Contemporary Accounting Theory

This document provides an overview of contemporary accounting theory, focusing on the history and development of the conceptual framework for financial reporting in the USA, UK, Australia, and globally under IASB. It also discusses the concerns of Australian accounting professionals regarding the application of IASB and the quality of the conceptual framework for financial reporting. Additionally, it includes insights from the annual report of Metcash, a listed Australian company, on financial reporting.

Contemporary Accounting Theory

Executive summary
Financial reporting is the disclosure of economic consequences and related statistics to
management and outside stakeholders about how an employer is performing over a particular
time period. Financial reporting is the disclosure of monetary outcomes and associated facts to
management and external stakeholders about how a business enterprise is performing over a
particular time period. This is seen here that there are various problems that are faced by the
accounting professionals in Australia due to which the reporting of the financial accounts are not
done more prominently. While the global reporting initiative and the IIRC has been done so as to
achieve the objective of maximising the goal of the company. Also the company Metcash in
relation to financial reporting is defined. This also relates to the performance of the accounting
standards and its impact on the quality and significance of the company.

Contents
Executive summary.......................................................................................................................2
Contents...........................................................................................................................................3
Introduction......................................................................................................................................4
Part A...............................................................................................................................................5
Information related to History and development of the Conceptual Framework for Financial
Reporting in the USA, UK, Australia, and globally under IASB................................................5
Concern of Australian accounting professionals regarding the application of IASB..................6
Discussion on concern about the quality of the conceptual framework for financial reporting..7
Annual report...............................................................................................................................8
Part B.............................................................................................................................................10
Comparison between the sustainability reporting guidelines of GRI and IIRC for the corporate
social reporting..........................................................................................................................10
Strengths and limitation of the conventional accounting based upon the conceptual framework
reporting.....................................................................................................................................11
The limitations and usefulness of the theories related to sustainability as well as the integrated
reports........................................................................................................................................12
Criteria of integrated report and whether the company has followed the components
significantly...............................................................................................................................13
Discussion on the integrated report of Australian company and the comparison of this with the
South African company.............................................................................................................14
References......................................................................................................................................15
Appendix........................................................................................................................................17

Introduction
The term financial reporting is characterised as the reporting of the financial data to the company
which helps the company to identify and report the financial transaction within the company to
the stakeholders of the company. The IASB is the main organisation in the world which defines
the structure of the financial reporting in the world and how the financial reporting would take
place in an organisation. This is the organisation which helps in defining various accounting
standard that are to be followed by the company so as to achieve the objective of giving true and
fair disclosure to the stakeholders of the company (Bedford & Ziegler, 2016). While the Global
reporting initiative is considered as the non-profit organisation which has the initiative to help
the business and the government of the country to understand and communicate the impact on
the critical sustainability of the climate change on the stakeholders of the company as well as the
society as a whole. Also for the purpose of this assignment the company that is taken is the
Metcash which is considered as one of the Australian stock exchange listed company and is
working in the industry of conglomerate. This report is divided into two parts where in the first
part the conceptual framework of the accounting theories and its impact would be considered
while on the second part the sustainability reporting would be done for the purpose.

Part A
Information related to History and development of the Conceptual Framework for Financial
Reporting in the USA, UK, Australia, and globally under IASB.
According to Choudhry & Mizerka, 2018, International aaccounting standards boards is a set
framework of accounting standard and independent. IASB is a conductor of international
accounting standards committee and was established on April 1, 2001. There are in early time
the international accounting standards were known as international financial reporting standards
and these are accountable for utilization and implementation of these standards (Bertomeu,
Beyer & Taylor, 2016). Antecedent framework of ifrs foundation was known as international
accounting standards foundation and it was initiated on 6, February, 2001. It was launched as
nonprofit company or organization in Delaware, USA. Ifrs framework is an independent and
nonprofit corporation. The chief objective of these standards is to ready an standard and united,
set of rules and standards that are more understandable by people, having high degree accuracy
and these can be implemented at international level, international financial reporting standards
are depends upon clearly progressive rules and standards, also beneficial for public.
In its regard the main goal of set up ifrs is to develop standards and rules that provides clarity,
obligation and effectiveness to all people of business and market. Their mission is to assist
people an accounting standards that are for long term and maintain belief between all of them.
IFRS foundation made a three layer structure and one of them is IASB. Ifrs is responsible for
setting the accounting standards and rules and also maintain technical services. This is obliged
for regulators and boards of capital market dominions. In former times IASB has 14 members as
full time board members (Callen, 2015). They were responsible for setting up standards for
financial accounting.

