Contemporary Issues in Accounting

This assignment critically analyses the annual reports of Blackmores Ltd, an Australian health supplement company, to establish whether the financial statements are prepared in accordance with the conceptual framework of reporting. The report discusses the objectives of the conceptual framework, recognition criteria, fundamental and enhancing qualitative characteristics of the financial statements, and recommendations for improvement. The subject is accounting, and the course code and college/university are not mentioned.

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

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CONTEMPORARY ISSUES IN ACCOUNTING
Executive Summary
The focus of this assignment is to critically analyse the annual reports of a company which is
listed in Australian Stock Exchange (ASX). The company which is selected for this assignment
is Blackmores ltd which has its business headquarters in Australia. The report will be analysing
the financial statements of the company and establish whether the financial statements are
prepared in accordance with conceptual framework of reporting. The report will be stating the
various objectives which the conceptual framework of accounting serves in today’s environment.
In addition, it will point out the recognition criteria of the company and also whether the
financial statements show Fundamental and Enhancing features in the financial statement. Lastly
the report will be ending with a section of recommendations.

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CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Discussions......................................................................................................................................3
Objectives of Conceptual Framework.........................................................................................3
Recognizing Criteria........................................................................................................................7
Fundamental Qualitative Characteristics.....................................................................................8
Enhancing Qualitative Characteristics.........................................................................................9
Conclusion and Recommendations..................................................................................................9
Reference.......................................................................................................................................11

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CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
Conceptual Framework may be defined as a system or ideas which are important so that
it can be used by different organization for the purpose of preparation of the annual reports of a
business by following the rules, regulations and guideline. The framework is useful to promote
comparability and consistency among the annual reports which are prepared by different
businesses and also annual reports which are prepared at different reporting dates (Díaz et al.
2015). Conceptual Framework provides the guidelines which are needed to be followed to ensure
that the financial statements of the company are represented in an effective manner. The
framework consists of various accounting standards which were issued by AASB, accounting
principles which are followed and accounting conventions. The conceptual framework should be
followed by each entity to ensure that the financial statements is displaying fair representation
(Libby 2017).
The company which is selected for this assignment is Blackmores ltd. The company is
engaged health supplement business in Australia. The company was first established in 1930 and
the company has its headquarter in Australia. The net profit which was generated by the business
after tax amounted to $ 58 million and the company has a global presence in most of the major
countries (Blackmores.com.au. 2018).
Discussions
Objectives of Conceptual Framework
As discussed above Conceptual Framework of reporting enables the users of the financial
statements to understand, compare and interpret the financial information which is provided in
the annual reports of the company. The objectives of conceptual framework are discussed below
in details:

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CONTEMPORARY ISSUES IN ACCOUNTING
1. The purpose of Conceptual framework is to ensure that the annual reports of the company
contains all relevant and necessary information which can be of use to the users of the
financial accounts of the business. These users are mainly potential investors and
stakeholders of the business. The information which are presented in the financial
statements are used for taking decisions regarding future investments and present
holdings of the shares. The financial statements are also taken as performance report of
the company. In the case of Blackmores ltd, the annual reports of the company for the
year 2017 shows necessary information which can be used by the shareholders in order to
take decision regarding investments in the shares of the company or decision relating to
holding the ownership of shares of the company. The components of the financial
statements are effectively prepared which can provide the shareholders information
regarding the overall performance of the company and also regarding how the business is
utilizing the funds of the shareholders.
2. Another objective of Conceptual framework is to effectively assess the amount of cash
inflows which is generated by the business. The framework is also used to identify the
various sources through which company can generate future cash inflows for the business
and various resources which can be used by the business. As per the annual reports of
Blackmores ltd, the business has effectively anticipated certain expenses which the
business and will be implementing new standard which can improve the reporting process
of the business in 2018.

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CONTEMPORARY ISSUES IN ACCOUNTING
Figure 1: (Cash flow Statement of Blackmores Ltd)
Source: (Blackmores.com.au. 2018)
3. Conceptual Framework of reporting helps in depicting all the information which are
relating to the assets, liabilities and the income and expenses of the company which can
help the shareholders in determining the financial performance of the company on the
basis of these components of the financial statements. Blackmores Ltd has shown in the
statement of profit and loss account the net profit of the company along with all other
income and expense items of the business.

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CONTEMPORARY ISSUES IN ACCOUNTING
Figure 2: (Profit and loss Account of Blackmores Ltd)
Source: (Blackmores.com.au. 2018)
Thus, from the above analysis of the objectives of the Conceptual framework it is clear that
the framework is very important for effective representation of the financial information of the
company in the annual reports which is prepared by the company. Such information are of
immense use to the stakeholders of the company.

