Company and Financial Reporting: A Study of Australian Companies under AASB Framework

The report discusses the need for corporate regulation in financial reporting, the adaptation of IFRS by the AASB framework, and the analysis of owner's equity in four ASX listed companies. The report also includes a comparative analysis of debt and equity of the chosen companies. Overall, the report highlights the importance of financial reporting and the role of regulations in ensuring comparability and transparency in financial statements.

Running head: COMPANY AND FINANCIAL REPORTING
Company and financial reporting
Name of the Student:
Name of the University:

1COMPANY AND FINANCIAL REPORTING
Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
Discussion........................................................................................................................................3
The Corporate regulation and mangement..................................................................................3
Accounting standard setting of AASB and IFRS........................................................................4
Owner’s equity.............................................................................................................................6
Comparative analysis of debt and equity of the chosen companies:..............................................8
Conclusion:......................................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Executive Summary
The following topic has three sections that consist of the need corporate regulation by business
management in the process of accounting, the evaluation of the adaptation of IFRS by the AASB
framework and analysis and importance of the owner’s equity in the four ASX listed company.
In addition to that the report would also analyze the change in the debt equity ratio for the last
four years. The primary motive of the discussion is to know the nature and purpose of the
financial reporting of the Australian companies under the guidance of the AASB framework.
Introduction
The primary objective is to provide a base for the analysis of the implications of in the
financial reporting for the organizations. With the help of the regulators the profession of
accountancy is powerful in the achievement a major rise in the comparability of financial
statements. It provides a usual boundary for what is to be accounted for in the financial reports,
along with the rules about how transactions and items must be accounted for. Moreover the
discussion deals with the adaptation of IFRS in the AASB framework (Acharya and Ryan 2016).
The participation of Australian accounting standard board in the setting process of global
accounting standard outlines the power and function of the contribution and working to the
worldwide process standard setting.

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Discussion
The Corporate regulation and management
The importance for the regulation in the financial reporting is vital for the organizations
since there are various vital user of financial reporting that includes equity investors, employee,
analyst adviser, public the government and stakeholders. The various stakeholders however,
required to able to understand and interpret the monetary information in a organized process for
make the needed monetary decisions. In case the various accounting users made the financial
reports, it shall be made in varied ways that would comply with their suitable requirements. In
the case, the varied groups will understand the various financial reports their own ways thus may
create a global differences in the practice of accounting (Capkun, Collins and Jeanjean 2016).
The Accounting practices differ from country to country as well as their frame work of
regulation. Therefore in order to maintain a balance between the various accounting frameworks
the regulations are important. This also sets a boundary for the users of accounting so that there
is a systematic interpretation of the financial data. The requirements disclosure resolves some of
the issues that are associated with of information between the user groups of accounting. It also
enables the user to compare the inducements level with the received by the other users (Leuz,
and Wysocki 2016). The regulations therefore, addresses the various issues of financial
information by requiring the setting a boundary for the of certain key items of interest to the user
groups. With the help of the regulators the profession of accountancy is more powerful in
achieving a major increase in the financial statements comparability (Hoskin, Fizzell, and Cherry
2014). It provides a general framework for what is to be accounted for in the financial reports,
along with the rules about how items and transactions should be accounted for (Christensen, Lee,
Walker and Zeng 2015).