Concern of Australian accounting professionals regarding the application of IASB
As per the views of Deb, 2019, IFRS was launched to evolve standards, affinity and clarity of
fiscal records of any business for a defined time period. It is very helpful in decision making
process for any corporation who implement these in an effective manner. In present time there
are many countries which are working with these ifrs including South Korea, Australian and EU.
There are many challenges were facet by Australian to follow these accounting standards. Ifrs
implementation shown some issues in its adoption and uses by many countries like attaining the
importance, manner and causes, time for adopting it (Dye, 2017). In the year 2003, the report by
aasb was represents and financial reporting council provides a planned way to adopt these ifrs in
Australian so after it Australian regulatory bodies and corporations evaluated that it will reduce
their cost and enhance the profit margin. These are expected to be more useful for international
corporations for reducing their cost of capital and make their leveraging system better. The
regulatory bodies of Australian were determined to adopting it with a cover space between there
financial records and data. There are many arguments and issues were raised in implementation
of these accounting standards. These were emerging as challenges for auditors and accountants
of Australian. There are many issues related to lack of expertise and knowledge related
challenges. The problems of implementation, understanding, attain knowledge about it and its
evaluation by regulatory bodies, accountants, auditors and persons who are worked with old
financial system also faced many issues in its implementation.

Discussion on concern about the quality of the conceptual framework for financial reporting.
According to Hsieh, Ma & Novoselov, 2019, The conceptual framework that are defined by
various accounting standard board helps in analyzing the structure of the financial reporting and
also underlines the financial reporting formula. It is considered as the coherent system which
consist of the concepts and the flow from the objectives. This helps the identifying the purpose
of the financial reporting for the company and also helps in the providing the guidance for the
purpose (Hall, 2016). This also helps in identifying the financial reporting boundaries and the
selecting the transaction that is required to be analyzed for the purpose of entering into the
company’s books of accounts. This also defines that how the data needs to be recognized and
measured and how the report needs to be summarized for the purpose.
The first level identifies the objective of financial reporting, the purpose of financial reporting.
The second degree gives the qualitative traits that make accounting records useful and the factors
of financial statements (Assets, liabilities, and so on). The 3rd stage identifies the popularity, size,
and dis-closure standards used in organizing and making use of accounting requirements and the
specific concepts to implement the objective. Those standards encompass assumptions,
principles, and constraints that describe the present reporting environment (Malik, 2015).
The Framework's motive is to help the IASB in growing and revising IFRSs that are based on
regular ideas, to help preparer to develop constant accounting regulations for regions that are not
blanketed through a widespread or where there may be desire of accounting coverage, and to
help all events to recognize and interpret IFRS. Hence this is seen that the organisation which are
preparing the conceptual framework are more organised towards the functioning of the
conceptual framework and it is well maintained and helps in giving the best quality work for the
organisation financial reporting (Mansor, 2015). Through this the stakeholders of the company
gets a true and fair view of the affairs which helps them to perform the functions as desires by
the organisation.

Annual report
The annual report that has been considered for the purpose of the study is based on the Metcash
company which helps in understanding the impact on the organisation of the financial reporting
and also helps in identifying the various reports that the company has framed and the what are
the major components of the reports that have been prepared by the organisation. The report also
contains the major qualitative characteristics that they exhibit in the financial reporting. So as to
achieve the objective of maximising the objective of showcasing the true and fair view of affairs
of the company.
(i) The company Metcash has the objective of performing the business in the best
possible manner so as that they are able to get the disclosure of the income more
significantly and the accurately to the stakeholders of the company. This has been
identified in this reporting that the company has to build and utilise various
accounting statement so that they are able to generate the information for the same.
The company has identified and generated the three financial statement which gives
the conclusion of all the affairs of the company. these includes the following
statement that has been prepared by the company which includes statement of the
financial position of the company, statement of changes in the equity of the company,
statement of the cash flows of the company and various notes to accounts. These
statements are prepared as per the requirements of the accounting standard in the
company and is defined as per the structure which is related to the classification of
the company as a whole. Also as per the requirements the company has prepared the
directors report which helps them to analyse the purpose and study of the significant
reports of the organisation. Some of the major components of the company’s financial
statements includes the director reports and the shareholding of the key managerial
personnel of the company. It also contains the financial statements such as balance
sheet and the income statement of the company. This helps in understanding the
requirements of the company and what are the current trends in the company as a
whole. This also helps in understanding the current market position of the company in
the world.
(ii) For the purpose of disclosing the financial result to the stakeholders of the company
the company used various methods which helped them to achieve the objective of

