Effectiveness of Conceptual Framework in Australia Case Study of Flight Centre

This case study explores the effectiveness of conceptual framework in Australia with a focus on Flight Centre. It discusses the benefits and purpose of a conceptual framework for financial reporting, the background of Flight Centre, and its role in adhering to the accounting standards.

Effectiveness of Conceptual Framework in Australia1
EFFECTIVENESS OF CONCEPTUAL FRAMEWORK IN AUSTRALIA CASE STUDY OF
FLIGHT CENTRE
Student’s Name
University
Course
Date

Effectiveness of Conceptual Framework in Australia2
Table of Contents
TITLE:.............................................................................................................................................3
Executive Summary.........................................................................................................................3
Definition of Terms.........................................................................................................................3
Australian Security Exchange (ASX):.........................................................................................3
Accounting Theory:.....................................................................................................................3
Introduction......................................................................................................................................3
Aims and Findings...........................................................................................................................4
Benefits and purpose of a conceptual Framework for Financial Reporting................................4
Background of Flight Centre...........................................................................................................5
Discussion of Issues.........................................................................................................................5
How Flight Centre Work.............................................................................................................5
The role of Flight Centre.............................................................................................................6
Conclusion and Recommendations.................................................................................................9
References......................................................................................................................................10

Effectiveness of Conceptual Framework in Australia3
TITLE: Effectiveness of Conceptual Framework in Australia Case Study of Flight Centre
Executive Summary
These are theories that are set by the Accounting regulatory bodies to ensure that accounting
practical problems are objectively tested and that financial Reporting issues are dealt with
appropriately. Financial Accounting Standard Board (FASB) was formed in 1973 in Norwalk to
set standards for public organization. The Board is an Independent and a not-for-profit
organization whose objective is to issue financial accounting standards that are not only
transparent but also promotes financial reporting in order to provide accurate and timely
information to the users. International Accounting Standard Board (IASB) was formed in the
year 2001 to oversee the operations of the IFRS. It replaced the International Accounting
Standard Committee (IASC). International Financial Reporting Standard (IFRS) are standard
rules that are to be adhered to by all accountants globally for harmonization of accounting
practices across the world.
Definition of Terms
Australian Security Exchange (ASX): Australia’s premier large Capitalization equity Index.
Accounting Theory: Theories and methods that are used in studying and analyzing financial
reporting rules and regulations. Accounting Concepts are accounting rules applied while
preparing the financial Statements and Accounts. They include Accrual Concept, Consistency
concept, Going Concern concept and Prudence Concepts
Introduction.
Flight Centre being one of the largest Airline Company in Australia, has contributed significantly
in contributing to the implementation and development of the conceptual frame work. The

Effectiveness of Conceptual Framework in Australia4
corporation has played a great role in ensuring that the obligations of the Accounting conceptual
frameworks are met. The main purpose of the Conceptual frame work is to help the IASB to
develop future IFRS and to review its current IFRS and this topic has clearly brought out how
the Flight Centre has ensured that this happens (Bath, 2012).Flight Centre role of overseeing has
enabled the Australian listed companies to be left with no option but to comply with the
implementation of the rules and regulations set out the Boards. This has ease the work for the
Australian government prepares the financial statements because it harmonizes the way financial
statement are to be prepared globally (Frijns, 2010). The topic has explained the conceptual
frame works that have been adopted by the Flight Centre Corporation such as the IFRS, AASB
and the IAS (Viljoen, 2015). Conceptual framework is very vital as far as reporting of financial
statement is concerned, for instance it help financial statement users to understand the
information provided by the organization. Companies with whose portfolio have high liquidity
and need a benchmark and Flight Centre provides this benchmark for such company’s
Aims and Findings
Benefits and purpose of a conceptual Framework for Financial Reporting.
i. Provide clear defined terms that are used in discussion of accounting problems.
ii. Guides those who set the accounting standards while coming up with ways on how to
review financial reporting rules.
iii. Helps to ensure internal consistency in the accounting Standards
iv. Lack of an accounting standard can lead to misunderstanding among those preparing the
financial statements. Conceptual framework can therefore help to solve such
misunderstanding.