4COMPANY AND FINANCIAL REPORTING
The regulations may include the mandates like the conventions like the materiality, the
revenue recognition and objectivity. There exist various objectives and criteria that are helpful at
the time of choosing the method of accounting. The choice of accounting method must always be
reliable, relevant, understandable and comparable to all involved parties for the same to be
favorable to the accounting users. Accounting regulations may however, may limit the extent to
which the accountants are able to prepare the financial statements to meet the needs of different
user groups (Coleman, Cotei and Farhatn 2016). However, this may discourage the accountants
from experimenting new techniques of accounting transaction recordings. There is no assurance
that the standard procedure will provide the required information by the different groups of
financial reports. Yet, there is the need for the reports to be regulated as it would be comparable
and it can save money and time while adjusting them into a general arrangement.
Accounting standard setting of AASB and IFRS
Every major country has their own accounting standards, however to bring
standardization and comparability, efforts has been made by organizations like IFRS to bring in
the accountability with the Australian accounting standard board (AASB). The participation of
Australian accounting standard board in the setting process of global accounting standard
outlines the power and function of the contribution and working to the worldwide process
standard setting. The international financial reporting that has been adopted by Australia is
similar to the council for strategic direction of financial reporting (Jin, Shan and Taylor 2015).
Therefore, the operational process of AASB incorporates the work program and IASB and IFRS.
However, there is difference in involvement degree which may be substantive or non non
substantive. The operational process of Global public segment standard of accounting board is
strictly supervised by the AASB.

5COMPANY AND FINANCIAL REPORTING
The chart shown in the above diagram represents a simple view of the process of standard
setting that highlights the operations of the AASB. The AASB are given with the duty of
identification of the various technical problems, oversights and premeditated directives.
The IFRS that is the international financial reporting standard that is the accounting standards
that have been implemented and developed by International accounting standard board has
fifteen member countries including IFRS (AASB 2014). The business is able to do a comparison
of the financial statements by implementation of the specific reporting standard. In the present
discussion, it is not compulsory for the IASB member countries to adopt the reporting standard
because the full acceptance of standard results in loosing of certain quality level of. For example,
the full acceptance of IFRS would be rejected by United States because they might not contain
market incentive for the preparation of the financial statements (Nobes 2014). Additionally, it is
also be said that advantages would be empowered by the cost associated with the IFRS adoption.

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Owner’s equity
The owner's equity is one of the primary components of the balance sheet
and accounting equation. It represents the investment in the business deducting the owner's
draws or drawings from the operations adding with the net profit. It refers to the amount of assets
minus the liabilities. As the amounts need to follow the principle of cost the amount of equity
does not show the current fair market value of the organization. It is viewed as a residual
claim on the operational assets as the liabilities have a higher claim (De George, Li and
Shivakumar 2016). The owner’s equity can also be viewed as a business assets source. The
chosen Australian companies whose financial report is to be analyzed are Woolworths,
Wesfarmers, JB Hi-Fi and Met cash.
Analysis of items of equity of Woolworths:
The amount of contributed equity stood at $ (million) 6055 in year 2018 compared to $
5615, $ 5252 and 5064.9 in year 2017, 2016 and 2015 respectively. From the figures, it can be
said that the value of equity has risen since year 2015. The reserves are recorded at $ 353, $ 357
in year 2018 and 2017 compared to $ 93.9 and 95.1 in year 2016 and 2015. It can be suggested
that the reserves has increased (Johnston and Petacchi 2017). Furthermore, retained earnings are
recorded at $ 4073, $ 3554, $ 3124.5 and $ 5831.0 in year 2018, 2017, 2016 and 2015
respectively.
Analysis of each items of equity of Met cash:
For Met cash, the amount of contributed and other equity is recorded at $ 600 in year
2018 as against $ 1719.3, $ 1626, $ 2391.9 in year 2017, 2016 and 2015. As per the abnual
report the amounts of value of equity decreased in year 2018. Analyzing the amounts of the

