Importance of Conceptual Framework for Accounting

Running head: BUSINESS ACCOUNTING
Business Accounting
Name of the Student:
Name of the University:
Authors Note:

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BUSINESS ACCOUNTING
Summary:
Every country has conceptual framework for accounting. The accounting in an organization must
be in accordance with the applicable conceptual framework of the country. Companies operating
in Australia are under obligation to comply with the Australian Conceptual Framework for
Accounting. Accounting standards issued by Australian Accounting Standards Board (AASB)
are the standards to be followed by the companies operating in the country to comply with the
conceptual framework for accounting in the country. A clear picture has emerged from this
document that suggests that the conceptual framework of accounting is the prime consideration
to be kept in mind while recording financial transactions in the books of accounts and preparing
financial statements. Accordingly the validity of accounting treatment of two practical entities
namely, Telstra and Spirit Telecom is discussed below with respect to certain aspects of
accounting treatments.

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BUSINESS ACCOUNTING
Contents
Summary:.........................................................................................................................................1
Introduction:....................................................................................................................................3
Part 1:...............................................................................................................................................3
Part 2:...............................................................................................................................................4
Part 3:...............................................................................................................................................6
Part 4:...............................................................................................................................................7
Conclusion:......................................................................................................................................9
References:....................................................................................................................................11

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BUSINESS ACCOUNTING
Introduction:
Telstra has purchased a land in 2010 at a cost of $52 million. The market value of the land in
2018 stands at $200 million. As per the accountant of the company it is important to revalue the
land to reflect the economic reality of the asset at the present date. Also the compliance with
conceptual framework of accounting by Spirit Telecom Limited shall be discussed here by taking
examples from its Annual Report 2018.
Part 1:
Australian Accounting Standards Board, here in after to be referred to as AASB in this
document, has issued accounting standards to be followed in recording, summarizing and
maintaining books of accounts of entities operating in the country. The objective behind
introduction and implementation of these standards is to improve the quality of financial
reporting in the country. The fair and true representation of financial performance and position of
an entity in the financial statements is achievable when the financial statements are in
compliance with the accounting standards issued by the country (Barker and Teixeira, 2018).
The accountant of Telstra while suggesting that the land should be revalued to reflect the current
financial value of the asset in the books of accounts stated that this notion is consistent with
qualitative characteristics of faithful presentation (BOYMAL, 2007).
The above statement is correct. The reason for confirming with the statement of the accounting
on the notion of consistency in qualitative characteristics of faithful presentation is because the
objective of financial statements is to state the true and fair financial performance and position of
an organization through financial reports. AASB 13, Fair Value Measurement, issued by the
AASB clearly outlines the importance of fair value accounting in reflecting the actual financial