Effectiveness of Conceptual Framework in Australia5
v. Assist Auditors and accountants to come up with accounting concepts that are relevant to
a transaction that is not captured in the existing Standards.
Background of Flight Centre
Flight Centre has it’s headquarter in Sydney, Australia. It has been in existence for 150 years
hence has stood the test of time in exchange experience. According to Dunfordm and Palmer
(2018), it comprised of 530 employee, and 6.7 million shareholders, 180 registered members,
and approximately 2,200 listed entities and issuers in the year 2018. The study also revealed that
Flight Centre has always been at the top for many years globally and its total market shares in
terms of capital is approximately $1.5 trillion, The interest rate derivative is about $47-trillion
and it is one of the biggest in Asia. The New York Security Exchange (NYSE) which is one of
its major exchanges had one of the outstanding listing qualifications that required total number of
shareholders equity for the last three financial years not less than $10 million. The world market
capitalization of $200 million, and at least $4 share price of NYSE, 2018. The findings also
stated that the beginning public offering together with secondary issuers is a mandatory
requirement for them to have 400 share Owners. Cooperation (2017) stated that in 2015
information services and Technical services revenue increased by 8% and 10% respectively. The
Financial Software company rose by 27% over the past years and ASX’s 19.3 Stake is now
worth $334m, more than 4% of its market value (Tian, 2015).
Discussion of Issues
How Flight Centre Work
Flight Centre raise money by declaring shares to its members who are listed on the stock
exchange. The members who are also the investors benefits by earning dividends when the

Effectiveness of Conceptual Framework in Australia6
company makes profits.Flight Centreavails a market for potential buyers and sellers to make
money. The opening time is as shown below
7am-10am Pre-open
10am open
10am-4pm Normal Trading
4pm-4:10pm Pre CSPA
4:10-4:12pm Closing Single Price Auction
Flight Centre normal working days are week-days only and it does not operate on public
holidays. The time ranging between 4:10 and 4:12pm has a single auction price which is aimed
at availing time for setting of each day’s closing prices.
A potential Investor who wants to have experience trading in all the companies listed on the
stock exchange can do so by exchanging a single trade that has low value.
The role of Flight Centre
Flight Centre being the pace setter of rules that are to be adhered to by the Australian markets,
and also one of the biggest listed exchange companies in the world, has various roles to play.
These roles have significantly impacted on the conceptual frame work of accounting (Galariotis,
2010).Flight Centre for instance does the review of application by companies who have the
qualifications and would want to be listed on Flight Centre, carry out the supervision duties to
ensure that organizations that have the approval observe the rules, review the application of the
Stakeholders who wants to be the participants of Flight Centre allow stakeholders to have a
direct access to the share market, maintains a system of record of ownership in the data base,
provide education to the members, ensure that standard corporate governance are maintained
and also to make sure that its members comply to the operational rules and regulations (Chohan,
2017).

Effectiveness of Conceptual Framework in Australia7
According to Hambleton and Roca(2016), for a company to be listed on Flight Centre, it must
have minimum number of 300 non-affiliate investor at $2000 and a Free float of 20%. It must
also pass the profit test of $1 million and the company size in terms of assets must be $4 million
net tangible assets or $15 million market capitalization. The secondary markets for instance must
stimulate its liquidity in the number of its company shares to realize the value of their business.
The listing also requires a higher standard of disclosure which results in additional management
of time and investment. The Flight Centre does all these to ensure that Assets are reported and
disclosed as per the requirement of the Standard in the frame work.
As a role model to other entities, Flight Centre has ensured that all the reporting companies listed
on the security exchange have adopted the conceptual framework. For instance ASX adopted the
IFRS to be used by the team. By adopting this standard, Flight Centre has ensured that all the
organizations that contest a broad acquires capital to grow their business and also to give
comprehensive financial details (Keogh, 2018). For a company to qualify for the listing, Flight
Centre has to verify that it meets all the requirements of this Standard.Flight Centre is an
independent entity and serves the public, private and not-for-profit Sectors, it therefore has to
make it compulsory for these companies to adopt the IFRS before it approves the application
made to be listed, this will in turn make the work of the Flight Centre easier and faster. In doing
so Flight Centre contributes to the development of the framework.
All the companies listed on Flight Centre are reporting entities, and from the reporting entity
concept all of them are required by the Act to be in consistent with the Australian Accounting
Standard (AASB). ASX being an overseer, will work with the government to help in putting this
concept into action. Flight Centre has laid out the rule that requires an individual or a group who
is applying for the listing to have the certification of the Australian Accounting Standards in

