cleaner production, 181,
pp.192-200.
Bayern, S., 2016. The Implications of Modern Business–Entity Law for the Regulation of
Autonomous Systems. European Journal of Risk Regulation, 7(2), pp.297-309.
Bekçioğlu, S., Kaderli, Y., Köroğlu, Ç. and Sezer, D., 2016. A New Cost Accounting
Concept by the End of 20th Century: Strategic Cost Management. Muhasebe ve Finans
Tarihi Araştırmaları Dergisi, (10), pp.120-138.
Blackmores 2019. [online] Blackmores.com.au. Available at:
https://www.blackmores.com.au/-/media/files/investor-centre/annual-and-half-yearly-
reports/blackmores-annual-report-2018_web-final.pdf?
la=en&hash=D0C9F6CC732CA4F557FE8E92A24AF04B64FEABEF [Accessed 23 Sep.
2019].
Blackmores 2019. About us. [online] Blackmores.com.au. Available at:
https://www.blackmores.com.au/about-us [Accessed 23 Sep. 2019].
Brumm, L. and Liu, J., 2019. New leasing accounting standard. Taxation in Australia, 53(8),
p.449.

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Carini, C., Rocca, L., Veneziani, M. and Teodori, C., 2018. The Reporting Entity Concept in
the Public Consolidated Financial Statement. International Journal of Business and Social
Science, 9(1), pp.1-21.
Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for
Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The
Journal of New Business Ideas & Trends, 15(2), pp.1-11.
Korol, S., 2015. Formation of acconting: social aspect. Вісник Київського національного
торговельно-економічного університету, (6), pp.115-126.
Omer, T.C., Sharp, N.Y. and Wang, D., 2018. The impact of religion on the going concern
reporting decisions of local audit offices. Journal of Business Ethics, 149(4), pp.811-831.
Xu, W., Davidson, R.A. and Cheong, C.S., 2017. Converting financial statements: operating
to capitalised leases. Pacific accounting review, 29(1), pp.34-54.