maximising the sales of the company. Hence for the purpose of achieving the
transactions the company for the assessment of carrying value determined the cash
flow projections which covered over five year period. Hence for estimating the value
above five years terminal growth rate is used for the purpose. For the purpose of the
study the key assumptions that are taken for the purpose is based on the nature and
uncertain events. For the future cash flow estimation the discounted rate has been
used by the company so that they are able to achieve the objective of maximising the
growth of the company. For the purpose of the property that are on lease the company
used the AASB 16. Information of the full-size accounting policies and strategies
followed, inclusive of the standards for reputation in appreciation of every
magnificence of financial tool, monetary liability and fairness device
(iii) There are various qualitative characteristics that are defined by the company so as to
achieve the objective of maximising the performance of the financial statement of the
company. Some off the characteristics of the financial reporting of the company
includes that all the transactions that are recorded in the books accounts of the
company are based on the IASB and IFRS. The policies are consistent with previous
year policies and not changed in this year. Expected effect of AASB 15, AASB 9 and
AASB 16 on the group’s monetary statements inside the respective years of their
preliminary application. The company has used the fair value hedges in reporting the
financial structure of the company they have changed in the fair value hedges of the
company which is attributable to the company. The inventories are valued lower of
the cist or the net realisable value of the company. The company has also
implemented the share based payment transactions which helps the company give the
best price for the share based payments.

Part B
Comparison between the sustainability reporting guidelines of GRI and IIRC for the corporate
social reporting.
Corporations are now obliged to be socially and environmentally responsible. They are expected
to contribute to sustainable development and to have their activities scrutinized. Corporate social
responsibility is defined by the World Business Council for Sustainable Development.
GRI is supportive of included reporting because it develops as an essential and important
innovation of corporate reporting (Modell, 2017). GRI advocates for the inclusion of sturdy
sustainability metrics (primarily based on a multi-stakeholder technique) to included reporting, in
support of its ordinary imaginative and prescient of a sustainable international economy. As a
pioneer within the development of sustainability reporting during the last two decades and the
worldwide preferred setter for sustainability disclosures, GRI believes it has a relevant role to
play and a duty to collaborate actively in the further development of included reporting. GRI
believes that incorporated reporting which incorporates suitable material sustainability
information equally alongside monetary information presents reporting companies with a large
angle on risk. Heaps of corporations round the arena use the GRI trendy to reveal sustainability
data, and a few are presently experimenting with integrated reporting. To further the
development of included reporting and actively participate in its evolution, GRI convenes a
company leadership institution on included Reporting with a set of its GOLD network
contributors and different corporations conducting sustainability reporting and included
reporting, so one can contribute extra immediately to ongoing talk around incorporated reporting.
Sustainability disclosure provides a broader view of a corporation’s overall performance than
financial disclosure on my own (Nitzl, 2016). While utilized in integrated reporting, it is able to
screen fee creation across six capitals: economic, synthetic, intellectual, human, social and
relationship and herbal. Powered through a unique collaboration between GRI and the
international incorporated Reporting Council (IIRC), the 2017 GRI company management
organization on included reporting ambitions to clarify how the GRI Sustainability Reporting
standards and the international Framework can be used collectively to offer insights into cost
advent across the six capitals and drive transparency.

Strengths and limitation of the conventional accounting based upon the conceptual framework
reporting.
The accounting standards and the concepts within the organisation helps the company to achieve
the objective of maximising the disclosure and the reporting within the organisation and this
helps the company to achieve the objective of initiating the best financial performance and
the disclosure to the stakeholders of the company (Oboh & Ajibolade, 2017). It is seen that
there are various strengths and limitations which are related to the conventional accounting.
Hence some of the strength and weakness of the company which are related to the company
includes, different accounting policies and framework, Accounting frameworks inclusive of
IFRS allow the preparers of financial statements to apply accounting rules that maximum as
it should be mirror the situations in their entities. While a degree of flexibility is critical
which will gift reliable records of a particular entity, using diverse set of accounting
regulations amongst one of a kind entities impairs the extent of comparison between
monetary statements. The use of various accounting frameworks by way of entities running
in special geographic regions also presents similar troubles whilst comparing their financial
statements (O'Dwyer & Unerman, 2016). The trouble is being triumph over with the aid of
the growing use of IFRS and the convergence manner between leading accounting bodies to
arrive at a single set of global standards.