7COMPANY AND FINANCIAL REPORTING
retained earnings, it represents that value has increased to $ 780.6 in year 2018 as against
accumulated loss of $ 87.7 in year 2017, $ 184.7 and $ 765.9 in year 2017, 2016 and 2015
respectively (Tschopp and Huefner 2015). Amount of reserves for year 2018 stood at $ 0.7
compared to $ 3.0 in year 2017 and $ 4.1 in year 2016 and 2015.
Analysis of items of equity of Wesfarmers:
For year ending 2018 and 2017, issued capital is reported at $ 22277 million and $ 22268
million compared to $ 21937 and $ 21844 in year 2016 and 2015 respectively. There has been
constant rise in value of issued capital. Value of retained earnings is recorded at $ 176 for year
2018 compared to $ 1509, $ 874 and $ 2742 for year 2017, 2016 and 2015 respectively (Mardini,
Crawford and Power 2015). The retained earning has reduced initially and has risen and decline
further in the present year. Reserves were at 344, 190, 166 and 226 for year 2018, 2017, 2016
and 2015. The reserves declined and then increased showing that the reserves account has
increased due to rise in profits.
Analysis of each items of equity of JB Hi-Fi:
The equity stood at $ 438.7 and $ 49.3 in year 2017 and 2016 in comparison to $ 565.21
in year 2015. It is showed according the annual report that there is a fall in value of the equity.
Value of reserves is recorded at $ 33.2 and $ 27.1 in year 2017 and 2016 compared to $ 17.63 in
year 2015 respectively indicating a consistent increase in value (Sutherland 2017). Now, looking
at the figures of retained earnings, it can be seen that the amount is recorded at $ 381.6 and $
328.3 in year 2017 and 2016 respectively compared to $ 269.3 in year 2015. The figure suggests
that the value of retained earnings is rising.

8COMPANY AND FINANCIAL REPORTING
Comparative analysis of debt and equity of the chosen companies:
The debt to equity ratio, evaluated by dividing the total liabilities of company by its
equity of stockholders, is a debt ratio used to measure a financial leverage of the organization
(Leuz and Wysocki 2016). The debt to equity ratio represents the amount how much debt a
company is using to finance its assets relative to the value of equity of the shareholders.
The total amount of liabilities of Woolworths limited for year ending 2018 and 2017 is
recorded at $ 12709 and $ 13167 compared to total value of equity that is recorded at $ 10849
and $ 9876. It is suggested by the figure that value of equity is less as against total amount of
debt. The amount of total debt for Met Cash is recorded at $ 2330.4 and $ 2294.9 in year 2018
and 2017 compared to $ 2254.2 and $ 2313.3 in year 2016 and 2015 respectively. On other hand,
the value of equity is recorded at $ 1388.6 and $ 1637.4 in year 2018 and 2017 compared to $
1538.4 and $ 1275.2 in year 2016 and 2015 respectively (Perera and Chand 2015). In case of
Wesfarmers limited, the total amount of liabilities is recorded at $ 14179 in year 2018 and 16174
in year 2017 respectively indicating that total amount owed by organization to other has reduced.
Looking at the figures of equity, it can be seen that equity has reduced from $ 23941 in year
2017 to $ 22754 in year 2018 respectively (Kim, Shi and Zhou 2014). For the company of JB
Hi-Fi, the total liabilities amount or debt is recorded at $ 1598.9 and $ 587.6 in year 2017 and
2016 compared to 551.5 in year 2015 respectively. It can be observed from the figures that the
total liabilities amount has increased in year 2017. Total amount of equity on other hand stood at
$ 853.5 in year 2017 compared to $ 404.7 in year 2016 and $ 343.47 in year 2015
respectively).The amounts shows that total value of equity has risen in year 2017.

9COMPANY AND FINANCIAL REPORTING
Conclusion
The primary purpose of the study is to understand the nature and purpose of the financial
reporting of the Australian companies under the guidance of the AASB framework. The chosen
Australian companies whose financial report is to be analyzed are Woolworths, Wesfarmers, JB
Hi-Fi and Met cash. From the figures of all the four companies, it can be observed that JB Hi-Fi
has less amount of total debt followed by Woolworths compared to Wesfarmers and Met Cash.
For the figures of equities, it can be seen that the value of equity of Wesfarmers is more than all
other firms.

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References
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11COMPANY AND FINANCIAL REPORTING
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