Compliance of Carsales.com Limited with AASB Conceptual Framework

This report examines the compliance of Carsales.com Limited with the AASB conceptual framework standards. The report states that the company follows all the principles of conceptual framework for financial reporting.

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 objective of this report is to examine the compliance of Carsales.com Limited with the
AASB conceptual framework standards. The results of the analysis of this report state that the
company follows all the principles of conceptual framework for financial reporting.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Conceptual Framework Objectives..................................................................................................3
Target Audience...............................................................................................................................8
Recognition Criteria.........................................................................................................................8
Fundamental Qualitative Characteristics.......................................................................................13
Enhancing Qualitative Characteristics...........................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
At the time of conducting the accounting and financial reporting related operations,
business entities face different types of complex accounting issues. In most of the cases,
companies face accounting issues as they do not fully comply with all the necessary accounting
policies, procedures, standards and principles. These standards and principles have a integral part
to play in the accounting operations of the companies as they help the business entities in
carrying on the accounting operations in the proper way so that the financial statements of them
reflect their true financial position. Most importantly, the investors largely rely upon these
financial statements for their investment decision-making process. This same aspect is also
applicable for the Australian Security Exchange (ASX) listed business entities. In Australia,
Australian Accounting Standard Board (AASB) provides the ASX listed companies the
necessary standards and principles for their accounting and financial reporting after collaborating
with International Accounting Standard Board (IASB). The directory of these accounting
standards and principle is known as AASB Conceptual Framework (aasb.gov.au 2018). The
objective of this report is to examine the compliance of Carsales.com Limited with the AASB
conceptual framework standards. Carsales.com is an Australian ASX listed business entity
involves in the online selling of automotive, motorcycle and marines (carsales.com.au 2018).
Conceptual Framework Objectives
The aim of AASB conceptual framework is to achieve three major objectives through the
financial reporting of each ASX listed company. They are shows below:

4CONTEMPORARY ISSUES IN ACCOUNTING
The first objective of AASB conceptual framework is to provide all the necessary
information about the economic resources of the business entities so that the users can know the
financial standing of them (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
The above figure shows that Carsales.com has provided all the necessary information
about their different economic resources like non-current assets, current assets, liabilities and
others through the release of the consolidated statement of financial position

5CONTEMPORARY ISSUES IN ACCOUNTING
(shareholder.carsales.com.au 2018). By using this statement, users can determine the financial
standing of the company.
The second objective of AASB conceptual framework is to provide all the neccsery
information about factors like revenue, profit, loss and others so that the users can measure the
financial performance of the companies (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
The above figure shows that Carsales.com has provided all the relevant information about
the sales, expenses, profit and other factors of their business through the release of consolidated

6CONTEMPORARY ISSUES IN ACCOUNTING
statement of comprehensive income (shareholder.carsales.com.au 2018). Users can determine the
financial performance of the company by using this information.
The third objective of AASB conceptual framework is to provide necessary information
to the users so that they can determine the change in financial position and financial performance
of the business entities (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)

7CONTEMPORARY ISSUES IN ACCOUNTING
(Source: shareholder.carsales.com.au 2018)
The above figure shows that Carsales.com has provided all the required information
related to change in profit, change in equity, change in cash flow and others through the release
of consolidated statement of change in equity and consolidated statement of cash flows
(shareholder.carsales.com.au 2018). It is possible for the users to determine the change in
performance of the company by using this information.

8CONTEMPORARY ISSUES IN ACCOUNTING
In addition, Carsales.com follows the standards of Corporations Act 2001, Australian
Accounting Standard and AASB in order to prepare and present their financial statements. For
the same purpose, the company has also complied with the standards of International Financial
Reporting Standards (IFRS) and IASB (shareholder.carsales.com.au 2018). Thus, on the basis of
all the above discussion, it is clear that Carsales.com follows the objectives of AASB conceptual
framework.
Target Audience
The main aim behind the preparation of financial statements is to provide the target
audience with all the relevant and required financial information for their different decision-
making process. As per the conceptual framework of AASB, target audience refers to the users
of financial information and they are investors, creditors, lenders, banks, other financial
institutions, government, tax authority and consumers (aasb.gov.au 2018). They need financial
information for different purposes. As per the above discussion, Carsales.com provides all the
required financial information through different financial statements; like information of
economic resources can be obtained from the statement of financial position, financial
performance related information can be obtained from the income statement and others. Thus,
one aspect is clear that the target audience can obtain their required financial information
adequately from the financial statements of Carsales.com (shareholder.carsales.com.au 2018).
Recognition Criteria
Apart from the major objective, another aim behind the introduction of AASB conceptual
framework is to make the ASX listed companies recognize their assets, liabilities, equity,
revenue and expenses as per the criteria provided by this conceptual framework. The following

9CONTEMPORARY ISSUES IN ACCOUNTING
discussion shows the compliance of Carsales.com with the recognition criteria of AASB
conceptual framework:
Revenue: Carsales.com recognizes and measures their revenue by using fair value of the
consideration received. Revenue from the selling of goods is recorded when the goods are
provided to the customers. Carsales.com follows the AASB 15 and AASB 118 for the
recognition of revenue (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
Expenses: Carsales.com has three types of expenses. In case of retirement benefit obligations,
Carsales.com recognizes them in the statement of profit and loss. Research and development
costs are recognized as expenses incurred. Lease expenses are recognized in the profit and loss
statement as per AASB 16 (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)