Effectiveness of Conceptual Framework in Australia8
completion. The requirement applies to both reporting periods of the interim year and those of
for the financial reporting periods at the end of the financial year. The ASX avails more
information about its operations and about the importance of observing the regulatory frame
work by publishing its information requirements and also compares the reporting requirement
with the requirements of the jurisdiction (ASX, 2013).
Flight Centre has its Corporate Governance Council which was formed early 21st century, this
council unites a variety of business, shareholders and other groups in the industry. The main
objective of the council is to facilitate the growth and give recommendations about the corporate
governance. The recommendations are purposed to increase the investor confidence and also to
help the reporting entities to reach their expectation as far as corporate governance is concerned
(Frino, 2011). The Flight Centre reporting entities are to act as the benchmark and compare
between their practices of corporate governance and those of the council recommendation, and to
disclose the cause of inconformity. The rule is aimed at encouraging reporting entities to accept
the council’s recommendation practices without necessarily pushing them to adopt them thus
contributing to the embracing of the standards willingly.
Flight Centre adheres to compliance of its rule by taking the responsibility of verifying that every
company listed in the stock exchange complies with the rules and that the listed company
participates in observing the operating rules of different markets (Young, 2015). It monitors and
enforce the compliance to encourage the participants to comply. According to Vo (2015),
participants are given an admission form to verify and confirm whether he or she is a member of
ASX market or not. This verification will in turn put the participants to forcefully observe the
regulatory frameworks so as to avoid being inconvenienced when it comes to being registered on
the stock exchange.

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Conclusion and Recommendations
Conceptual frame work concept is of great importance to the prepares of financial statements
As well as to the users. Every organization should work towards meeting its obligations so as to
meet the global requirements of financial reporting standards. Flight Centre has tried to meet this
obligations but still there is room for improvement. For example ASX should encourage its
management team to improve its approach towards the AASB and should support it by ensuring
that the responsibilities of the staff and the companies listed are well defined. The ASX should
also work closely with the Minister to monitor the regulatory requirements of the listed
companies and the market as a whole, this will ensure that no one violets the rules and regulation
set by the company Act. If the above recommendations are accepted, The Australian
Government should continue to work with the Flight Centre to come up with regulatory
philosophy that can add to more improvement and development of the conceptual frame work.

Effectiveness of Conceptual Framework in Australia10
References
ASX, A.S.E., 2013. ASX listing rules.
Bath, V., 2012. Foreign investment, the national interest and national security-foreign direct
investment in Australia and China. Sydney L. Rev., 34, p.5.
Chohan, U., 2017. Blockchain and Securities Exchanges: Australian Case Study.
Cooperation, A.A.P.E., Authority, A.A.P.R., Exchange, A.A.S., Aboriginal, A.T.S.I., Islander,
T.S., Agreement, A.A.W., Accountants, C.C.P., Scheme, C.C.S. and Orders, F.F.M.S., 2017.
Abbreviations and acronyms. The European Union in Crisis.
Dunford, R. and Palmer, I., 2018. Managing for high performance? People management
practices in Flight Centre. Journal of Industrial Relations, 44(3), pp.376-396.
Frijns, B., Gilbert, A. and Tourani-Rad, A., 2010. The dynamics of price discovery for cross-
listed shares: Evidence from Australia and New Zealand. Journal of banking & finance, 34(3),
pp.498-508.
Frino, A., Lecce, S. and Segara, R., 2011. The impact of trading halts on liquidity and price
volatility: Evidence from the Australian Stock Exchange. Pacific-Basin Finance Journal, 19(3),
pp.298-307.
Galariotis, E.C., 2010. What should we know about momentum investing? The case of the
Australian Security Exchange. Pacific-Basin Finance Journal, 18(4), pp.369-389.
Hambleton, J. and Roca, R., 2016. MORE CLARITY ON PRICE-FIXING IN DISTRIBUTION
RELATIONSHIPS: FLIGHT CENTRE LTD V ACCC.
Keogh, K., Gordon, C. and Marinovic, P., 2018. Cyber security: Global developments in cyber
security law: is Australia keeping pace?. LSJ: Law Society of NSW Journal, (42), p.82.

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Tian, X., Do, B., Duong, H.N. and Kalev, P.S., 2015. Liquidity provision and informed trading
by individual investors. Pacific-Basin Finance Journal, 35, pp.143-162.
Viljoen, T., Westerholm, J., Zheng, H. and Gerace, D., 2015. Fleeting Orders and Dynamic
Trading Strategies: Evidence from the Australian Security Stock Exchange (ASX). Journal of
Accounting and Finance, 15(4), p.108.
Vo, M., Cohen, M. and Boulter, T., 2015. Asymmetric risk and return: Evidence from the
Australian Stock Exchange. Pacific-Basin Finance Journal, 35, pp.558-573.
Young, J.P., Win, A.K., Rosty, C., Flight, I., Roder, D., Young, G.P., Frank, O., Suthers, G.K.,
Hewett, P.J., Ruszkiewicz, A. and Hauben, E., 2015. Rising incidence of early‐onset colorectal
cancer in A ustralia over two decades: Report and review. Journal of gastroenterology and
hepatology, 30(1), pp.6-13.