The limitations and usefulness of the theories related to sustainability as well as the integrated
reports
The last twenty years have seen good sized improvement in educational literature on accounting
and responsibility systems for the mixed management and reporting of financial and non-
financial performance. Lecturers and practitioners have analysed the interaction between
managements’ strategic propositions, organisational control structures and overall performance
dimension and reporting structures (Otley, 2016). Among several proposals advanced by means
of scholars within the accounting, control and governance domain names, four frameworks that
have emerged are: The Balanced Scorecard, the Triple backside Line, Sustainability Reporting
and integrated Reporting.
As reporting is mainstreamed, the realization is bound to develop that reporting can't be based on
periodic procedures and a final minute scramble for records to be protected in reviews. This
could lead to extra organizations and companies incorporating sustainability goals into their
management control systems (Parker, 2016). These systems may be used now not best for the
motive of helping the sustainability and integrated reporting however also to inspire behaviour
that is Consistent with the business enterprise’s sustainability objectives. The accounting
profession is likewise possibly to play a position within the promotion and implementation of
sustainability and incorporated reporting-related management manage systems via their
assurance exercise. Sustainability guarantee vendors call for that proof of mentioned topics be
accrued, maintained, and managed in similar style to accounting statistics. These needs
for auditable proof are possibly to result in more institutionalization of sustainability and
included reporting associated management manage structures (Parker & Fleischman, 2017).

Criteria of integrated report and whether the company has followed the components significantly
The South African company that is taken for the purpose of the study includes pick and pay ltd
which is a supermarket chain and was established in the year 1967. The company is operating its
business in best possible manner so that they are able to achieve the objective of maximising the
social responsibility towards the society (Schaltegger & Burritt, 2017). Hence while making the
financial reporting the company has followed various components that are required to be
followed for the purpose of getting the integrated report more valuable. These includes the
following:
 Organisational overview and the external environment under which it operates: The
Company in its reporting has covered the requirement of giving the organisational
overview so as to achieve the objective of maximising the integrated report.
 Business model: the company has also emphasised on the status where the company
business model has been defined. Here the directors of the company has defined the
model under which the company works so as to achieve the objective of getting the
investment from the investors of the company.
 Risks and opportunities and how they are dealing with them and how they affect the
company’s ability to create value: the company has also integrated the effect of the risk
and opportunity so as to help the investors gets the analysis of risk and the opportunities
that exist for the company in the environment in which it operates.

Discussion on the integrated report of Australian company and the comparison of this with the
South African company.
This is seen that the Australian company also prepares the integrated report so as to deliver the
true and fair value of the affairs for the organisation and to achieve the objective of complying
with the AASB and the IFRS reporting. The company has also followed all the components
which are related to the performance of the organisation. It is seen that all the components that
are important for the company are being given by Metcash which helps them to achieve the
objective of maximising the transparency of the company (Zeff, 2018).
The company is also reporting its corporate social responsibility in its report. They have taken
various steps that are related to the company’s financial performance. This includes that the
company is focusing on the corporate social responsibility which helps them to perform the
objective of complying with rules and regulations related to the reporting standards. The
company focuses on the,
 Organizational overview and external environment
 Governance
 Stakeholder Identification/ relationships
 Business model
 Performance
 Risks, opportunities and internal controls
 Strategy and resource allocation
These are similar to the components which are followed by the South African company and both
the company focuses on these concepts more significantly.

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Appendix
Integrated components that are required to be followed by the Pick and Pay limited South
African company
S.
no.
Components Followed
or not
1. Organisational overview and the external environment under which it
operates
1.
Followed
2. Governance structure and how this supports its ability to create value Not
followed
3. Business model Followed
4. Risks and opportunities and how they are dealing with them and how they
affect the company’s ability to create value
Followed
5. Strategy and resource allocation Followed
6. Performance and achievement of strategic objectives for the period and
outcomes
Followed
Outlook and challenges facing the company and their implications Followed
7. The basis of presentation needs to be determined, including what matters are
to be included in the integrated report and how the elements are quantified or
evaluated.
Followed
Integrated components that are required to be followed by the Metcash limited an Australian
company

S. no. Components Followed or not
1. Organizational overview and external environment Followed
2. Governance Followed
3. Stakeholder Identification/ relationships Followed
4. Business model Followed
5. Performance Followed
6. Risks, opportunities and internal controls Followed
7. Strategy and resource allocation Followed