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Equity: Carsales.com classifies their ordinary shares as equity. There is not any par value of the
ordinary shares and there is not any limited amount for the authorized capital. For the recognition
of equity, Carsales.com follows AASB 1004 for the recognition of equity (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
Assets: Carsales.com historical cost method for the recognition of property, plant and equipment
after deducting depreciation and follows AASB 116 for this recognition (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
The recognition of trade and other receivables are done based on fair value after the
deduction of amortized cost and provision for impairment. For this purpose, Carsales.com
follows AASB 139 (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)

11CONTEMPORARY ISSUES IN ACCOUNTING
Carsales.com uses fair valuation model for the recognition of goodwill. Other intangible
assets of the company are subject to amortization on the straight line basis. For this recognition,
Carsales.com follows the AASB 138 (aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)
Liabilities: Trade and other payables are considered as liabilities and their payment is usually
done within 30 days of the recognition. Short-term obligations are paid within 12 months from
the recognition. The payment of long-term employee benefits is done within the 12 month from
the recognition (aasb.gov.au 2018).

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(Source: shareholder.carsales.com.au 2018)
Carsales.com recognizes their business borrowings at fair value after the consideration of
incurred net transaction costs and their measurement is done based on amortized cost
(aasb.gov.au 2018).
(Source: shareholder.carsales.com.au 2018)

13CONTEMPORARY ISSUES IN ACCOUNTING
Fundamental Qualitative Characteristics
According to AASB conceptual framework, financial reports of the companies need to
possess the fundamental qualitative characteristics; they are Relevance and Faithful
Representation (aasb.gov.au 2018).
Relevance: This specific characteristic assists the users in obtaining their required financial
information for effective decision-making process and it makes financial information more
useful (aasb.gov.au 2018). The earlier part of this study shows that Carsales.com releases all the
necessary financial statements containing financial information helping the users in decision-
making process (shareholder.carsales.com.au 2018).
Faithful Representation: The relevant financial information must be faithfully represented so
that they cannot cause any material misstatements in the financial statements (aasb.gov.au 2018).
The audit report of Carsales.com states that there is not any material misstatement in the
financial reports. In addition, Carsales.com follows the regulations of AASB, Corporations Act
2001, IFRS and IASB that ensure the faithful representation of the financial statements
(shareholder.carsales.com.au 2018).
Enhancing Qualitative Characteristics
AASB conceptual framework provides four enhancing qualitative characteristics of
financial reporting that helps in improving the quality of financial reporting; they are
Comparability, Verifiability, Timeliness and Understandability (aasb.gov.au 2018).
Comparability: This characteristic assists the users in identifying the similarities and
differences between the financial performances of the entities (aasb.gov.au 2018). Carsales.com

14CONTEMPORARY ISSUES IN ACCOUNTING
provides the degree of comparability in their financial information by complying with all AASB
conceptual frameworks and faithfully represents their financial statements
(shareholder.carsales.com.au 2018).
Verifiability: Verifiability helps the users in reaching consensus with the application of different
knowledge and different observation (aasb.gov.au 2018). Users of the financial information can
directly verify the provided information of Carsales.com with the AASB standards
(shareholder.carsales.com.au 2018).
Timeliness: Timeliness ensures that the users get required information in correct time
(aasb.gov.au 2018). Carsales.com releases their financial statements at a specific time of the
financial years so that the users can easily access them for decision-making purpose
(shareholder.carsales.com.au 2018).
Understandability: This characteristic helps the users to classify, characterize and present
financial information for their different purposes (aasb.gov.au 2018). In case of Carsales.com,
the users with reasonable financial knowledge can easily access the provided financial
information by the company (shareholder.carsales.com.au 2018).
Conclusion
From the above discussion, one aspect is clear that the business entities can avoid the
significant accounting issues by complying with the required standards and principles of AASB
conceptual framework. In case of Carsales.com, the company conducts their accounting and
financial operations after complying with the required standards and regulations of AASB
conceptual framework. For this reason, the company does not have to face the accounting issues.

15CONTEMPORARY ISSUES IN ACCOUNTING
Thus, it is recommended for all the ASX listed business entities to follow the AASB conceptual
framework for effective and correct financial reporting.
References
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http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 15 Apr.
2018].
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 15 Apr.
2018].
Aasb.gov.au. (2018). Contributions. [online] Available at:
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[Accessed 15 Apr. 2018].
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http://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 15 Apr. 2018].
Aasb.gov.au. (2018). Financial Instruments: Recognition and Measurement. [online] Available
at: http://www.aasb.gov.au/admin/file/content105/c9/AASB139_07-04_COMPoct10_01-11.pdf
[Accessed 15 Apr. 2018].
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http://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf
[Accessed 15 Apr. 2018].

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Aasb.gov.au. (2018). Inventories. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 15 Apr.
2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf
[Accessed 15 Apr. 2018].
Aasb.gov.au. (2018). Revenue from Contracts with Customers. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB15_12-14_COMPoct15_01-18.pdf
[Accessed 15 Apr. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf
[Accessed 15 Apr. 2018].
Carsales.com.au. (2018). About Us - carsales.com.au. [online] Available at:
https://www.carsales.com.au/carsales-info/about-carsales [Accessed 15 Apr. 2018].
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2018].