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CONTEMPORARY ISSUES IN ACCOUNTING
Recognizing Criteria
The recognition criteria of the reporting components needs to fairly represent the various
components of the financial statements which are to be recorded. Australian Accounting
Standard Board (AASB) is the board which issues standards related to accounting which set the
guidelines which are to be followed by businesses for treatment of certain items of the financial
statements and thereby ensuring that the annual reports are showing true and fair view (Ahmed,
Neel and Wang 2013). In addition to this, the conceptual framework also set a certain guideline
which is to be followed for recording and recognizing specific transactions of the business (Brief
and Peasnell 2013). The various components which are to be recognized are given below:
1. Assets: As per the general framework assets are to be subdivide into short-term assets and
long-term assets which are also known as current and non-current assets respectively.
Blackmores ltd have subdivided their assets as per the requirement of the framework. The
current assets of the company consist of cash and cash equivalents, inventory and debtors
which are commonly seen as an item of the current assets of the company. The non-
current assets of the company comprise of investment, property, plants and equipment
and deferred tax assets and intangible assets of the business.
2. Liabilities: The liabilities of the business are also sub divided into current and non-
current liabilities similarly as assets. The asset side total will always be equal to the
liability side total as per the matching principle of accounting. The current liabilities of
Blackmores ltd consist of trade payables, current tax liabilities and other current
liabilities of the business. The non-current liabilities of the business consist of interest
bearing liabilities and other liabilities as well.

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CONTEMPORARY ISSUES IN ACCOUNTING
3. Income: The income of the company is recorded and shown in the profit and loss account
prepared by the company. The revenues are recognized by the company when the risks
and rewards associated with the product is transferred to third party.
4. Expenses: The expenses of the company are depicted in the profit and loss account of the
company. Some of these expenses are cash expenses while some are non-cash like
depreciation and impairment loss.
5. Equity: The equity of the company comprises of retained earnings which are generated
by the business and used for financing purpose of the business and also issued capital of
the business.
Fundamental Qualitative Characteristics
As per the financial statements of Blackmores ltd, the financial statements contain the
qualitative characteristics which are given below in details:
1. Relevance: This principle states that the annual reports of any business should include
information which are relevant and which can be used by the shareholders of the
company (Zhang and Andrew 2014). In the case of Blackmores ltd, all related AASB and
IAS standard which is relevant has been followed.
2. Faithful representation: In order to prove that the financial statements are showing true
and fair view, the financial statement are audited and independently investigated by an
independent and competent auditor (Beattie 2014). The auditors of the company are
Deloitte which is one of the big 4 auditing firms. The auditor of Blackmores ltd is of the
view that the financial statements are showing true and fair view and the company has
complied with all relevant accounting standards and principles.

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CONTEMPORARY ISSUES IN ACCOUNTING
Enhancing Qualitative Characteristics
The Enhancing Qualitative features of the financial report of the Blackmores ltd are given
below in details:
1. Comparability: As per this principle the users of the financial statements are able to
compare the similarities and differences which arises between the results of the financial
statement of a company between two periods (Palea 2013).
2. Verifiability: This principle states that the financial statements should be verifiable by the
users of the financial statements of the company.
3. Timeliness: The principle states that financial information should be made available to
the shareholders of the company in a timely manner.
4. Understandability: The financial statements should be such that the users of the financial
statements are able to clearly understand the financial information. The information
should be properly classified, summarized and presented in a concise manner which can
promote understanding (Macve 2015).
Conclusion and Recommendations
Thus, from the analysis of the annual reports of Blackmores ltd it is clear that the
company follows conceptual framework of reporting as the company as recorded all the relevant
transaction which can help the users to gain understanding of the financial statements are shown
in the financial statement of the company. In addition to this, the financial statements also satisfy
the fundamental and Enhancing qualitative features of the financial statements. The financial
reports of the company also follow recognition criteria which enables the financial statements to
contain all relevant information which can be of use to the potential investors and stakeholders of
the business.

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CONTEMPORARY ISSUES IN ACCOUNTING
Recommendation
The recommendations which can be given to the company which can lead to further
improvement of the reporting framework is given below in points form:
1. The management needs to improve the disclosing requirement of Key audit matters
which relates to rebate of $ 143.5 million and the same need to be explained clearly in the
financial statements.
2. The financial statement of Blackmores ltd can be improved further with better
presentation of the financial information of the business.

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Reference
Ahmed, A.S., Neel, M. and Wang, D., 2013. Does mandatory adoption of IFRS improve
accounting quality? Preliminary evidence. Contemporary Accounting Research, 30(4), pp.1344-
1372.
Beattie, V., 2014. Accounting narratives and the narrative turn in accounting research: Issues,
theory, methodology, methods and a research framework. The British Accounting Review, 46(2),
pp.111-134.
Blackmores.com.au. (2018). Company information. [online] Available at:
https://www.blackmores.com.au/about-us/company-information [Accessed 20 Apr. 2018].
Brief, R.P. and Peasnell, K.V. eds., 2013. Clean surplus: A link between accounting and finance.
Routledge.
Díaz, S., Demissew, S., Carabias, J., Joly, C., Lonsdale, M., Ash, N., Larigauderie, A., Adhikari,
J.R., Arico, S., Báldi, A. and Bartuska, A., 2015. The IPBES Conceptual Framework—
connecting nature and people. Current Opinion in Environmental Sustainability, 14, pp.1-16.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Palea, V., 2013. IAS/IFRS and financial reporting quality: lessons from the European
experience. China Journal of Accounting Research, 6(4), pp.247-263.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.